What is the primary purpose of the agreement between Caterpillar and Navistar?

The agreement establishes a 50/50 joint venture to develop, produce, market, sell, distribute, and support heavy and certain medium-duty trucks outside of North America and the Indian subcontinent. It also creates a strategic alliance for the development, design, manufacture, and sale of Caterpillar-branded heavy-duty severe service trucks in North America.

What are the initial financial commitments to the joint venture?

Caterpillar and Navistar will each contribute $45.5 million as an initial capital contribution to the Joint Venture Company. They are also committed to providing up to an additional $123.4 million in funding over the subsequent three years.

How will the joint venture be governed?

The Joint Venture Company will have a Board of Directors with six members, three appointed by Caterpillar and three by Navistar. Navistar will appoint the President to manage daily operations, while Caterpillar will appoint the Chief Financial Officer. Key operational and financial plans will require board approval.

What is the duration of the joint venture agreement?

The initial term of the Joint Venture Operating Agreement is set for 25 years. This term can be extended for subsequent five-year periods upon written agreement by both Caterpillar and Navistar.

CAT 8-K: Material Agreements

Summary

Caterpillar Inc. (CAT) announced on April 6, 2009, the execution of a Truck Business Relationship Agreement with Navistar International Corporation. This agreement establishes a 50/50 joint venture aimed at developing, producing, marketing, selling, distributing, and supporting heavy and certain medium-duty trucks outside of North America and the Indian subcontinent. Additionally, the companies are forming a strategic alliance for the development, design, manufacture, and sale of Caterpillar-branded heavy-duty severe service trucks within North America. The joint venture will be a significant undertaking, with initial capital contributions of $45.5 million from each party and commitments for up to an additional $123.4 million over the following three years. The governance structure ensures equal representation, with Caterpillar and Navistar each appointing three directors to the Joint Venture Company's Board. The President, responsible for day-to-day operations, will be appointed by Navistar, while Caterpillar will appoint the Chief Financial Officer. The agreement outlines a 25-year initial term, with potential for extensions, and includes provisions for exclusivity and non-competition within the defined scope of the joint venture business.

Key Highlights

1Caterpillar Inc. is forming a 50/50 joint venture with Navistar International Corporation for the development, production, and sale of heavy and medium-duty trucks outside North America and the Indian subcontinent.
2A strategic alliance will also be formed to develop, manufacture, and sell Caterpillar-branded heavy-duty severe service trucks in North America.
3Each company will contribute $45.5 million initially to the joint venture and commit up to an additional $123.4 million over the next three years.
4The joint venture will have a 6-member Board of Directors, with each company appointing 3 directors.
5Navistar will appoint the President (day-to-day operations), and Caterpillar will appoint the Chief Financial Officer.
6The joint venture agreement has an initial term of 25 years, subject to extensions.
7The transaction is subject to certain closing conditions, with a termination date of September 30, 2009, if not closed by then.

CATERPILLAR INC 8-K Report, Material Agreement (Apr 7, 2009)

Summary

Key Highlights

Frequently Asked Questions