26 December 1997

Cat strengthens hold on diesel engine market

By Andy Collings

STRIKING a deal with Lucas-Varity to buy the Perkins Engines business (farmers weekly, Business, Dec 19) is a major coup for construction and industrial machinery giant Cater-pillar.

It will significantly strengthen Cats already substantial diesel engine operations and secure an in-house supply of power units for the smaller machines it is developing to complement the traditional big-muscle, earth-moving mach-inery.

For Peterborough-based Perk-ins, the move ends a period of speculation that LucasVarity would be happy to sell off the engine business, despite its growing worldwide success.

Perkins sales topped $1bn for the first time two years ago, selling some 220,000 engines for more than 3000 different applications, and has sustained that level of sales since.

Perkins is reckoned to have 40% of the European engine market for industrial and construction equipment, 33% of the mid-range generator set sector, and 25% of the market for agricultural power units. Massey Ferguson is the principle customer in agriculture, with Landini and JCB also relying on Perkins power.

Claas increasingly favours Perkins for its combines, and Case became a major customer this year, taking 50hp to 100hp versions of the 900 and second-generation 1000 series engines for the new Doncaster-built CX tractors.

However, LucasVarity says Perkins needs a more substantial road vehicle engines business to remain competitive as an individual global player and has chosen to sell rather than back the company in this quest.

Caterpillar is a logical suitor, since the company already has a strong position in the truck engine market, as well as marine, industrial and other applications that contribute to an engines business worth some $4bn – a quarter of Cats total sales.

It has few products in the low to medium horsepower sectors, however, and Perkins, which already supplies Cat with engines for loaders and telehandlers, will fill the slot nicely.

In return, Perkins will gain from Caterpillars strength and obvious commitment to engine production, as well as the financial and other resources needed to develop new products, applications and technology.

Caterpillar already buys Perkins engines for its telescopic handlers – now Cat intends to buy Perkins itself.