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Eaton, Cummins to Form Joint Venture for Automated Transmissions


kscarbel2
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Transport Topics  /  April 10, 2017

Eaton Corp. and Cummins Inc. have agreed to form a joint venture to produce automated transmissions for medium- and heavy-duty trucks, a move that would deepen the suppliers’ longstanding powertrain alliance.

Cummins and Eaton each would own 50% of the venture, to be named Eaton Cummins Automated Transmission Technologies.

Cummins will pay Eaton $600 million for its stake, while Eaton will contribute the designs for its next-generation automated heavy-duty transmission, as well as its current Procision medium-duty transmission and certain assembly assets.

The transaction is expected to close in the third quarter, pending regulatory approval.

Craig Arnold, Eaton’s chairman and CEO, said the joint venture will better position the company’s transmission business to meet the industry’s demand for reduced emissions and greater fuel economy — largely driven by regulation — as well as improved drivetrain performance.

“Our joint venture with Cummins will leverage the technical strengths and experience of two industry leaders with long histories and deep industry expertise to provide superior automated transmission technology for our global customers,” Arnold said.

The combination also will expand Eaton’s access to global markets for automated transmissions, he said, adding that the joint venture will use the proceeds of the transaction to target growth opportunities.

Cummins Chairman and CEO Tom Linebarger said his company’s joint venture with Eaton “will deliver the most advanced automated transmissions and develop an integrated powertrain and service network that supports our customers like never before.”

The joint venture will build on the existing partnership between Eaton and Cummins. The two independent suppliers have long collaborated on product integration through their SmartAdvantage powertrain lineup, which pairs Cummins’ engines with Eaton’s transmissions.

The joint venture, however, will focus on more tightly integrating transmissions not only with Cummins’ engines, but also with truck makers’ vertically integrated offerings, Arnold said.

Most truck manufacturers have been heavily promoting their own proprietary engines, while continuing to offer Cummins engines as a third-party option. Cummins, based in Columbus, Indiana, is the only major independent supplier of heavy-duty truck engines remaining in the North American market.

Eaton’s Arnold said much of the trucking industry’s ongoing transition from manual transmissions to automated manual transmissions already has taken place, but isn’t completely done.

That broader movement toward AMTs has heightened the industry’s focus on ensuring that the engine and transmission work together in an efficient way, Arnold said. Tightening emission and fuel-economy standards also require the engine and transmission to work together in a more seamless fashion, he added.

In addition to developing new products, the joint venture also will sell and support Eaton’s current heavy-duty automated transmissions in North America. Eaton will continue to manufacture those transmissions during the transition period.

Meanwhile, Eaton’s Vehicle Group will retain its global manual transmission and clutch businesses, as well as its current generation of medium- and heavy-duty automated transmission products outside of North America. Eaton also will retain its light-duty and agricultural transmissions aftermarket business, as well as its global automotive business.

Eaton, based in Dublin, Ireland, is a diversified supplier of power management products.

The joint venture’s board and management will be composed equally of Eaton and Cummins leadership.

Cummins will report the joint venture’s revenue as part of its Components business segment.

Eaton will report 50% of the venture's earnings within its Vehicle segment.

Arnold said the joint venture is currently in “startup mode.” As such, Eaton said it expects no material change in operating profits for its Vehicle segment in 2017 and 2018 as a result of the joint venture. It expects revenues for that segment to decline about $25 million in 2017 and fall about $200 million in 2018.

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Eaton, Cummins Announce Global Automated Manual Transmission Partnership

Heavy Duty Trucking  /  April 10, 2017

A new joint venture, Eaton-Cummins Automated Manual Transmission Technologies, includes current Eaton AMTs as well as a new, heavy-duty AMT slated for introduction later this year, plus future AMT products designed for commercial vehicle markets worldwide.

Building on a well-established commercial vehicle powertrain partnership, Eaton and Cummins announced the new venture April 10. The two companies will jointly design, develop, manufacture and service a global portfolio of automated manual transmissions for medium- and heavy-duty commercial vehicles.

Cummins and Eaton will each own 50% of the new joint venture, and Eaton will receive $600 million in cash from Cummins for its interest.

The new joint venture includes both current Eaton AMTs as well as a new, heavy-duty AMT slated for introduction later this year, plus future AMT products designed for commercial vehicle markets worldwide. Both Cummins and Eaton dealers worldwide will support the new company’s AMT products.

Ken Davis, president of Eaton’s Vehicle Group, said in a conference call that the new joint venture company will develop both proprietary AMTs that are vertically integrated with Cummins diesel engines, as well as stand-alone AMTs for OEMs and for customers spec’ing non-Cummins engine solutions.

Assuming the required regulatory approvals and customary closing conditions are met, the companies expect the transaction to close in the third quarter. Cummins will consolidate joint venture results as part of its Components business segment.

Eaton’s Vehicle Group will retain its global manual transmission business, global clutch business, current generation medium-duty and heavy-duty automated transmission business outside of North America, global aftermarket business, light-duty transmission business, agricultural transmission business, and global automotive business and associated product lines. 

“Eaton-Cummins Automated Transmission Technologies brings together two strong companies that have worked together for decades, have similar values and have a shared commitment to their customer’s success," said Ed Pence, vice president and general manager of Cummins High Horsepower Engine Group. "This announcement today is a historic milestone in Cummins’ efforts to become a global powertrain solutions provider by supplying our customers the best-performing commercial vehicles possible – with that is with our own engines, or supporting proprietary OEM diesel engines.”

Pence added that the new joint venture is wholly in keeping with Cummins’ historical product offerings, and will complement those existing product lines as well. “We you look at our history at Cummins and the engines, turbochargers, emissions and air-handling solutions as well as our filtration and fuel systems, we believe this new joint venture fits very well into that existing product portfolio and will give our global OEM partners even more choices to help them develop the best performing commercial vehicles they can using the specifications of their choosing.”

Cummins Chairmand and CEO Tom Linebarger added, "Our growth strategy includes expanding our product offerings and extending our global footprint by becoming the world’s leading powertrain supplier. Our JV with Eaton will deliver the most advanced automated transmissions and develop an integrated powertrain and service network that supports our customers like never before.”

 

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Cummins, Eaton form AMT joint venture

Sean Kilcarr, Fleet Owner  /  April 10, 2017

The 50/50 partnership to build automated mechanical transmissions for heavy- and medium-duty commercial vehicles should be finalized by the third quarter of 2017.

Eaton Corp. and truck engine partner Cummins Inc. are now forming a new 50/50 joint venture to build automated mechanical transmissions (AMTs) for heavy- and medium-duty commercial vehicles to be called Eaton Cummins Automated Transmission Technologies.

The two companies said in a statement the new joint venture should be finalized by the third quarter of this year, with Cummins consolidating joint venture results as part of its components business segment going forward.

Meanwhile, Eaton gets $600 million in cash from Cummins for its 50% interest in the joint venture and will report its earnings from the venture though it vehicle group.

Craig Arnold, Eaton’s chairman and CEO, noted in a conference call with analysts that the fiscal impact on Eaton’s revenue in 2017 and 2018 will be “notably muted,” with expectations for $25 million in 2017 and $200 million in 2018 as the joint venture is in “startup mode.”

Going forward, however, he thinks this particular joint venture will deliver “even more attractive returns” while providing added and needed scale to Eaton’s global vehicle business.

“We think that business is well positioned for growth in and around changes in a regulatory environment based fuel economy and [exhaust] emissions control,” he added. “We think it strengthens us to best address future demands for drivetrain performance.

Once established, Arnold said the joint venture will design, assemble, sell and support all future medium- and heavy-duty automated transmissions for the commercial vehicle market – which includes Eaton’s current medium-duty AMT, the Procision, as well as a next generation heavy-duty AMT currently under development.

The joint venture will also be tasked with marketing, selling, and supporting Eaton’s current generation of automated heavy-duty transmissions to OEM customers in North America, Arnold noted.

“We’re going to continue manufacturing those heavy-duty automated transmissions but sell them through the joint venture,” he stressed.

Arnolds stressed, however, that Eaton’s Vehicle Group will retain its global manual transmission, global clutch, current generation medium- and heavy-duty automated transmission business outside of North America, as well as control of its global aftermarket, light-duty transmission, agricultural transmission, and global automotive business and associated product lines.

“Customers are focused on powertrain solutions that provide the best combination of technology, performance and quality,” he emphasized.

“This combination puts together two of the world’s leading powertrain suppliers to position our respective businesses to develop solutions for emissions, fuel economy and ultimately performance as well.”

Arnold added that Eaton has worked with Cummins for many years, which is why it’s put automated transmissions into this joint venture.

“Like the Smart Advantage technology we developed years ago, this is an opportunity to build on our history and do better job of deeper integration,” he said.

The joint venture will also increase Eaton’s access to global markets, allowing it to benefit from Cummins’ scale around the world. “We’re equally excited for the synergies that come with working more closely together, such as in purchasing, than we can do as independent companies.”

“Our growth strategy includes expanding our product offerings and extending our global footprint by becoming the world’s leading powertrain supplier,” added Tom Linebarger, chairman and CEO of Cummins. “Our joint ventured with Eaton will deliver the most advanced automated transmissions and develop an integrated powertrain and service network that supports our customers like never before.”

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Cummins and Eaton are still living in the past, and it has cost them. Their profitability and global footprint, speaking of the truck industry, is a fraction of what it once was.

The merger is arguably an act of desperation in their struggle to remain relevant.

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I think Cummins will make it, but I see them transitioning from primarily highway engines to non-highway (if they haven't already).  And, speaking of highway diesels, think of how much trouble they would be in if they didn't have FCA (Ram) to sell to.  Navistar's move to basically replace their VT365 with the Cummins B6.7 generated some good press, but I am not sure that deal represents a lot of volume.  In addition, I believe the GM/Isuzu 'Duramax' will be offered in International's new class 4/5 truck, what is to stop that engine from replacing the B6.7 in other International applications?   

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Building a global automated transmission strategy

Sean Kilcarr, Fleet Owner  /  April 11, 2017

New 50/50 joint venture between Cummins and Eaton aims to eventually build global presence in automated transmission market.

The formation of Eaton Cummins Automated Transmission Technologies announced by Eaton Corp. and truck engine partner Cummins Inc. this – a new 50/50 joint venture to build automated mechanical transmissions (AMTs) for heavy- and medium-duty commercial vehicles – is part of an effort by the two companies to begin building market share with a style of powertrain that’s in high demand.

Last year, for example, Volvo Trucks North America noted that the I-Shift AMT – originally for the European market in 2001 – got spec’d on 83% of its truck models sold in North America back in 2015, with higher percentages expected going forward.

Add to that a report issued by the North American Council for Freight Efficiency (NACFE) several years ago that highlighted the fuel-savings potential of AMTs, along with the driver-friendly aspects of automated gearboxes, and the stage is more than set for a big changeover in powertrain selection within the global commercial vehicle market.

Ken Davis, president of Eaton’s vehicle group, said that the initial focus of the Eaton/Cummins AMT joint venture will be on commercial vehicles in linehaul highway operating environments, especially where the company’s new heavy-duty AMT scheduled to be unveiled later this year is concerned.

“Our next generation product is especially going to start in linehaul highway operation first, then we’ll build up to 18-speed options for other [heavy truck] segments,” he said in a conference call with reporters this week.

By contrast, the focus for Eaton’s medium-duty dual-clutch AMT within the joint venture – the Procision – will be on segments such as pickup and delivery trucks and shuttle bus service, with perhaps expansion into the recreational vehicle market, Davis added.

Ed Pence, vice president and general manager of the high horsepower engine business at Cummins, added on the call that the discussions about forming this joint venture started back in September 2015 as part of a strategic focal point expressed by Tom Linebarger, chairman and CEO of Cummins.

Pence said Linebarger identified powertrains as a “growth market” that Cummins needed to put more focus upon – and the engine maker by that point already had a partnership established with Eaton, Pence noted, which made for a good fit.

“We’ve been talking about this since the introduction of Smart Advantage back in 2013,” he explained. “This [joint venture] is the next level opportunity.”

Eaton’s Davis added that, as a transmission-focused business, the joint venture will also seek to provide solution for “vertically-integrated” OEM engines as well.

“We understand that in order to compete in this market, we need to integrate with OEM engines,” he stressed. “It’s very clear we’ll be integrating these transmissions with Cummins engines and OEM engines.”

Cummins’ Pence emphasized that dealing with “vertical integration” is not new in the trucking industry.

“We’ve been dealing with it even since the late 1970s; there’s a considerable amount of vertical-integration within the landscape of our major markets,” he emphasized. “Our strategy very much aligned with Eaton’s – build the best products with a high degree of optimization for OEMs with high performance backed up by high support. It’s a very complimentary strategy for this partnership moving forward.”

In a separate call with industry analysts, Craig Arnold, Eaton’s chairman and CEO, stressed that he thinks this particular JV will deliver even more attractive returns while provided added and needed scale to Eaton.

“We think business well positioned to growth in and around changes in a regulatory environment around fuel economy and emissions,” he explained. “We think it strengthens case for best address future demands for drivetrain performance.”

“This is an opportunity to look at our business and ask how best we can position it to grow,” added Eaton’s Davis. “This partnership with Cummins makes sense every level and leveraging Cummins’ global presence. The main focus right now is how to accelerate growth in U.S. and then globally. Certainly as we get into this venture certainly take a look at what opportunities exist in terms synergies material and development.”

“It’s about accelerating our ability to develop and deliver sophisticated products for our customers,” added Cummins’ Pence. “We’re combining and aligning the engineering expertise of Eaton and Cummins for [truck] OEMs and their end customers as well as leveraging and combining the strength of both company’s service networks. We see the 50/50 opportunity to design and sell future AMT systems and develop further value for both our companies in the future.”

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Cummins and Eaton are being squeezed out the market by the vertical integrators like Daimler-Volvo-Scania-Paccar-Fiat and Navistar/Volkswagon) (Notice the dominant Euro connection). Mack was at one time the chief of the vertical integrators. That's why Cummins and Eaton should buy Mack and offer an outlet for their products. Mack was a large Eaton partner until Volvo came along. Mack made numerous L models with Cummins diesels and offered Cummins right up to the CL model. Now they only offer baby Cummins in the MHD and Cummins gas pots. Cummins/Eaton/Deere/Cat/Hendrickson and Oskosh have the dealer network to pry Mack away from Volvo. If Trumps infrastructure replace dreams come true there would be plenty of opportunities for American owned Mack Truck. If an American company bought and unleashed Mack I believe Volvo would disappear from American roadways and Diamler would loose market share. Paccar would still be around as they seem to have a way of surviving.

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Actually, in the old days, we were a very small vendor customer. Cummins and Eaton were our competition. Sure, we built some Cruise-liners with Cummins-Eaton drivetrains because Ryder demanded it. But we promoted the superior Mack "balanced design" drivetrain, resulting in "pedigreed" trucks representing over 90 percent of production.

I recall when Air Products ordered R-models with Silver 6V92s, They...........regretted it.

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Eaton and Cummins Inc. Announce Joint Venture

Cummins Press Release  /  April 10, 2017

Eaton and Cummins today announced an agreement to form a joint venture for automated transmissions for heavy-duty and medium-duty commercial vehicles. The joint venture will be named Eaton Cummins Automated Transmission Technologies.

Cummins and Eaton will each own 50 percent of the new joint venture. The formation of the joint venture is subject to regulatory approvals and customary closing conditions. The parties expect the transaction to close in the third quarter of 2017. Cummins will consolidate joint venture results as part of its Components business segment.

“Customers are focused on powertrain solutions that provide the best combination of technology, performance and quality,” said Craig Arnold, Eaton chairman and chief executive officer.

“Our joint venture with Cummins will leverage the technical strengths and experience of two industry leaders with long histories and deep industry expertise to provide superior automated transmission technology for our global customers.”

“Our growth strategy includes expanding our product offerings and extending our global footprint by becoming the world’s leading powertrain supplier,” said Tom Linebarger, chairman and CEO, Cummins Inc. “Our JV with Eaton will deliver the most advanced automated transmissions and develop an integrated powertrain and service network that supports our customers like never before. Just as we’ve done for the past 100 years, we will use our experience in partnerships and technological expertise to ensure our customers’ success.”

The global joint venture will provide customers with industry-leading transmission technologies and solutions that deliver best-in-class fuel efficiency, performance and uptime while leveraging both Cummins’ and Eaton’s global service and support networks. The joint venture will design, assemble, sell and support all future medium-duty and heavy-duty automated transmissions for the commercial vehicle market. Eaton’s current medium-duty automated transmission, Procision®, and next generation heavy-duty automated transmissions, will be part of the joint venture. In addition, the joint venture will market, sell, and support Eaton’s current generation of automated heavy-duty transmissions to OEM customers in North America.

Eaton’s Vehicle Group will retain its global manual transmission business, global clutch business, current generation medium-duty and heavy-duty automated transmission business outside of North America, global aftermarket business, light-duty transmission business, agricultural transmission business, and global automotive business and associated product lines.

Under the terms of the agreement, Eaton will receive $600 million in cash from Cummins for 50 percent interest in the joint venture.

Conference Call with Eaton Management at 1:00 p.m. Eastern, April 10, 2017

Eaton’s conference call to discuss the joint venture is available to all interested parties as a live audio webcast today at 1 p.m. United States Eastern time via a link on the center of Eaton’s home page. This news release can be accessed under its headline on the home page. An audio replay of the webcast will be available at the same link.

Cummins leadership will comment further on the joint venture and answer investor questions during its Q1 2017 Earnings call on May 2 at 10 a.m. ET.

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On 4/11/2017 at 4:32 PM, kscarbel2 said:

I recall when Air Products ordered R-models with Silver 6V92s, They...........regretted it.

I knew a guy that had an old Air products tractor, it was a '79 or so White Road Boss, also with a 6V-92.  I got the impression Air Products was a bit like Roadway, they would buy tractors from just about anyone, but would always order the exact same powertrain.    

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