Cummins in light-duty engine deal with automaker

By James B. Kelleher CHICAGO, July 26 (Reuters) - Cummins Inc. (CMI.N: Quote, Profile, Research), the U.S. engine maker, said on Wednesday that it signed a partnership with a major car maker to produce light-duty diesel engines for pickup trucks and sport utility vehicles.

The Columbus, Indiana-based company, which already makes the diesels that power some Dodge Ram pickups made by Daimler Chrysler (DCXGn.DE: Quote, Profile, Research), declined to name the partner. It said that for "competitive reasons" the company wanted its name to remain "confidential."

Cummins only described it as "a major automotive manufacturer serving the North American market."

Cummins has existing relationships with a number of companies that fit that description, though none of them, except Chrysler, are to supply engines for passenger vehicles.

It supplies medium- and heavy-duty diesel truck engines to Ford Motor Co. (F.N: Quote, Profile, Research), Volvo (VOLVb.ST: Quote, Profile, Research) and Volkswagen (VOWG.DE: Quote, Profile, Research).

It has no similar partnerships with any Asian automaker -- though this agreement may change that. In a note to investors, Peter Nesvold, an analyst at Bear Stearns, speculated the unnamed partner might be Nissan Motor Co. (7201.T: Quote, NEWS, Research), Japan's second-largest car maker.

Nesvold said that he has heard "on multiple occasions" that Nisan wants to introduce a diesel version of its Titan pickup for model year 2009.

"Nissan ... concluded that it needed a diesel to more fully take on the F-series, Silverado, and Dodge Ram, but that it lacked technical capabilities to handle the U.S. emissions regulations," he wrote in the note.

Nesvold said that Navistar International Corp. (NAV.N: Quote, Profile, Research), the Warrenville, Illinois-based truck and engine-maker, had also been bidding on the Nissan project. If Cummins and Nissan had indeed agreed to partner, Nesvold said it was "a very minor longer-term negative" for Navistar.

Mark Land, a spokesman at Cummins, declined to comment on any speculation regarding the partner.
Land said that the engine was still in the prototype stage and that site selection for the plant that will make it had only been narrowed down to "a handful of states."

The first vehicles with the engine are expected to hit the market by the end of the decade, he said.

Wednesday's announcement was the latest win for Cummins. Last month, Paccar Inc. (PCAR.O: Quote, Profile, Research), one of the largest U.S. truck makers, said that starting next year it would power its medium-duty trucks exclusively with engines built by Cummins, eliminating Caterpillar Inc. from that lineup.

Starting with model year 2008, a Cummins engine will also be the standard offering for the Ford F650 and 750, replacing engines built by Navistar.