As many of you may know, Caterpillar, better known as just CAT, is one of the powerhouse engine builders in the world of commercial trucks, mining equipment, construction equipment, forestry, oil and gas, marine, and much more. Basically, if you have something big and it needs an engine to power it, chances are that CAT makes an engine for it or just makes the equipment itself.
With that being said, the on-the-road truck market, which is commercial trucks, semi-trucks, tractors, whatever you want to call them, is missing from CAT’s portfolio, but it wasn’t always this way. At one point, CAT was one of the powerhouses in the on-the-truck world, so what happened? Why did CAT stop making truck engines? Sit down, get comfy, and let’s unpack this whole story.
Emissions Compliance
To quickly boil down CAT’s reasoning for leaving the on-the-road truck world, it’s actually really simple: emissions. But, as you’ll see, there’s more to it than you might think. Emissions compliance is ultimately their reasoning, but there’s some nuance in there that we need to go over.
To fully understand the emissions situation, we can rewind the clock to 1990. During this year, there were amendments added to the Clean Air Act, which meant that diesel engines need to output fewer emissions and the enforcement was set to start in 1994, which meant all 1994 models needed to meet the new standards.
The bar for emissions output was continually raised and enforced through the Clean Air Act and the EPA, all the way up until now. It wasn’t until around 2007 that things got much tougher, which is also when you saw new emissions components plopped onto the trucks that you and I buy, such as Duramax and Cummins trucks.
ACERT Failures
When these changes went through in 2007, CAT decided to use a different emissions system than everyone else on the market with the ACERT system, which stands for Advanced Combustion Emission Reduction Technology. The ACERT system cost CAT an estimated $500 million dollars and it was supposed to be a replacement for exhaust gas recirculation.
Fun fact, when new emissions standards went through in 2002, CAT rejected exhaust gas recirculation entirely, which meant they had to pay a pretty big fine for each engine they built within a certain time frame, because the engines weren’t up to the standards, at least until the EPA certified their ACERT system. Imagine that, paying the government extra money somehow fixes the problem of your engines not meeting their emissions standards.
It’s almost like it was never about emissions output in the first place and just a scam to forcibly steal money from companies. Regardless of your stance on emissions systems, the point is that CAT made a huge investment and gamble on ACERT being superior to EGR, and ultimately it wasn’t.
In the long run, they were having tons of warranties with ACERT equipped engines, on top of losing market share, mostly to Cummins. The combination of those two things made it barely profitable at all for them to build on-the-road truck engines, and on top of that, they weren’t going to meet the upcoming 2010 emissions standards which were going to be even stricter.
Because of the upcoming emissions standard changes, market share being lost to Cummins and other companies, and warranty claims, CAT announced in 2008 that they’d be leaving the on-the-road truck engine market in 2010 before the emissions changes went into effect. On the same day though, they also announced a partnership with Navistar, but more on that later. That begs the question, though, why not just switch to EGR, add a DPF system and SCR, and continue to compete with the other companies?
Low Profit and High Cost
Well, financially it didn’t make sense. They were already spending the large majority of their R&D budget on making their on-the-road truck engines emissions compliant, plus the warranty claims. It just didn’t make sense, especially when you consider that even with their market dominance, at one point controlling upwards of 40% of the on-the-road truck engine market, these engines only accounted for 10% of their income.
When you consider how much money they were dumping into making their emissions systems work and all the headaches involved with that, and that it was all for only 10% of their income, it makes sense to just shut that program down and focus on the more profitable parts of your business.
Ultimately though, they were forced out of the market by an artificial need for changes to their products. The need for cleaner and cleaner engines is ultimately what crushed them because they just couldn’t get their emissions systems dialed in to a point that their customers were satisfied, so you can really thank the US Government for crushing another company.
2008 Announcement
To be fair though, their 2008 announcement to stop making on-the-road truck engines also aligns with the 2008 stock market crash, which saw their stock price fall dramatically. I should also bring up the fact that companies like Kenworth, which builds trucks, ultimately could one day cut off an engine supplier such as CAT, and introduce their own engine line, or create an exclusive partnership with a different engine supplier.
With that in mind, CAT didn’t want to just continue being an engine supplier for on-the-road trucks, but to also be one of the companies building the trucks around the engine, so they got into the truck building market. So, after killing off their engines in 2010, they launched their CAT truck in 2012. Some of these trucks even included a CAT CT15 engine which was based on the C15 engine, but that engine still didn’t meet emissions standards which meant low sales and more fines from the EPA.
The CAT Truck
With that in mind, the CAT truck was generally fitted with an International engine, which is where that Navistar partnership I mentioned earlier, comes into play. Ironically though, the International engine wasn’t as reliable or as powerful as the old CAT engines, which meant that CAT has their branding on a truck with an engine that was worse than a CAT engine.
Simply put, the CAT truck sucked, was unreliable, and basically, everyone was buying other trucks such as Kenworth, Peterbilt, and so on. Ultimately this lead to CAT shutting down their truck building venture in 2016, which meant they had fully exited the new manufacturing of engines and trucks, but they didn’t just say f*ck it and leave their old customers out to dry, so they shifted their focus towards offering parts to help keep their old engines on the road longer.
Summary
So, that’s the full story of how CAT went from dominating the on-the-road truck market for decades, at some points controlling up to 40% of the engine market, to seemingly shutting down out of nowhere, followed by a failed attempt to build the truck rather than the engine.