Eaton and Cummins announced on April 10 a new joint venture, Eaton Cummins Automated Transmission Technologies, to design, develop, manufacture and service next-generation automated manual transmissions (AMTs) for heavy- and medium-duty commercial vehicles. The JV also includes current Eaton AMTs.
Cummins and Eaton will each own 50% of the new JV. Eaton will receive $600 million in cash from Cummins, which will consolidate joint venture results as part of its Components business segment. The transaction is expected to close in the third quarter of 2017.
“Cummins and Eaton have worked along side each other for decades. This [JV] will accelerate our ability to develop and deliver innovative product solutions for our customers,” Ed Pence, vice president and general manager of Cummins High Horsepower Engine Group, said in a conference call with media. “This strategic partnership can provide us the ability to expand our global footprint and customer base by combining the Eaton and Cummins engineering and technological expertise in the design of automated transmission technologies, powertrain products, and deliver improved performance, reliability and fuel efficiency for our OEM and end-use customers.”
The global joint venture will leverage both Cummins’ and Eaton’s global service and support networks. Eaton’s current medium-duty automated transmission, Procision, and next-generation heavy-duty automated transmissions will be part of the joint venture. It will also market, sell and support Eaton’s current generation of automated heavy-duty transmissions to OEM customers in North America.
The companies plan to announce a new next-gen heavy-duty product later this year.
Ken Davis, president of Eaton’s Vehicle Group, said in a conference call that the new joint venture company will develop automated transmissions that are vertically integrated with Cummins diesel engines, as well as AMTs for “targeted engines” from OEMs.
“Look at our history at Cummins of partnering with our OEMs to provide them with engine solutions, with air handling solutions through Cummins Turbo Technologies, to emissions solutions through our aftertreatment business, and of course our fuel systems business,” Pence said. “We believe that this automated transmission technology partnership fits very well into that portfolio of allowing Cummins to offer the very best integrated solutions for our OEM partners globally, but also where they are using their own proprietary engines, help them to develop the best-performing commercial vehicles they can with specifications of their choice.”
The initial focus of the joint venture is “all on investment for growth,” said Pence—“harnessing the talent, the capabilities, and technology innovation of both companies as we pursue that growth.”
“Our main focus is how do we accelerate the growth of this business both in the U.S. and globally,” Davis added. “But as we get into this joint venture we will certainly take a look at what [cost savings] opportunities exist in terms of synergies of materials and development, etc. It's part of the optimization of working together.”
Multiple vehicle segments in North America will benefit from this joint venture, according to Davis. “Certainly on-highway markets with our current automated products make a lot of sense—everything from our current SmartAdvantage 10 speeds up to our 18 speeds, and those can be used for heavy haul and vocational products as well,” he said. “The next-generation products originally will be launched with a line-haul target, but eventually we’ll continue to build multi-speed versions of those, and they'll be targeted across multiple vocations. Our Procision is aimed right at the medium-duty market where Cummins has a very strong presence. Everything from P&D (pickup and delivery) to buses, potentially RV segments, all those vocations for medium-duty will certainly be a prime target.”
The joint venture will be located in Eaton’s Galesburg, MI, campus, where “a large amount of our transmission development work is done today,” said Davis. Manufacturing will occur at Eaton’s existing assembly plants that currently produce the transmissions. “We'll let you know where the next-generation heavy-duty [AMT] will be manufactured when we announce that product later this year.”
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.