Caterpillar Inc. and the commercial vehicle division of DaimlerChrysler AG have agreed to form a 50/50 global alliance to develop, manufacture, market and distribute medium-duty engines, fuel systems and other powertrain components to serve the needs of third-party customers and for use in their own products. The agreement provides the framework for a number of joint ventures, supply agreements and cooperative projects, subject to the consent of U.S. and European regulators. According to the framework agreement, upon regulatory approval, the Alliance will create: -- A medium-duty engine joint venture that will develop, manufacture and market current and future medium-duty engines and parts for sale to third-party customers and to DaimlerChrysler and Caterpillar for use in their own products. The sales volume of this joint venture is expected to grow significantly by mid-decade from a level of about $2 billion for the combined parent companies in 2000. -- A fuel systems joint venture that will develop, manufacture and market current and advanced technology fuel systems to third-party customers and for use by the parent companies. The sales volume of this joint venture is expected nearly to triple by mid-decade from a level of about US$600 million for the combined parent companies in 2000. -- Research and engineering cooperation in such key areas as combustion technology, electronics, air-handling systems, exhaust aftertreatment and materials technology. The goal of the two companies is to enable their engines to meet increasingly demanding customer and regulatory requirements for noise and emissions control. These engines will be sold to third parties and incorporated into Caterpillar's and DaimlerChrysler's own products. -- Combined purchasing volumes that will focus on delivering the procurement cost synergies created by the various elements of the alliance. -- The medium-duty engine joint venture will include Caterpillar's U.S. facilities in Greenville, SC, and its operations in Peterborough, UK. DaimlerChrysler will contribute its Sao Paulo, Brazil, medium-duty engine facility. DaimlerChrysler's Mannheim, Germany, facility, both parents' engine remanufacturing facilities, and certain operations in Caterpillar's Mossville, IL, facility and in its Gosselies, Belgium, facilities, will contribute as contract manufacturers to the joint venture. Both companies' medium-duty engineering/development resources and related intellectual property also will become part of the venture. -- The fuel systems joint venture will include Caterpillar's U.S. facilities in Pontiac, IL, and in Jefferson and Thomasville, GA, as well as its remanufacturing facility in Nuevo Laredo, Mexico. DaimlerChrysler's Glatten, Wolfratshausen, and Rellingen facilities in Germany, and its U.S. remanufacturing facility in Grand Rapids, MI, will participate in the venture. In addition, the two partners reached agreement for Caterpillar to continue to supply heavy-duty 10-16 liter engines for use in Freightliner companies' trucks. Both DaimlerChrysler and Caterpillar emphasized that they also will remain independent global suppliers of heavy-duty diesel engines, which are excluded from the alliance. Caterpillar is a manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Headquartered in Peoria, IL, the company posted 1999 sales and revenues of $19.7 billion. DaimlerChrysler AG carries vehicle brands Mercedes-Benz, Freightliner, Sterling, Western Star, Setra, Thomas Built Buses, DDC and MTU. In 1999 the commercial vehicle division of DaimlerChrysler achieved revenues of $26.9 billion and sold 555,000 trucks, vans and buses.