Last month Paccar announced plans to build a $400-million facility to manufacture 12.9-liter and 9.2-liter engines for its Peterbilt, Kenworth and DAF-branded Class 8 trucks for the OEM's North American and global markets. The plant, which will be built at an undisclosed location in the Southeastern U.S., is scheduled for completion in 2009.

The announcement confirms a long-rumored Paccar initiative to vertically integrate its engines in the North American market.

“The Paccar 12.9-liter and Paccar 9.2-liter engines are of a similar displacement as to what's being offered in DAF trucks worldwide,” says Andy Wold, Paccar treasurer.

According to Mark Pigott, chairman and CEO, “The…facility…positions Paccar to capitalize on growing opportunities in North America, Europe and Asia.” He adds that it will provide the flexibility to supply products and components to Paccar facilities and customers on a global basis.

“Paccar has learned from DAF and its customers the performance and cost advantages of installing its own powertrain, as well as the benefits of additional aftermarket parts and service business for our dealers,” says Jim Cardillo, executive vp. “Offering a Paccar powertrain to our North American customers will provide additional choices in their vehicle specs.”

According to investment firm Bear Stearns, the Paccar announcement provides yet more evidence of a trend to build greater vertical integration among truck OEMs and would likely erode the market share of engine maker Cummins. The engines built at the Paccar facility will not compete directly with Cummin's 11- and 15-liter engines, but dealers may try to shift customers to Paccar-branded engines to gain more aftermarket parts business, Bear Stearns says.