Detroit Diesel Corporation | Joint Ventures Begin in the Early 1990s
Joint Ventures Begin in the Early 1990s
Joint ventures with other major manufacturers further consolidated the revival of Detroit Diesel. German giant Mercedes-Benz entered into an agreement with Detroit Diesel in 1991 to develop electronic fuel delivery systems. As part of an engine development financing agreement, Diesel Project Development, a wholly owned subsidiary of Mercedes-Benz, bought $20 million of Detroit Diesel debentures in 1993, giving the German firm an 11 percent stake in the company. Volvo Penta also came to an agreement in 1993 that promised Detroit Diesel exclusive rights to certain Volvo Penta marine diesel products within the NAFTA area. Perkins Engine, based in England, and Detroit Diesel made an agreement in 1988 that facilitated certain aspects of distribution. Perkins also agreed to manufacture some smaller engines for Detroit Diesel, providing them with a variety of engines ranging from 5 to 2,500 horsepower. In 1993, Detroit Diesel formed a joint venture company with RABA plc of Gyor, Hungary. The new company, named RABA-Detroit Diesel Hungary, Kft., reportedly will use RABA as its Eastern European manufacturing center, opening up an extensive potential market for products. Finally, in a return to its roots, Detroit Diesel entered into a "technology coalition" with Republic Locomotive to build new electronically controlled locomotive engines.
These joint ventures represent a strategy that each of the major U.S. engine makers, Detroit Diesel, Cummins Engine, and Caterpillar, had begun to employ by the early 1990s. Rather than continuing to fight each other for a dwindling share of the American market, each company attempted to increase foreign sales. The U.S. manufacturers hoped that forging ties with foreign companies would open European and Japanese markets, where potential sales were double what could be had in the U.S. market. The management of Detroit Diesel believed that the NAFTA and GATT agreements would "provide opportunities for growth even after considering the cyclical nature of the North American heavy-duty truck market."