Caterpillar & Shanghai Diesel In Talks

Posted on March 22, 2006 reports that Chinese engine manufacturer Shanghai Diesel Engine Co. Ltd. is in preliminary discussions to boost its cooperation with Caterpillar Inc. "We are in talks with Caterpillar to explore the possibility of a closer relationship," the company said in a statement published in the Shanghai Securities News. Shanghai Diesel issued the statement in response to recent media reports about the Caterpillar’s acquisition ambitions in China.

Caterpillar confirmed the talks to Reuters, but declined to provide any details. "We are currently discussing possible additional cooperation with Shanghai Diesel, but at this time we have nothing to announce," Caterpillar spokesman Jim Dugan said.

A senior executive at Shanghai Diesel told Reuters the two parties set up a joint venture in the early 1990s to produce diesel engines for trucks, but later closed that operation. The Chinese firm continued to make diesel engines under license from Caterpillar, with the products sold mostly in the domestic market.

Talks with Caterpillar on further cooperation started this year, the executive told Reuters, adding that nothing has been decided. The Shanghai Diesel executive declined to comment on the possibility that Caterpillar might buy a controlling stake in the Chinese firm, in a move similar to the Xugong deal.