Caterpillar Inc. (CAT) has agreed to engage Exxon Mobil Corp. (XOM) to manufacture lubricants for its factories and dealers. Under the multi-year agreement, Exxon will exclusively supply the 33 private-label lubricants that Caterpillar uses for its engines, transmissions, hydraulics and final drives.
Exxon has been supplying private label lubricants to Caterpillar since 1987. The companies are also jointly engaged in product research. One of the significant outcomes of this research is the introduction of lubricant technologies that enhances the performance of machines and engines, while lowering operating costs for Caterpillar. Additionally, they provide greater sustainability through extended oil drain intervals and protection of engine emission reduction systems.
Exxon and Caterpillar are also developing next generation lubricants and innovative technologies that will help reduce emissions and extend component life.
Caterpillar is well positioned to expand margins through its CAT Production System initiatives, ultimate pricing power, market leadership, and exposure to the global infrastructure boom. However, these positives will be partially offset by the delayed economic recovery in the developed nations, the impact of an unfavorable product mix and higher pension expense.
In the first quarter results of fiscal 2010, Caterpillar had raised the sales and revenues range and profit expectations for fiscal year 2010. For sales and revenues, the revised range was $38-$42 billion. The profit was expected to be in the range of $2.50 – $3.25 per share.
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