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. Last Updated: 07/27/2016

Caterpillar to Make ZiL Fuel Systems

The U. S. engine maker Caterpillar Inc. has extended its strategic partnership with Moscow-based truck company AMO-ZiL, creating a Joint venture to produce fuel systems for ZiL's diesel engines.

The new firm Novodiesel will occupy 9, 000 square meters of manufacturing space in ZiL's plant in southern Moscow and will help ZiL increase output and quality of ZiL diesel engines.

"Novodiesel meets Caterpillar's needs to gain entrance to the Russia market", Richard Thompson, Caterpillar vice president, said in a company statement.

Caterpillar has had a long association with ZiL, playing a role in setting up ZiL's diesel engine production line. In June, Caterpillar, ZiL and U. S. truck manufacturer PACCAR, formed another joint venture, Novotruck, a marketing and dealership network for hybrid ZiL trucks equipped with Caterpillar engines and for some models of PACCAR's Kenworth trucks.

Caterpillar's other main business in Russia has been in mining. It formed a joint venture this month with the giant Urals metallurgical plant, Uralmash, to build oil drilling equipment, and has won contracts this year worth more than $150 million selling tractors and tools to Russia's oil and gas industry.

Alexel Cheretkov, president of Novodiesel, said that the new company, 51 percent owned by Caterpillar, would help ZiL overcome production delays at its main diesel engine plant in Yartsev, 400 kilometers outside Moscow.

He added that the new fuel could also help boost ZiL's sales of its mid-range trucks by improving fuel efficiency, reducing fuel emissions and raising reliability.

ZiL's main Moscow plant has been forced to operate only four days a week until the end of January because it is owed billions of rubles by customers in Central Asia, especially in Kazakhstan.

Cheretkov said he hoped the new improved fuel systems would help ZiL attract new customers in nontraditional markets in the former Soviet Union, especially in the private sector.

ZiL, which became one of the first state firms to go private earlier this year, produces about 150, 000 trucks a year Company officials say that it hopes to equip 75, 000 of these with diesel engines, thanks to the new Novodiesel fuel systems.

ZiL raised it prices 70 percent from Nov. 1 with the basic diesel-equipped truck now selling for 11 million rubles ($9, 700).

Russia's other main mid-range truck manufacturer, GAZ, based in Nizhny Novgorod, faces even greater problems replacing collapsing markets in the former Soviet republics. Last month it closed several production lines indefinitely because late payments by customers meant it could not pay suppliers.