Caterpillar Inc. (CAT) and Navistar International Corp. (NAV) have signed a definitive agreement to build Caterpillar-brand construction trucks for North America and sell commercial trucks and engines in several overseas markets.

The joint-venture has been in the works since last June and is intended to leverage the two Illinois-based companies' strengths in manufacturing, engineering and dealer distribution.

Navistar and Cateripillar will develop heavy-duty trucks for vocational specialties, such as road construction, mining, logging and waste hauling. The trucks will be manufactured in Navistar's Garland, Texas, assembly plant and feature Caterpillar-badged engines built by Navistar.

The trucks will be sold by Caterpillar's dealers, helping offset the loss of sales from service and replacement parts on Caterpillar-built truck engines.

Caterpillar, the world's largest builder of construction equipment, plans to quit making engines for the U.S. truck market at the end of 2009 to avoid the cost of complying with new domestic emissions standards.

Frank Manfredi, president of Manfredi & Associates, an Illinois-based market research firm for the off-road equipment industry, predicted the vocational trucks will help Caterpillar exectuves determine whether the company would be able to field a broader line of heavy-duty commercial trucks to rival Volvo, which already sells trucks under the Mack brand, as well as Volvo construction equipment.

"I'm guessing this will lead to something more," said Manfredi. "The Cat dealers don't really have a lot of experience selling new trucks though."

The trucks will be unveiled in late 2010 and will go into full production in early 2011.

For Navistar, the key benefit of the collaboration is expected to be overseas. Navistar will build Caterpillar and International-branded trucks that will be sold through Caterpillar's overseas dealers.

Navistar, which is the largest maker of medium-duty commercial trucks in the U.S., considers overseas trucks sales a growth sector. But the company lacks an effective dealer network outside of North America. Caterpillar's dealers are expected to remedy that shortcoming.

The initial markets targeted by the venture are Australia, Brazil, China, Russia, South Africa and Turkey. The first trucks are expected to be available as soon as the third quarter.

The 50-50 joint-venture will have its own management team and a board of directors made up of representatives from the two companies.

Caterpillar's shares were at $31.35, up 0.1%, in after-hours trading, while Navistar's rose 0.2% to $32.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com