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BAE Systems has signed a 20-year agreement with Caterpillar to collaborate on a parallel hybrid electric engine for heavy-duty trucks.

BAE said��last week��that the new system builds upon BAE’s HybriDrive power plant.

“The system, which can improve fuel economy by an average of 30%, is designed for heavy-duty truck applications that include refuse collection, construction, pickup and delivery, and utility vehicles,” BAE said.

Caterpillar will manufacture transmissions for the new vehicle.

“Through this alliance, our transmission will become an integral part of BAE Systems’ new HybriDrive parallel system,” Jeff Pohl, Caterpillar’s hauling and OEM drivetrains product manager, said.

BAE also said it has an agreement with refuse truck builder Crane Carrier Co. to develop engines for its trucks.