Employers find that students are graduating from engineering programs without the necessary competence and know-how to be successful in industry, often lacking sufficient communication and collaboration skills imperative for developing new products. Modern product development, from development and design through to production, planning, and marketing is moving increasingly to the digital domain as a result of technological progress and increasing pressure to deliver more complex and more customized products in less time at the lowest cost. The engineers of tomorrow must be able to communicate and collaborate effectively and efficiently using technologies and software, such as Computer-Aided Design (CAD) or Engineering (CAE), Product Data Management (PDM) or Enterprise resource planning (ERP) tools. In an effort to ensure that graduating students can successfully apply what they have learned in their engineering lectures to real-world engineering problems, the Lower Saxony Institutes of Technology (NTH) has sponsored a project "Computer-aided Product Development" that involves students in distributed development design projects that mirror what they will come across in industry. Engineering students from the Leibniz University of Hannover (Institut fur Produktentwicklung und Geratebau), the Technical University of Clausthal (Institut fur Maschinenwesen), and the Technical University of Braunschweig (Institut fur Konstruktionstechnik) work together on semester-long projects that require them to use engineering tools that are not often taught in typical engineering classes but crucial for product development in industry, exposing current shortcomings in the engineering curriculum. The project has been run twice, once with "closed" student groups at each site, each group responsible for a sub-assembly and communicating with students at other locations with regard to sub-assembly interfaces, and a second time with students from multiple locations making up "mixed" teams. Competence weaknesses have been identified, particularly in using PDM systems, and measures to improve the curriculum long term are being integrated into lectures. This paper will provide an analysis of the first projects as well as prospects for improving engineering education through distributed development projects.