FEATURE-Caterpillar’s big bet on the U.S. economy

Be prepared for the next great transfer of wealth. Buy physical silver and storable food.

Reuters / Mon Apr 9, 2012 6:59am EDT

* Company expands quickly to meet demand

* Dealers, buyers cite shortages of machines

* Risks from fragile recovery, Asian competition

By John D. Stoll

VICTORIA, Texas, April 9 (Reuters) – It hasn’t been long since Caterpillar Inc looked like the typical resident of the Rust Belt. Having misjudged how deep the U.S. economy would decline, the world’s largest maker of construction machinery reduced its workforce by 33,000 people worldwide in 2009, closed plants and posted lower profits.

But the Peoria, Illinois-based company has mounted a quick recovery and is emerging as the poster child for America’s manufacturing renaissance.

In 24 months, 15 Caterpillar facilities have been built or updated in the United States, tens of thousands of workers have been added to the payroll and $2 billion is committed for capital investments on its home soil this year.

“We haven’t seen Caterpillar doing this much building in the United States since probably the 1960s,” said Peter Holt, owner of the Holt Caterpillar dealership in San Antonio. Caterpillar is building a $200 million plant two hours southeast of his store, in Victoria, Texas, that is slated to start churning out badly needed excavators later this summer.

Underpinning Caterpillar’s U.S. momentum is a flood of demand by heavy equipment users in America – ranging from construction companies to oil drillers to cement producers – who are looking to replace aging machines now that the economy is improving and credit is easier to obtain.

But a major U.S. expansion is not without risks for Caterpillar. The U.S. economic recovery could still derail, given high unemployment and weak housing markets. And the growth rate of global machinery sales is also tracking at its slowest pace since May of 2010, although U.S. demand is brisk.

Even Holt, the dealer whose family was influential in founding Caterpillar, has a bad taste in his mouth from previous downturns. “Caterpillar has always tried to forecast,” he said. “We’ve never been any good at it (because) there is no consistency in the world economy.”

READ MORE

Thanks to BrotherJohnF

Leave a Comment


NOTE - You can use these HTML tags and attributes:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>