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TRENDS AND TIDBITS continued from page 23 Caterpillar, Largest Maker of Construction Machinery, Mounts Quick Recovery 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 work- force by 33,000 people world- wide in 2009, closed plants and posted lower profi ts. But the Peoria, Illinois-based company has mounted a quick recovery and is emerging as the poster child for America's manufac- turing renaissance. In 24 months, 15 Caterpil- lar facilities have been built or updated in the United States, tens of thousands of work- ers have been added to the pay- roll and $2 billion is committed for capital investments on its home soil this year. "We haven't seen Caterpil- lar doing this much building in the United States since prob- ably the 1960s," said Peter Holt, owner of the Holt Caterpillar dealership in San Antonio. Cat- erpillar is building a $200 mil- lion 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 fl ood of demand by heavy equipment users in America - rang- ing from construction compa- nies to oil drillers to cement producers - that are looking to replace aging machines now that the economy is improving and credit is easier to obtain. But a major U.S. expan- sion is not without risks for Caterpillar. Th e 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 2010, although U.S. demand is brisk. Even Holt, the dealer whose family was infl uential in founding Caterpillar, has a bad taste in his mouth from previ- ous 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. " WIND AT CAT'S BACK Caterpillar has money to spend. Th e company reports fi rst quarter earnings on April 25, with analysts expecting $2 billion of profi t on $16 bil- lion in sales, or a 47 percent increase in earnings over the entire course of 2009. Rev- enue this year is expected to top $71 billion, which would be $20 billion more than the company reaped in 2008. While the company has expanded quickly in emerg- ing markets and new sectors, including mining and rail- roads, much of its confi dence hinges on its faith in a gradu- ally improving U.S. economy. "We came out of the reces- sion much stronger and faster than expected, " Caterpillar Chief Executive Doug Ober- helman said in a company report in March. "I'm not one IDA UNIVERSAL May-June 2012 for passing up sales, so we really had to ramp up production quickly. " Key to this optimism is Cat- erpillar's record order backlog of $30 billion, three times higher than it was in 2009. Some customers will not get trucks they have ordered until as late as 2014. For contractors in south Texas, one of the key drivers of demand is the oil-rich Eagle Ford shale. "You can't get enough bulldozers and excavators right now, " said Barry Peterson, who buys equipment for Bay Ltd, a Corpus Christie, Texas-based construction company. He oſt en is in the market for used equipment with relatively little wear and tear, but machines made in 2009 and 2010 are nearly impossible to fi nd, forcing Bay to rely on the new market. Caterpillar Chief Financial Offi cer Ed Rapp said the com- pany's business cycles typically run in six-year increments and the current upswing is still in its early stages. "Th is time, we've tried to invest earlier in the eco- nomic cycle... you want to take advantage when the wind is at your back, " Rapp told Reuters in an interview. KEEPING PACE Meeting the needs of buy- ers like Peterson and the rest of the market is a risky but neces- sary proposition for Caterpil- lar. If it does not move quickly to boost production, Caterpil- lar risks losing market share to a growing group of global competitors that are edging in on its turf. "Th ere are a lot of them trying to come in," Peterson said of Caterpillar's com- petitors. He said many of those players, including South Korea's Hyundai and Japan's Komatsu, are eff ectively under- cutting Caterpillar on price, and have better availability and adequate warranties. "Hyundai has one of the best excavators on the market right now and their price point is 35 percent lower than Cater- pillar's. I buy a lot of equipment and that's something I look at very closely. " Holt, the dealer, said that availability of machines is a roadblock Caterpillar needs to clear. "We've had alloca- tion issues, " he said, referring particularly to excavators - versatile machines that represent Caterpillar's largest volume product. www.huffi ngtonpost.com, 4-9-12 Trends continued on page 27 25