Monday, April 09, 2012

Caterpillar: Poster Child for the U.S. Manufacturing Renaissance: Record Order Backlog of $30 Billion

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 U.S., 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.

While the company has expanded quickly in emerging markets and new sectors, including mining and railroads, much of its confidence hinges on its faith in a gradually improving U.S. economy.

"We came out of the recession much stronger and faster than expected," Caterpillar Chief Executive Doug Oberhelman said in a company report in March. "I'm not one for passing up sales, so we really had to ramp up production quickly."  Key to this optimism is Caterpillar'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."


Related: See CD post below on Midwest manufacturing.  

10 Comments:

At 4/09/2012 10:30 AM, Blogger morganovich said...

i've never done the regression, but it would be really interesting to see CAT revenues vs prices of key commodities.

i have a strong suspicion that their sales are tightly linked to the price of oil, coal, etc.

 
At 4/09/2012 10:46 AM, Blogger Buddy R Pacifico said...

"i've never done the regression, but it would be really interesting to see CAT revenues vs prices of key commodities."

I have done some digression analysis because my college stats tutor is not available. The results:

50% bonus depreciation on 2012 new CAT purchases.

The 50% depreciation bonus is probably boosting sales. Regardless, CAT has great products that are being built in the U.S.

So, build baby, build.

 
At 4/09/2012 10:51 AM, Blogger Benjamin said...

Build, baby, build! I love it, Buddy.

Let us hope the Fed delivers to American manufacturers regime certainty. And an exchange rate for the dollar that helps US manufacturing.

How can I expand a U.S.-based plant, if I worry that the Fed is going to fight global commodities inflation with tight US monetary policy again (ala 2008)?

What if the dollar soars?

We have a hide-and-seek, peek-a-boo Fed. No one knows what they will do next.

The Fed should target strong nominal GDP growth, and lay out transparent plans for the future.

It should announce it will buy $100 billion in Treasuries a month until we hit 7 percent nominal GDP growth for six quarters in a row. It may even wish to indicate that the trading range of the dollar should be lower.

It would be nice if the Fed was an ally, not the enemy, of domestic manufacturing.

 
At 4/09/2012 11:26 AM, Blogger Jon Murphy said...

i have a strong suspicion that their sales are tightly linked to the price of oil, coal, etc

I agree with you completely Morganovich.

Maybe when I have some of that "free time" people seem to talk about, I'll run the numbers. I assume CAT historical sales data is available as they are a public company?

 
At 4/09/2012 11:54 AM, Blogger juandos said...

Interestingly Illinois has apparently shot itself in the foot in a manner of speaking...

Note the following Op-Ed in the Chicago Tribune by Doug Oberhelman CEO of Caterpillar: Why job creators skip Illinois

 
At 4/09/2012 12:52 PM, Blogger morganovich said...

j-

yeah, i doubt it is a coincidence that the new cat plant is going into right to work georgia as opposed to the deeply union owned Illinois.

 
At 4/09/2012 1:12 PM, Blogger NormanB said...

GDP is about 13% below trendline and comensurately, employment (as Dr. Perry points out)is still 5M below 2007 and probably low by another 5M due to population growth.

This slack situation will not last forever and when it really begins to end, well, you ain't seen nothing yet!!!

 
At 4/09/2012 7:12 PM, Blogger Ron H. said...

Jon M: "Maybe when I have some of that "free time" people seem to talk about, I'll run the numbers. I assume CAT historical sales data is available as they are a public company?"

Free time? As a whippersnapper, you won't be seeing much free time for 30 years or so.

Take that!

:)

 
At 4/11/2012 5:42 AM, Blogger KKSOLUTION said...

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At 4/20/2012 6:48 PM, Blogger james said...

Something like fifty thousand manufacturing facilities were closed and much of the production moved to china or elseware over the last tweleve years. Their may be a small number of manufacturing companies expanding employment in the USA. But for every manufacturing job created in the USA their are many more lost to china and elseware.

 

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