Caterpillar To Expand Manufacturing And Increase Employment In The U.S. With New Hydraulic Excavator Facility In Victoria, Texas

Caterpillar Excavator

Once fully operational, the facility is expected to employ more than 500 people and would triple Caterpillar’s U.S.-based excavator capacity

Caterpillar Inc. recently announced it has selected the city of Victoria, Texas, as the location for the company’s new state-of-the-art hydraulic excavator manufacturing facility. Ground breaking for the 600,000-square-foot manufacturing operation is scheduled to take place in September 2010. The facility is expected to begin production in mid-2012. Once fully operational, it will triple the current capacity of hydraulic excavators produced by the company in the United States, and would double the number of Caterpillar employees in the U.S. making excavators.

This announcement was released the day before the company’s annual analysts meeting, which was held at the New York Stock Exchange this year. Caterpillar Inc. CEO Doug Oberhelman reviewed the company’s updated five-year strategy and goals with analysts and investors this afternoon. During a presentation followed by a question and answer session held at the historic New York Stock Exchange, Oberhelman expressed confidence about Caterpillar’s growth opportunities throughout the world and the company’s strategic focus on operational execution, which will drive financial performance over the next five years.

Doug Oberhelman, Caterpillar CEO

Oberhelman also discussed growth opportunities and highlighted a series of recent investments totaling more than $2.5 billion that will increase capacity in nearly all geographic regions around the world and will position Caterpillar to expand rapidly.

“We have streamlined our organization from the top down, and our leadership team is driving an intense focus on helping our customers succeed,” Oberhelman said. “From our factory floors to our research and development laboratories and everywhere across the company, we have the talent in place to win, and as we execute this strategy, we will deliver greater value to our customers, our stockholders and employees.”

The primary goals for the next five years are focused in three areas:

•            Delivering superior results – earnings per share growth, operating profit after capital charge (an internal metric for measuring business performance) and cash flow

•            Developing the best team of people – world-class safety and inclusion

•            Becoming the global leader everywhere we do business – from the quality

of our products, to PINS (percent of industry sales) and including aftermarket parts growth

The Caterpillar Production System (CPS) is the primary enabler of the company’s plan to execute the updated strategy. Since its implementation, CPS has already resulted in gains in product quality, cost savings and employee safety. CPS is also the key reason Caterpillar’s manufacturing efficiency has improved in every quarter since the end of 2008.

“Our primary goal for stockholders is delivering total shareholder returns over the business cycle in the top 25 percent of the S&P 500,” Oberhelman said. “To do that, we believe that we need to deliver compound annual earnings per share growth of 15 to 20 percent over the business cycle,” said Oberhelman. “We performed well during the downturn in 2009, and so far this year we’re doing better than we expected as we came into 2010. Last year, we discussed our 2012 profit goal of sales and revenues in a range of $55 to $60 billion, and earnings per share of $8 to $10 – and that’s still our goal for 2012. We are on the path to 15 to 20 percent growth over the cycle,” Oberhelman added.

In just the last two months, Caterpillar has announced a series of investments to open new facilities, expand existing operations, develop a new mining shovel product line and expand into the locomotive business with the acquisition of Electro-Motive Diesel. The company’s improved financial performance positions Caterpillar to continue making these strategic long-term investments in order to maintain its global industry leadership.

“These recent investments total more than $2.5 billion that Caterpillar is putting to work over the next several years in the United States, Brazil, China and India,” Oberhelman said. “Our leadership team will be held accountable to deliver on these goals so that we can help our customers become more profitable. When that happens, everyone wins.”

The decision to increase manufacturing capacity and employment in the United States, which was discussed during the analysts meeting,  is part of Caterpillar’s long-term strategic initiative to develop the appropriate global footprint to competitively produce hydraulic excavators.

“Based on our comprehensive review of possible locations, Victoria’s proximity to our supply base, access to ports and other transportation, as well as the positive business climate in Texas made this the ideal site for this project,” said Gary Stampanato, Caterpillar vice president with responsibility for excavators. “Caterpillar is committed to maintaining its global leadership position in the excavator industry, and this new facility in Texas will play an important role in our long-term plans to provide customers in every region of the world with the products and solutions they need to help them with their businesses.”

“Texas is the best place in the nation to grow your business, and nobody knows that better than the companies that are already here in the Lone Star State,” Texa

Governor Rick Perry said. “This Texas Enterprise Fund investment in Caterpillar will help create good jobs to Texans, and this expansion is proof that our combination of low taxes, reasonable regulations, fair legal system and world-class workforce is working to attract and retain the best employers in the world.”

Victoria Mayor Will Armstrong said, “Victoria is proud to play a role in Caterpillar’s plans to expand its hydraulic excavator manufacturing in the United States, while at the same time Caterpillar will be an important part of the work to reinvent Victoria.”

Victoria County Judge Don Pozzi added, “I am excited that a company with the global stature of Caterpillar has selected our community and in these economic times, I am certainly happy that Victoria County is positioned to help a project that will put local people to work.”

Currently in the U.S., Caterpillar produces two excavator models at a facility in Aurora, Ill., where it also produces wheel loaders, soil and landfill compactors, wheel dozers and components. In addition, Caterpillar produces excavators in Belgium, Brazil, China, France, Indonesia, Japan and Russia. The new facility will manufacture the two models now made in Aurora, as well as several additional excavator models now produced in Akashi, Japan, and exported to the United States. The expansion of excavator production in the U.S. will allow the Caterpillar facility in Japan to better serve the growing demand for excavators in Asia. Caterpillar has also recently announced plans to quadruple excavator capacity at its manufacturing facility in Xuzhou, China, primarily in support of growing demand in the Chinese market.

“We are making a number of these long-term investments in our global excavator business so that we are appropriately positioned to support Caterpillar’s corporate strategy,” said Rich Lavin, Caterpillar group president with responsibility for construction industries. “This will enable us to maintain our global leadership position while delivering superior products to our customers and results for stockholders.”

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