Despite its toughest year on record, Caterpillar chairman/CEO Jim Owens sees light at the end of the tunnel he describes as the “Great Recession.” Speaking before a crowd of several hundred Wall Street and financial industry analysts in Peoria August 3-4, Owens said: “There can be no economic recovery without a recovery in construction and mining equipment.”
Cat projects a GDP decline in North America of 3.2 percent this year and positive GDP growth of 2 percent next year.
Owens also mentioned that the swiftness with which the downturn erupted last fall caught everyone by surprise, and had it not been for Caterpillar’s “trough” plan, created in 2005, the damage to the company may have been much worse.
When the economy and the markets went into freefall in September Cat pulled the trigger on the trough plans. Some 26,000 people were laid off worldwide, and inventories and costs were cut but the core of the business was protected, including progress on building a new engine plant in Seguin, Texas, and a new motor grader plant in Little Rock, Arkansas.
Stu Levenick, group president of the machinery business division, outlined the company’s new “Lane” system for simplifying orders and availability. High volume Lane 1 products will be available to customers in days in pre-packaged popular configurations. Lane 2 products will be available in weeks with standard configurations and some options. Lane 3 products will be available in months and Lane 4 products will also be available in months with specialized, engineered-to-order configurations. The company estimates that some 50 percent of its machine volume will come from Lanes 1 and 2.
Some financial points from Cat’s quarterly report:
· Shipments of new Cat machines are down by about two-thirds.
· Last year this time Cat was projecting $55 billion in global sales and revenue. The adjusted forecast for 2009 is $34 billion.
· There are high expectations for the Cat/Navistar truck alliance (the truck is “in clay” as of the August meeting).
· The mining industry has been hanging on to its trucks and equipment far too long and will have to increase purchases above normal levels very soon.
– Tom Jackson
CNH Reman aims for broad customer base
Newly-created CNH Reman, a joint venture between CNH Global and long-time supplier Springfield Remanufacturing, will expand CNH’s product coverage across five lines: engines and components; drivetrain and components; rotating electrics; electronics; and hydraulics.
CNH surveyed end users and dealers and determined a need for a low cost alternative to new components, particularly for maintenance to support older machines. More than 80 percent of dealers said a broad reman offering was needed, and more than 60 percent of customers said reman components were as good as new.
The CNH Reman Technical Center has been in place since March, and is currently equipped to handle 300 calls a day. The center expects business to triple over the next five years, says Eric Bippus, vice president of sales and marketing, CNH Parts and Service, who believes a combination of factors related to the state of the industry will contribute to the growth of remanufacturing. Bippus says CNH Reman will be positioned to reach those especially hard hit by the downturn. “The average age of equipment, a lack of preventive maintenance and construction equipment sitting idle creates our target market,” he says.
– Amy Materson