Due to slump in the US construction market, some of the established construction equipment majors are under utmost pressure. Nevertheless, some have done very well as strong demand from Asia and Europe has offset the fall in the US market. How is Caterpillar coping up with this situation?
Looking at our most recent quarterly financial results for the third quarter of 2007, Team Caterpillar is performing remarkably well. It was our best quarter ever for sales and revenues with the $11.4 billion setting a new mark. Profit of $927 million and $1.40 per share also set a new high as the best third quarter in our history. As you noted, our sales and revenues for North America were down by 11 percent for the third quarter, but this was more than offset by booming Demand around the world.Sales in Asia Pacific climbed 30% while sales in Europe, Africa and the Middle–East rose 36% for the quarter. Sales in Latin America also increased with a 20% gain. These impressive gains demonstrate the strength of Caterpillar’s global business model and investment over the years to support customers in emerging markets outside the U.S.
Lot of churning is taking place in Indian construction equipment market and companies are set to widen their business platform, and product portfolios. What are Caterpillar’s plans on this front?
Caterpillar recognizes the importance of the Indian market, and as the Indian business platform evolves, we want to assist our customers through that evolution. In response to market challenges and to address rapidly expanding construction industry needs, Caterpillar, in conjunction with its dealers, has initiated a network of Cat Rental Stores across India. The goal is to establish 12 Cat Rental Stores by year’s end and a network of 75 by 2010. The stores will feature a comprehensive range of Caterpillar and allied brand tools and equipment to help meet Indian customers’ jobsite needs. Together with Indian dealers, TIL Ltd, and GMMCO Ltd, Caterpillar has established an innovative Contractor’s College to educate machine owners and users in the construction, mining and power systems market. Contractor College was one of a number of customer-focused programs Caterpillar and its Indian dealers initiated to assist Cat customers as they achieve improved productivity in their businesses. At Excon in Bangalore we displayed a Hydraulic Excavator Simulator, one of the many tools for the Contractor College. Operators can improve their skills through this simulator, which impacts productivity and profitability of our customers. Working closely with our dealers, we understand the challenges facing the Indian market and what we are able to do to help our customers improve their business and enjoy greater success. In addition, Caterpillar continues to invest in its manufacturing, logistics and technology operations based in India.
What are the perils in pricing in a market like construction equipment where innovation and fierce competition are changing the rules of the game. Do you believe in the benefits of high volume even at a lower per unit price to build and widen customer base?
For over 80 years, Caterpillar’s business philosophy has remained the same—to provide our customers with the best and most competitive products, and along with our dealer network, to provide unsurpassed support for those products. This global business model focuses on providing value to our customers as we enable them to do their jobs in the most efficient and economical manner. As Team Caterpillar helps these customers to complete projects in the most cost effective and timely manner, those customers will become more profitable and they will be able to grow their businesses. By providing our customers high quality and reliable equipment and unmatched customer service, we will help them to be successful. Caterpillar has followed this business model for more than 80 years, and Caterpillar’s global leadership position in the industry today is a testament to our mutual success with our customers.
How Caterpillar looks India as a big chunk of market for its products and services. What market share the company is looking to garner in the next 3-4 years in view of tremendous infrastructure spending. Do you plan to set up more manufacturing facilities or upgrade existing ones in India near future?
Caterpillar’s presence in India is stronger than ever. We currently employ nearly 3,000 people in India and we are investing in our operations across India to support our growing customer base in India. In 2002, Caterpillar established an Engineering Design Center in Chennai to provide engineering support to the enterprise in product design and development. Caterpillar manufacturing operations located in India produce mining and earthmoving equipment, engines, engine components and generator sets. These products primarily support customers in the domestic Indian market and in the wider Asia Pacific region. As a general policy, Caterpillar does not discuss market share, but we believe our continued investment in India as well as the investments our dealers are making in this market will lead to continued success for our customers in India. Additionally, as we help our existing customer base in India succeed and grow our experience around the world tells us that other contractors and potential customers in India will seek to benefit from the value that Caterpillar and its dealers bring to market.
What major segments of construction equipment in India are set to grow and which segment Caterpillar would be focusing on?
The Indian Government recognizes the need for more roads, power, ports, airports etc. Naturally, the result is a construction and mining industry that is growing rapidly and quite naturally fits perfectly for the focus of the broad range of Caterpillar products being offered to Indian contractors. For decades all around the world, Caterpillar customers have used Cat machines and engines to make progress possible. The current plans for development and modernization in India, and the need for products to support those plans means that India is among a handful of developing nations in the world where there is tremendous potential for Caterpillar to support current and future customers who will play an important role in the development of India’s economy. This development will help to improve the standard of living for millions of people living in India and Caterpillar and its dealers are proud to help play a role in this positive development.
What enabling policy provisions Caterpillar looks to Government to further facilitate its business operations in India?
To allow the flow of goods and services throughout India freely and without the encumbrance of permits and multi-taxations would improve business operations. To allow OEM’s like Caterpillar to provide customers remanufactured products. Being one of Caterpillar core competences, REMAN Products provide customers a cost-effective way to maintain and repair equipment, as well as to promote sustainable development in business.
