Notes on Caterpillar Inc

Topics: Komatsu Limited, Peoria, Illinois, Caterpillar Inc. Pages: 19 (7285 words) Published: February 19, 2013
New Targets: Early to Mid-1990s
A new president, Tetsuya Katada, took over in 1989. Katada decided that Komatsu's management had been hampered to some extent by the company's goal of catching Caterpillar. Whereas this strategy had worked remarkably well in expanding the company while the global market was growing, now that worldwide demand for construction equipment was down, Komatsu did not have the flexibility to adapt. Katada believed that the creativity of Komatsu's middle managers had been sacrificed while everyone was concentrating on Caterpillar, and that managers had grown afraid to question the direction of the company. Katada's solution was to stop comparing Komatsu to Caterpillar. He encouraged managers to think of Komatsu as a "total technology enterprise," and to find new products and markets that fit the wider definition of the company. Komatsu's new goal became the somewhat broader "Growth, Global, Groupwide," with a more concrete aim to double sales by the mid-1990s. (last accessed 15 November 2012) Is Caterpillar Back on Track?

Posted on April 29, 2004
By Michael Arndt
For once, some good news from a heartland manufacturer: On Apr. 22, Caterpillar (CAT) surprised investors with blockbuster first-quarter results. The maker of heavy equipment and engines reported that sales leaped 34%, to $6.47 billion, a first-quarter record, while profits more than tripled, also a period best. Price increases of 1.5%, imposed across the board on Jan. 1, lifted both sales and profits by $74 million. More important was an upsurge in orders throughout Cat's product line and in virtually every geographic market. Better yet, Caterpillar expects the good news to just keep rolling in. It forecasts that profits will be at least 65% higher this year, instead of 40%, while sales are projected to rise 20%, up from its previous prediction of 12%. If the forecast turns out to be accurate, Cat would close the year with earnings of at least $1.8 billion on sales of nearly $27.2 billion, putting it on track to meet its $30 billion annual sales target by 2006. "Business is strong," says Chief Financial Officer F. Lynn McPheeters. "This is a broad-based recovery." UPS AND DOWNS. So is it time for investors to jump into the stock? Not necessarily. Cat shares hit a 52-week high of $87.50 in January, 2003, and were bumping close to that again as all the good news rolled in recently. But the price has since fallen to $77.64 on Apr. 29. Analyst David Bleustein of UBS Securities believes Cat could reach $91 within the next 12 months, up from his previous target of $82. He also hiked his 2005 earnings forecast by 24%, to $2.12 billion. But many investors seem worried that the strong economic recovery may not last. That's why Bleustein, for one, has a neutral recommendation on Caterpillar's stock. The shares have already risen substantially, having fetched only $45.72 at the end of 2002, unchanged from yearend 1999. Even at today's price, the price is still up 75% since Dec. 31, 2002, and 50% in the last 12 months. PRICE HIKES. Caterpillar's comeback, moreover, has been a long time coming. After peaking in 1998, equipment sales stalled for four years, at about $18.6 billion a year. Net profits slipped to less than $800 million in 2002 -- half the 1997 level. Typically, McPheeters says, the construction industry goes through downturns of two to three years. Indeed, the latest trough was the longest in decades. The Peoria (Ill.) manufacturer certainly surprised investors with a couple of other extraordinary moves: It announced that prices of all Cat machines will go up an additional 2% to 3%, effective July 1. This round of hikes -- like the last -- will probably stick because all of Cat's competitors are raising prices, too. Also, the company says it will be hiring more workers in the U.S. and abroad. Already, Cat's global payroll has grown by 3,750 workers, or 5.6%, from a...
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