I'm not exactly sure what this means, but I'm working on finding out. The Caterpillar Building Construction Products include telescopic handlers, backhoe loaders, track and wheeled excavators, track-type tractors and track-type loaders, wheel loaders, skid steer loaders and integrated toolcarriers. Watch for mention in this press release of pricing and product development . . . CHICAGO (Dow Jones)--Caterpillar Inc. (CAT) is freeing its compact-construction-equipment business from the company's corporate confines in hopes of making its skid-steer loaders and mini-excavators more competitive and profitable. Managers for the Building Construction Products division will be able to make decisions about pricing, new product development and purchasing components without the centralized corporate structure used for the company's larger machinery lines. The move is intended to make the construction-products division more responsive to a formidable set of rivals that include U.S. market leader Bobcat Co., U.K-based JCB Ltd., Japan's Kubota Corp., Deere & Co. (DE) and CNH Global N.V (CNH). "A lot of the other companies around the world that compete in this small end are just focused on those small products," said Caterpillar spokesman Jim Dugan. "The idea is to allow Building Construction Products to be more agile ... and focus on its competitiveness and profitability." During the first six months of 2009, revenue from the construction-products division fell 68% from 2008 to $584 million. The customer base for the business is largely made up of smaller contractors and landscapers that have been hit hard by the collapse of housing construction in the U.S. in the past year. Caterpillar, based in Peoria, Ill., expects the division to become more efficient at lowering its costs, allowing the company and its dealers to offer lower prices on compact equipment without sacrificing profit margins. The changes also will apply to Caterpillar's forestry-equipment line, which is part of the construction-products division. Industry analysts say skid-steer loaders and small excavators often wear out after four or five years of regular use, requiring manufacturers and dealers to obtain the bulk of their profits from the initial sale of the equipment. "The Cat dealers are used to selling machinery at lower margins and then selling parts for it forever and ever into the future," said Frank Manfredi, president of Manfredi & Associates, a machinery-market consultant in Mundelein, Ill. "The small products don't generate a lot of parts business. They don't lend themselves to major engine rebuilding." Caterpillar said it has no plans to exit the small-equipment market. The changes in constructions products do not include creating a separate holding company or subsidiary for the division. Construction products will continue to rely on Caterpillar's back office operations, information technology and employee services. Vice President Mary Bell, a veteran Caterpillar executive who has headed construction products since 2007, will remain at the helm. Management and manufacturing operations also remain located in North Carolina. The transformation of the business is expected to take several months to complete. Caterpillar's stock on Friday ended down 1.25% at $51.20 a share. ###
Are they going to farm out the manufacture of the mini's and skids?
sounds like they will have a NOT made in USA sticker on them....soon
Will be interesting to watch.
Most of Cat's stuff already isn't made in the USA. Rubber tired stuff and small dozers come from Europe and tracked stuff comes from Japan. Mitsubishi has a big role in the Cat excavator production. They design and build the machine and Cat-Michigan powers it. About the only thing that is US made still by Cat is the engines and transmissions. Hydraulics are built by Haldex in Britain. Its really a shame, you pay for a US name to get a foreign POS .
V16CatMetKanick - You sir, do not know what your talking about.
Thanks, keerym! Good to see your sentiments. This is an interesting move. I'm not sure what it means, either... we'll find out.
our 315 was built in japan. just saying
I am not sure I understand the "sell the machine cheap and rely on selling parts and service on the machine to make your money." I have never saw that as a CAT business philosophy. It seems more like their idea is to sell the machine high, justify the high purchase price on superior service, high resale and more productivity. I am not saying that is reality only that has been the drum they keep beating. I have never heard any say that CAT equipment is cheap to purchase new. The article stating basically that because smaller equipment is basicly disposable that the compact lines are not profitable over the long haul. Interesting. I wonder what their solution to this will be. They also illude to not being quick enough to respond to the changing market conditions in their present configuration. I wonder how they plan on fixing that. This should be interesting.
Bingo. There is actually a bigger picture, however, and I will publicly challenge Cat's executive management to propose a solution to this: if you think the CCE industry is unprofitable, how exactly do you plan to sell machines in China and India, where machines are even more disposable? If Cat can fix BCP, there's still no guarantee that they'll be able to get a seat at the China and Indian tables with the same strategy.
From my perspective of the article it looks like the management at Cat will allow the CCE people to manufacture their machines without getting stuck in the old management processes. Maybe they can find their own suppliers or change designs for the better while machines are in production. Maybe a new production process or using sub contractors for specific component supply would work better. There are always different ways that economies of scale can be applied to a manufacturing process. Sometimes just taking the committees out of the decision making process will save a ton of money. I really can't see Cat marketing any machine that they don't consider a premium product.
I own a Cat skid steer and when this thread popped up I was a bit surprised at the title. If Cat small equipment is currently "uncompetitive", they sure have sold a lot of units. I demoed the first Cat skid steer that our dealer got in and was so impressed, I waited 2 years for the high flow version to be introduced, I bought the first one they had come in the yard. For me the productivity of the machine outweighed any other consideration, but even considering that the price of the $32,000 machine was within $2000 of the major competing manufacturers, in fact they all fell within a $2000 range. I've often wondered how the manufacturers recoup their R&D costs with compact equipment, there are so many players and a limited market. I do hope that Caterpillar does not consider lowering the quality of their machines in search of what they consider a more competitive pricing structure. I've often stated here at the Board that the support that Caterpillar gives their customers is an important consideration in the purchase price and leads directly to profit margins.
I would not say that Cat was "uncompetitive" in this particular market, I would say that they just are not dominating the market the way they like to in other areas. From the article it seems that Building Construction Products will be in tuned to what the customers' needs are and can adjust the product faster then having to go through the corporate chain. We have one Cat mini-excavator and three Hitachi/John Deere. We have not been impressed with the Cat, but absolutely love the Hitachi/John Deeres. I have spoken with the Cat salesman about the problems with the Cat when compared to the others. He has past this feedback on in hopes BCP will address the problems. The other issues that might be corrected with this new corporate arrangment is I have asked Cat as well as other manufacturers to add options to the machines such as bolt on blade edges and heavy duty buckets on the mini excavators. If the market norm is a life span of 4 or 5 years then Cat should change that with a machine that could economically be rebuilt over and over. We paid more for our Cat then the others and was under the assumption that it was a Cat and would be superior to our other machines, we were fooled. This is where they could change, but I am afraid that they will focus more on throwaway machines and stick with the 4 or 5 year life span.
You might be on to something here, and if this is the case they're going to have a tough time dominating a market with so many players. With the large equipment, they don't have near the amount of competitors as they do with the compact equipment, so market share will naturally be higher. With the smaller equipment, there are so many different levels of quality to choose from that all the manufacturers have to be careful they don't price themselves outside what the consumer is willing to pay for a better quality machine. It should be interesting to see how this pans out, and whether we get better equipment as a result.
I can see Cat reducing overhead, that just makes sense. Where they will have problems is if they reduce the quality, how do you still call yourself the best? The other brand salesman will have a field day on that. Cat was late to the game in the skid market, are they having a harder time than thought?