Friday, November 11, 2011

Caterpillar to Shift Some Production to U.S.

By BOB TITA

Caterpillar Inc. said it plans to shift production of small construction machinery from Japan to a new plant in North America that is expected to employ more than 1,000 people.

The new plant, whose location wasn't identified, will become the company's global source for small bulldozers and mini-hydraulic excavators. It also will export partially assembled mini-excavators to Europe to improve delivery times for European customers.

Caterpillar, which is based in Peoria, Ill., said it expects to begin construction during the first half of 2012.

Compact machinery originated from Japan's cramped urban centers where full-sized machinery is too large for many job sites. But the small machinery has become ubiquitous on construction sites in the U.S. and Europe, performing a variety of tasks from moving gravel to digging holes for building foundations.

"The markets for smaller track-type tractors and mini-excavators have evolved significantly in the past 30 years, with the majority of customers now located in North America and Europe," said Mary Bell, vice president for Caterpillar's Building Construction Products division. "Producing these machines at a North American location will put us in the best possible position to serve our customers in the building construction industry."

The new plant will handle all major fabrication work for the machinery, painting and final assembly. The company also is planning an on-site distribution center for the equipment made at the plant.

Caterpillar, the world's largest manufacturer of construction and mining equipment by sales, has been rearranging its overseas assembly sites to create more production capacity for developing countries, particularly in Asia. Its plant in Sagami, Japan, that has been assembling small bulldozers and excavators will be retooled for high-tech component assembly to support the company's growing production base in Asia.

Caterpillar last year announced plans to move some of Sagami's excavator production to a new plant being constructed in Wujiang, China.

Caterpillar also is moving assembly of its larger excavators from Akashi, Japan, to a new plant in Victoria, Texas, to free up production capacity for Asian markets where sales of Caterpillar equipment have been surging in recent years. The new Texas plant is expected to be completed by the middle of 2012.

Caterpillar's announcement of a new plant without naming a location will likely set off an intense competition between U.S. states hungry for manufacturing jobs. States interested in hosting plant can be expected to offer the company incentive-laden aid packages with tax breaks and government grants for training new employees.

Nearly all of Caterpillar's investments in new U.S. plants in recent years have been the South, particularly Texas and North Carolina, where the company's Building Construction Products division is based. Caterpillar already builds compact construction machinery in Clayton and Sanford, N.C.

Write to Bob Tita at robert.tita@dowjones.com

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