Illinois Courts Caterpillar for Factory Amid 10% Unemployment

Illinois is trying to persuade Caterpillar Inc. (CAT), the world’s largest construction and mining- equipment maker, that its home state is the best location to build a factory that will employ more than 1,000 people.

“We have reached out to them and we will continue our discussions,” Marcelyn Love, a spokeswoman for the Illinois Department of Commerce and Economic Opportunity, said Nov. 15 in a telephone interview. “We want to continue our relationship with them as well as to strengthen the Illinois economy.”

Caterpillar, which is moving certain tractor and excavator capacity to North America from Japan, said last week it may select the location of the new plant by year-end. The Peoria, Illinois-based company’s Chief Executive Officer Doug Oberhelman said in March that while Caterpillar planned to stay in the state, lawmakers had created an “unfriendly” climate for investment.

The company won’t comment or speculate on possible locations or which states have made approaches, Bridget Young, a Caterpillar spokeswoman, said in an e-mail today.

Caterpillar analyzes logistics, port access, proximity to suppliers and “the overall general business climate” when it assesses potential locations, she said. Love declined to comment on whether Illinois may offer incentives.

Tax Increase

Oberhelman said in May that he’d received inquiries from more than 20 states seeking investment from the company. CME Group Inc. (CME) and CBOE Holdings Inc. (CBOE), which operate exchanges for futures and options in Chicago, have said they will leave Illinois unless a 46 percent corporate tax hike approved in January is reduced.

Illinois’s unemployment rate rose to 10 percent in September.

Caterpillar said Nov. 11 it will shift manufacturing of small track-type tractors and mini-hydraulic excavators to North America from Sagami, Japan, bringing production closer to the majority of its customers. Construction of the new plant will begin in the first half of 2012.

The company also said this month it’s adding a new parts distribution center in California, a mining-truck plant in Batam, Indonesia, and is expanding existing Illinois factories to build more trucks and tractors. Caterpillar said Nov. 10 it offered as much as HK$6.89 billion ($885 million) to buy China’s ERA Mining Machinery Ltd.

The company is targeting an increase in sales of as much as 20 percent in 2012.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

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