Caterpillar CEO Oberhelman to Campaign on U.S. Government Debt

Caterpillar Inc. (CAT) Chief Executive Officer Doug Oberhelman said he will campaign later this year for a cut in U.S. government debt because the issue affects customers of the largest maker of construction and mining machinery.

“It’s starting to hold us back,” Oberhelman said in an interview yesterday with Bloomberg Television’s “Street Smart” at the company’s demonstration and learning center in Edwards, Illinois. “For the contractor base and customers in this country, it’s worrisome. It has a chill in the air.”

Customers of Caterpillar are “scared to death” that tax rates will rise as public expenditure stalls, he said. Higher taxes and cuts in spending on government programs amounting to $607 billion as measured by the Congressional Budget Office will take effect at year-end without congressional action.

The looming so-called fiscal cliff is “holding back our customer base in the United States more than it is us,” Oberhelman said.

Oberhelman is a member of the Campaign to Fix the Debt, said Jim Dugan, a spokesman for Peoria, Illinois-based Caterpillar. The organization is a bipartisan group of former lawmakers, business leaders and budget experts that also includes former World Bank President Robert Zoellick and Honeywell CEO David Cote.

Political Donations

The group said in July it would rally centrist voters who are more concerned with reducing the budget deficit than ideological battles over taxes, spending and the size of government.

Oberhelman donated $2,500 to Republican presidential candidate Mitt Romney in March and the same amount in June 2011 to Illinois Senator Dave Koehler, a Democrat, according to data compiled by OpenSecrets.org, a campaign finance watchdog group in Washington.

Caterpillar rose 0.6 percent to $88.94 in New York yesterday. The shares have dropped 1.8 percent this year, the worst performer on the Dow Jones Industrial Average after Hewlett-Packard Co. (HPQ), McDonalds Corp. and Cisco Systems Inc.

“We’re global enough we’ve got things we can do all over the world,” Oberhelman said.

Caterpillar got 37 percent, or $6.5 billion, of its sales from North America in the second quarter, according to data compiled by Bloomberg. Its next largest source of revenue was the Asia-Pacific region, accounting to 25 percent of sales.

Chinese Slowdown

The company is trying to boost its presence in China. Caterpillar said last month that it has too much inventory in the country as the economy there slows.

China’s export growth shrank in July, with shipments increasing 1 percent from a year earlier, the customs bureau said yesterday in Beijing, after an 11.3 percent rise in June. The slowdown intensifies risks of a seventh quarter of deceleration in the world’s second-largest economy.

Caterpillar shut its main Chinese excavator factory for much of July and is exporting many of the products manufactured there, Mike DeWalt, director of investor relations said in a presentation yesterday.

“You have to take a long view of China,” Oberhelman said yesterday. “It’s going to modernize, it’s going to develop.”

“It’s way under-excavated,” he said. “In the meantime, we can’t cede the China construction market to someone else.”

While Caterpillar more recently has made a push in the country through acquisitions and factory expansions, it has been selling machines there since the late 1970s, Chief Financial Officer Ed Rapp said yesterday in a separate interview.

China is trying to stimulate growth for a population increasingly moving to cities from rural areas while also managing inflation, he said.

“We’ve been to this movie before,” Rapp said. “History has been as they go through those transition periods between growth, or trying to drive inflation down, you get through rough spots.”

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

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

Enlarge image

Caterpillar Raises Forecast

Daniel Acker/Bloomberg

Caterpillar is selling more excavators, dozers and dump trucks as U.S. construction spending recovers and the global mining industry boosts investment to meet projected commodities demand.

Caterpillar is selling more excavators, dozers and dump trucks as U.S. construction spending recovers and the global mining industry boosts investment to meet projected commodities demand. Photographer: Daniel Acker/Bloomberg

10:55

Aug. 10 (Bloomberg) -- Doug Oberhelman, chief executive officer of Caterpillar Inc., talks about his company's business strategy, relations with labor unions and the U.S. government's debt. He speaks with Carol Massar on Bloomberg Television's "Street Smart." (Source: Bloomberg)