Caterpillar to Sell Texas-Made Excavators in U.S., South America

Caterpillar Inc., the world’s largest maker of construction and mining machines, intends to sell excavators from its new Texas factory in the U.S., Mexico and South America, the chief executive officer said.

“Some of them will be exported regularly to South America but maybe other places as well down the road,” Caterpillar CEO Doug Oberhelman said today during an opening ceremony for the company’s new hydraulic-excavator factory in Victoria, Texas. “Mexico, especially, is a big market for us and of course from Ecuador, Colombia south.”

North American machine sales in the three months through July rose 25 percent from a year earlier, the company reported in a securities filing this month citing retail sales reported by dealers. Latin American machine sales were down 2 percent, according to the filing. The Texas plant will serve South American countries other than Brazil, where the Peoria, Illinois-based company already has a plant that produces excavators, which move earth.

“This is part of Caterpillar’s broader strategy to effectively line up its manufacturing footprint to be closer to the customer and in a more cost-efficient manner,” Larry De Maria, a New York-based analyst for William Blair & Co., said in an e-mail today.

Some of the models produced in Texas also have been manufactured in Japan. The new factory will let Caterpillar better serve markets in the Americas and the Japanese plant will focus on Asia. Excavator sales in China dropped in the first half of this year and excess inventory is hindering short-term growth prospects, according to Bloomberg Industries.

Chinese Inventory

Caterpillar is delaying excavator capacity additions in China and exporting much of the product made there, Mike DeWalt, director of investor relations, said in an Aug. 8 presentation.

The Texas factory probably won’t increase inventory because the buildup is mainly in China, where its products serve markets with less stringent emissions requirements than the U.S., Oberhelman said. Equipment from China may go to the Middle East, which is “still very hot right now,” he said.

The Texas “plant is as modern as we can get for diesel-engine emissions, very highly sophisticated,” Oberhelman said.

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