Caterpillar CEO Leaves Heir to Finish Navigating Downturn

  • Company veteran Jim Umpleby to succeed Oberhelman as CEO
  • Dave Calhoun will assume role of non-executive chairman

Caterpillar Inc.’s Doug Oberhelman will retire after 41 years at the largest maker of construction and mining equipment, leaving his replacement to finish the job of steering through a commodities slump.

The 63-year-old will be replaced as chief executive officer on Jan. 1 by company veteran Jim Umpleby, who is currently a group president for energy and transportation, the Peoria, Illinois-based company said in a statement Monday. The shares fell 0.4 percent.

Since overseeing an expansion that led to record sales in 2012, Oberhelman has been navigating a slowdown in demand for engines, giant trucks and shovels. He reorganized mining and energy segments, shutting down dozens of factories and eliminating thousands of jobs. A years-long initiative to streamline the company’s supply and distribution network has yielded results as its gross margin has climbed annually since 2013, even as revenue slumped.

The new CEO will face a more formidable global competitor after Komatsu Ltd., the second-biggest mining and construction equipment maker, agreed to buy Joy Global Inc. for $2.89 billion in July. That deal gives the Tokyo-based manufacturer the largest independent maker of underground-mining equipment and the heft to better compete with Caterpillar beyond Komatsu’s dump-truck and excavator businesses.

JPMorgan Chase & Co. analysts Ann Duignan and Thomas Simonitsch had assumed Oberhelman would stay in the role until he reached 65, they said in a note to clients. The announcement comes a week before Caterpillar reports third-quarter earnings, when it often provides initial guidance for revenue growth for the upcoming year.

“The timing of the change in leadership suggests confirmation that the outlook for 2017 may be for a fifth consecutive year of revenue decline,” Duignan and Simonitsch wrote.

Stanley Elliott, an analyst at Stifel Nicolaus & Co., said the timing wasn’t very surprising. It may be more about having the new CEO in place before an important trade show in Las Vegas in March, he said by telephone from Richmond, Virginia.

Oberhelman, whose 2015 reported pay was $17.9 million, will remain as chairman until March 31 when Dave Calhoun will assume the role, in a non-executive capacity. Calhoun is senior managing director and head of private equity portfolio operations of The Blackstone Group LP. Umpleby will also join the board.

The outgoing CEO will retire with pension benefits worth at least $25.5 million and stock options valued at $6.44 million as of Friday’s close, according to data compiled by Bloomberg. He could earn even more from outstanding stock awards that will continue to vest if the company achieves certain performance goals.

Since Oberhelman became CEO in July 2010, Caterpillar shares have climbed 46 percent. That trails the 86 percent gain of the Dow Jones Industrial Average, of which Caterpillar is a member, and competitors such as Komatsu, which rose 51 percent in that time.

Caterpillar’s $8.6 billion acquisition of Bucyrus International Inc. in 2011, including debt, and the purchase of Hong Kong-based ERA Mining Machinery Ltd. and its unit known as Siwei in 2012 have dogged Oberhelman. The company bought Bucyrus, its biggest deal ever, as the mining cycle was nearing a peak and later took a $580 million writedown on Siwei.

The stock has rallied 29 percent this year along with a recovery in commodity-producer shares. The company is scheduled to report third-quarter earnings on Oct. 25.

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