Caterpillars may crawl, but this company isn't fuzzy about earthmoving machinery and agricultural equipment. Considered #1 in the world, Caterpillar (Cat) makes construction and mining machinery; diesel and natural gas engines; underground mining equipment; industrial gas turbines; and electrical power generation systems. It operates plants worldwide and sells equipment through some 3,500 offices in more than 180 countries. It also provides rental services through 1,300-plus outlets and offers financing and insurance for dealers and customers. Caterpillar Power Ventures invests in power projects that use Caterpillar power generation equipment. Cat Logistics offers supply chain services.
The company decided in 2011 to put its third-party logistics (3PL) subsidiary up for sale. It had also considered structuring it as an independent business within Cat Logistics, so that it might focus more on its core businesses. Two private equity firms, Centerbridge Partners and BC Partners, have expressed interest in acquiring the unit. Insiders have indicated that Cat's logistics operations could go for as much as $1 billion.
And focus it did. In mid-2011, with a decided interest in growing its mining equipment business, Caterpillar bought mining equipment giant Bucyrus International for $8.8 billion (including net debt).
Bucyrus products have assumed the Caterpillar brand name. Legacy Bucyrus products are sold through the Bucyrus traditional method of factory-direct distribution while they are transitioned to the Caterpillar network of independent dealers.
The acquisition of Bucyrus brings a major portfolio of surface and underground mining equipment, aftermarket replacement parts, as well as service support. Just a year prior to its own acquisition, Bucyrus purchased the mining equipment division of Terex, which brought with it large-scale mining machinery, hydraulic excavators, off-highway haul trucks, and drills.
One of Caterpillar's two core divisions is Machinery and Power Systems, which includes the segments of Construction Industries, Resource Industries, and Power Systems. Serving the heavy construction, general construction, and mining, quarry, and aggregates markets, the Construction Industries segment distributes such products as backhoe loaders, compact wheel loaders, and pipelayers.
The Resource Industries segment, which includes Bucyrus, provides machines that include electric rope shovels, tunnel-boring equipment, and compactors.
Power Systems serves the electric power, industrial, petroleum, marine, and rail industries with reciprocating engine powered generator sets, turbines, and other equipment.
Subsidiary FG Wilson manufactures generator sets, ranging from small standby units for domestic markets to large units used in national grids. Marine diesel engines are produced under the MaK brand, and off-highway diesel and gas engines are made under the Perkins name plate.
The machinery and power systems division's also has an "Other" operations segment that includes remanufacturing, primarily the refurbishment and restoration of used machinery and technologies for automotive and industrial OEMs, as well as for the defense industry.
The Progress Rail Services subsidiary, which outsources maintenance and repair services to the railroad industry, is also part of this division. In spring 2011 Progress Rail Services agreed to buy the trackwork manufacturing business of UK-based Balfour Beatty Rail, the infrastructure arm of Balfour Beatty. In mid-2010 the company bought Electro-Motive Diesel (EMD), a diesel-electric locomotive manufacturer, from Berkshire Partners and Greenbriar Equity Group. The $820 million deal scooped up EMD's strong service network and global presence.
To add sizably to its engines business, Caterpillar in fall 2011 acquired MWM Holding, a global supplier of natural gas and alternative-fuel engines, from investment firm 3i. The €580 million ($800 million) deal for MWM (Motoren-Werke Mannheim) strengthened the company's ability to offer gas engines to its customers.
Another core division is Caterpillar Financial Services (Cat Financial), Caterpillar Insurance (Cat Insurance), and their subsidiaries. At the front end of a purchase, Caterpillar provides wholesale financing to its dealers; at the back end, it offers support for the purchase and lease of its equipment.
Caterpillar took a hit in the Great Recession due to the negative impact on the construction industry; however, as recovery got underway in late 2009, the company was able to recover. Caterpillar posted a revenue increase of more than 30% and a profit increase of 202% in 2010 over 2009. The company's decision to bump up production in its machinery business (economic recovery spurred increased machine purchases) paid off with sales increasing 50% over 2009 -- shipments to Asia/Pacific and Latin America showed record and near-record highs, and North America's appetite increased about 50%.
Year-over-year revenue rose 41% in 2011 and profit was up 82%. All of Caterpillar's segments performed well that year, especially Resource Industries, which recorded an uptick of 104% thanks to increased activity in the mining industry as commodity prices rose and a stronger economy increased capital investment. Construction Industries rose 31% mainly because of demand for new machines in emerging markets and replacement equipment in developed markets. Power Systems charged ahead 28% behind rising demand in such emerging markets as Brazil, China, and India.
As about 65% of Caterpillar's sales are generated outside North America, the company is accordingly expanding abroad. Caterpillar Tianjin in China is investing $300 million to build a manufacturing facility in Tianjin; the plant is scheduled to become operational in 2013. In 2012 Caterpillar bought out Mitsubishi Heavy Industries' share in a joint venture, Caterpillar Japan, to become the sole owner. In 2010 Caterpillar acquired the remaining stake it didn't already own in an excavator joint venture formed with China-based Xuzhou Construction Machinery.
Caterpillar and Navistar International (a commercial truck, defense vehicle, bus, and diesel engine manufacturer) formed a 50/50 joint venture in 2009 -- NC2 Global LLC -- to manufacture and distribute on-highway commercial trucks outside North America. NC2 Global is initially targeting customers in Australia, Brazil, China, Russia, South Africa, and Turkey. As part of the global initiative, NC2 partnered with Chinese carmaker Anhui Jianghuai Automobile to drive development, manufacture, and sales of trucks and truck parts in China and abroad. In late 2011 Caterpillar handed over operational control of NC2 to Navistar.