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CATERPILLAR IN EMERGING MARKETS
Rich Lavin,
Group President
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIESLITIGATION REFORM ACT OF 1995
Certain statements contained in this presentation are forward-looking and involve risks, assumptions and uncertainties that cause actual results of Caterpillar to be materially different from those projected or implied in the forward looking statements. In this context, words such as "will," “believes,” “expects,” “estimates,”“anticipates,” “will be,” “should” and similar words or expressions identify forward-looking statements made on behalf of Caterpillar. It is important to note that actual results of Caterpillar may differ materially from those described or implied in such forward-looking statements based on a number of factors and uncertainties, including, but not limited to, changes in economic conditions; currency exchange or interest rates; political stability; market acceptance of Caterpillar's products and services; significant changes in the competitive environment; changes in law, regulations and tax rates; and other general economic, business and financing conditions and factors.
A more complete summary of risks and uncertainties is described in more detail in Caterpillar's Form 10Q filed with the Securities and Exchange Commission on October 31, 2008. Caterpillar undertakes no obligation to update these forward-looking statements.
What I’ll Cover Today
Overview of Caterpillar and recent history
Brief review of the 2009 outlook & beyond
Our Emerging Markets Strategy
Backhoe Loaders Skid Steer Loaders Multi Terrain Loaders Integrated Tool Carriers
Wheel Loaders Excavators Wheel Excavators Track-Type Tractors
Track Loaders Pipelayers Landfill Compactors Soil Compactors
Wheel Dozers Motor Graders Wheel Tractor Scrapers Articulated Trucks
Off Highway Trucks Underground Trucks Underground Loaders Track Skidders
Wheel Skidders Feller Bunchers Vibratory Compactors Asphalt Compactors
Asphalt Pavers Pneumatic Compactors Cold Planers Rotary Mixers
Product Range
About 300 Models in a broad range of product categories …
Machines
Nonresidential
EnergyMining & Quarrying
InfrastructureResidential Industrial
ForestryWaste
End MarketsMachines
Engines
From 100 KW to 22,000 KW
Broadest Range of Engines in Our
Industry
On-Highway Marine Industrial
Cat Machines PetroleumElectric Power
End MarketsEngines
Exit
Geographic Diversity
Caterpillar Dealers
• 181 Cat dealers
• 3,000+ branches & rental stores
• Over 120,000 employees
The Global Leader
2008 1997
Geographic Mix - Sales and RevenuesCaterpillar
• Broadest footprint in the industry
• In about 50 countries
• Well more than 50% of employees outside the U.S.
Outside
North
America
43%
NorthAmerica
57%
Outside
North
America
61%
NorthAmerica
39%
Sales and Revenues Synergistic growth & improved earnings stability
Products 66%
Integrated Services
34%Solar Customer Services
Genuine Cat Replacement Parts
2008 Sales and Revenues
$51.3 Billion
6 Years of Growth
2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008
Sales and Revenues Earnings Per Share
$41.5
$36.3
$30.3
24% EPS CAGR 2003 to 2008
$22.8
$51.3
$5.37$5.17
$4.04
$2.88
$1.56
$5.66
$45.0
What I’ll Cover Today
Overview of Caterpillar and recent history
Brief review of the 2009 outlook & beyond
Our Emerging Markets Strategy
2009 Outlook - Sales and Revenues
$40B +/- 10%
• Outlook changed significantly during Q4
• Credit markets tightened
• Commodity prices tumbled
• We opened the order board for the 1st time and let dealers cancel orders
• Declines in every region
• Wide range +/- for 2009
A Very Difficult
Year
Worldwide Recession2009 Outlook
2008 2009
Actual Outlook
Sales and Revenues $51.3 B $40B +/- 10%
Earnings Per Share $5.66 $2.50Excluding $500M for
redundancy costs
Key Longer-term Trends Long-term Positive for Caterpillar
We expect strong growth in worldwide infrastructure spending
over the next decade
� Significant need to improve and rebuild infrastructure in the developed world … after years of under investment … Stimulus will help
� Significant growth in the developing world … and that leads to a discussion of our strategy for emerging markets
Emerging Markets CSF
Caterpillar will establish a profitable leadership position in each of the emerging markets
by leveraging the holistic Caterpillar business model.
Supply
base Product
design
Financial services
ComponentsProduct
support
LogisticsDistribution
Manufacture Reman
Caterpillar’s Global
Business Model
Aggressive Implementation – Cat Differentiation
CIS Footprint
Cat Footprint• 4 offices
• 1 logistics/parts center
• 1 manufacturing facility- HEX, OHT
• 900 Employees
Future Operation
Current Operation
Cat Dealers Footprint• Dealership: 16• Branches: 110• Dealer employees: 3,000
Moscow
Tosno
Novosibirsk
Moscow Office
Moscow Distribution Center
Cat Tosno LLC: HEX
Cat Tosno LLC: OHT
Novosibirsk Office
Khabarovsk Office
Almaty Office
Almaty Khabarovsk
Singapore
l
India/ASEAN Non-Manufacturing Footprint
ChennaiBangalore
Asia Distribution Center Singapore
Cat India Private Ltd Tiruvallur
Bangalore Office:– India Power system Mktg– AP Logistics– AP Shared Service
Tiruvallur
Singapore Office: Marketing, Cat Finance, Logistics, Marine, Services
Jakarta Office:– PT Cat Finance Indo.– PT Solar Services Indo. Jakarta
Solar Turbines DelhiGovernment Affairs Delhi
Mumbai
Turbomach India Pvt Ltd. Mumbai
HosurCat Power India Pvt Ltd. Hosur
Engine Parts Distribution Center Hosur
Machine Parts Distribution Center Tiruvallur
Engine R&D Center Chennai
Balikpapan
PT Solar Services Indonesia
Trakindo Training Center
Cat Footprint• 8 offices• 3 logistics/parts centers• 1 R&D center• 1 Training center• Cat Employees: 4,800
Cat Dealers Footprint• Dealership: 14• Total CRS in India: 20• Cat Dealer Employees: 1,700+
Delhi
Singapore
CPIPL Bangalore: LPSD; EPD
F G Wilson Pondicherry: EPD
CIPL Chennai: QCTC, SWL-2021, BHL-SS
l
India/ASEAN Manufacturing Footprint
ChennaiBangalore
PTNR Natra Raya : MHEX, TTT,Worktools
Future Operation
Current Operation
MHEX Facility Chennai: MHEX
SPBU Chennai: Hose & coupling
Remanufactured components Singapore
Cat Indonesia Batam: Truck bodies and chassis for QCT, Large Mining Trucks
Jakarta
Batam
Delhi
Mumbai
Balikpapan
Cat Footprint• Today: 4 manufacturing facilities • Future: 8 manufacturing facilities
Cat Employees: From 4,800 to 6,500
China Growth
Sales & RevenuesBillions of US Dollars
• Sales & Revenue targets have been met
or exceeded over past 3
years in China
• In 2008, achieved 70% revenue growth over
2007, compared to 14%
growth globally
$5
$4
$3
$2
$1
• World-class segment varies by product– Significant segment for machine
markets developed by MNCs
– Requires aggressive marketing
– Re-educate customers
• Mid-tier segment is tough battleground– Rapidly growing, at expense of
low-end
– Quality wins battle
• Low-end– Local competitors dominate here
– Consolidation will occur over time
World-class
Mid-tier
Low-end
0
Years
The Challenge of China: Product StrategyM
ark
et S
hare
Current China Manufacturing Footprint
i
Guangzhou
Shanghai
Nanjing
Tianjin
Beijing
Hong Kong
Kunming Taiwan
Qingdao
Jinan
Suzhou
Xuzhou
Qingzhou
SEM Qingzhou: CWL, SWL, MWL, LPT, TX, Cabs, SEM
APS Tianjin: EPD
ATL Tianjin:Undercarriage
CCMC Wuxi-I:Hydraulics, Hose, Valves, Cabs
Wuxi
CXL Xuzhou: CHEX, MHEX, TTT
CPPX Xuzhou:MG, ACOM, CPLN, SCOM
Cat Footprint• Today: 6 manufacturing facilities• Cat Employees: 5,100
Future China Manufacturing Footprint
i
Guangzhou
Shanghai
Nanjing
Tianjin
Beijing
Hong Kong
Wuhan
Sanya
Shaanxi
Kunming Taiwan
Qingdao
Jinan
SuzhouChengdu
Xuzhou
CNCL Nanjing: BCP
Qingzhou
SEM Qingzhou: CWL, SWL, MWL, LPT, TX, Cabs, SEM
Reman move from CDC
Future Operation
Current Operation
CSCL Suzhou: MG, MWL
APS II Tianjin: EPD
APS Tianjin: EPD
ATL Tianjin:Undercarriage
CCMC Wuxi-I:Hydraulics, Hose, Valves, Cabs
Wuxi
400,1000 Engines Wuxi: IPSD
TTT Xuzhou
New paving Xuzhou
CXL Xuzhou: CHEX, MHEX, TTT
CPPX Xuzhou:MG, ACOM, CPLN, SCOM
Worktools Xuzhou
CCMC Wuxi-II: Cylinders, Gear pumps
Note: * CRS Included
Cat Footprint• Today: 6 manufacturing facilities• Future: 16 manufacturing facilities
Cat Employees: From 5,100 to 12,000
No. of Models
Product Portfolio(Locally built machines, engines & Gen sets)
Local Production Growth in AP
0
10
20
30
40
50
60
70
80
90
Today 2010
Supply Chain
• Over 300 suppliers provide parts for domestic operations and export
• Over 1000 international suppliers to support local growth
• Dedicated supplier development resources
• China Distribution Center established in 2006 outside of Shanghai
• Prime product local source suppliers support service parts business
Cat China Distribution Network
• CAT Dealers – 5 dealers in Greater China region
Dealers Branches Employees
WesTrac 13 1258
Lei Shing Hong 19 1482
China Engineering 9 1100
ECI-Metro 11 1100
Capital Machinery 6 150
• 1 F.G. Wilson Dealer in China, 7 in AP region
• 100 SEM Dealers covering China
Cat Dealer Expansion - 2010
Total Provincial Dealerships: 29Total Branches and CRS: 220+
Sichuan,Tibet
Yunnan
Guizhou, Chongqing
Qinghai
Shaanxi
Ningxia
Gansu
Beijing,Tianjin, Hebei
Jilin Shanxi
Liaoning
Helongjiang
Inner Mongolia
Jiangxi Fujian
Guangdong Guangxi
Hunan Hainan
Xingjiang Hong Kong, Macau
Shanghai, Zhejiang
Anhui Shandong
Jiangsu Henan
Hubei Taiwan
ECI-Metro Group
7 Cat Dealerships
China Engineers Group
8 Cat Dealerships
Lei Shing Hong Group
7 Cat Dealerships
WesTrac China Group
6 Cat Dealerships
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Capital Machinery – 1 Dealership
China Non-Manufacturing Footprint
i
Guangzhou
Shanghai
Nanjing
Tianjin
Beijing
Hong Kong
Wuhan
Kunming Taiwan
Harbin
QingdaoJinan
SuzhouXuzhou
Hangzhou
Qingzhou
Future Operation
Current Operation
Beijing Office:–CCI Beijing:Caterpillar China Investment Co. Ltd.
–CCFL Beijing: Caterpillar (China) Financial Leasing–Solar Turbine Beijing
Wuxi
AP China Proving Ground
Future sites:CCL HK:Caterpillar China
CLSC HK: Caterpillar Logistics Service
Demo & Learning Center
CCI Kunming: Caterpillar China Investment Co. Ltd. Kunming Branch
CRDC Qingdao: Caterpillar R&D Center, China, Qingdao
CLSC SH: Caterpillar Logistics Service SH
CMTS: Caterpillar Marine Trading (SH) Co, LtdCCL Shanghai: Caterpillar China Ltd. Shanghai Rep
ILC-SIP Suzhou: China Inbound Logistics Center
CLSTL Tianjin: Caterpillar Logistics Service Tianjin
CRDC Wuxi: Caterpillar R&D Center, China, Wuxi
CXDC Xuzhou: Caterpillar Xuzhou Design Center
China Distribution Center Shanghai
GMD Guangzhou: MakDiesel Engine
Motoren Foshan: Kiel engine and spare parts
Cat Footprint• Today: 9 offices, 2 logistics/parts centers, 3 R&D centers;• Future: 9 offices, 3 logistics/parts centers, 3 R&D centers and 2 Demonstration/Proving grounds• Cat Employees: From 5,100 to 12,000 (manufacturing included)
• New Industry Standards• Lowering Customer Cost• Same As New Quality• Benefits the Environment
In China
• NDRC Agreement Signed • Started operation in Nov. 2007
• About 60 employees• Leading the industry in China
• High-tech Solutions• 2008 workshop with Chinese government on policy making
Cat Reman
•China Stimulus Package Scope • Includes $4Trillion RMB ($586B) that is incremental to original 2009 and 2010 planned spending in the China 11th Five-Year Plan • Includes new & previously rejected projects and projects moved forward to ’09 –’10 • Significant allocation to projects in Cat industries (transportation, earthquake rebuilding, energy)
•Funding • Central government will fund $170B of $586B• Balance will come from local government and others (primarily state owned banks) • State owned banks well positioned to fund Stimulus projects• $37B of funding from central and local government – already released and allocated
• Cat China Division and Team China Actions• Team to coordinate action plans to take full advantage of stimulus package • Project opportunities being identified and action plans being developed and implemented
China Stimulus Package
Supply
base Product
design
Financial
services
ComponentsProduct
support
LogisticsDistribution
Manufacture Reman
Caterpillar’s Global
Business Model
Developing products for local market
needs
Caterpillar Components Produced in Country
Producing for Domestic & for Export
Developing Strong Local Supply ChainGrowing
Dealer Network
