Caterpillar speeds up its crawl into China

Caterpillar, the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines, began accelerating its expansion in China in the early 1990s with the establishment of a significant local production strategy. And the company isn't looking back. In 2006, Caterpillar moved its Asia-Pacific operations headquarters from Tokyo to Beijing. Caterpillar Group President Stu Levenick recently talked with China Daily reporter Wan Zhihong about the company's business strategy in China and its efforts in energy and the environment.

Q: Last year China announced it would further develop its own equipment manufacturing industry, and some leading Chinese machinery companies such as Sany and Liugong all said they would open plants overseas. Have you faced any competition from these Chinese companies, and what is your plan for the Chinese market?

A: Caterpillar has been active in China for a very long time. The company sold its first products to China in 1975 and opened its office in Beijing in 1978. Caterpillar has made important contributions to the development of the Chinese machinery and engine industries.

In 1987 we signed technology transfer agreements with 12 companies in 10 provinces in China, which marked a milestone for Caterpillar in China. It is no surprise to us that Chinese companies are becoming our competitors, and competition is a good thing.

We have already recognized that as a leading company you need to be very strong and be global in China. So it is natural for us to expand our operations here in the last five years. We have made significant increases and expansions of our operations here not only in manufacturing and new products, also in distribution and all the other elements of a global business model.

For example, as a global leader in the remanufacturing business, which takes end-of-life components and turns them into like-new products for a fraction of the cost, we established a remanufacturing business in China. Caterpillar Remanufacturing Services is one of the first wholly owned foreign entities to receive a remanufacturing license in China.

To support our Chinese customers, dealers and other customers in the Asia-Pacific region, Caterpillar recently opened a regional remanufacturing center in Shanghai. The Chinese government is very supportive of this business because it is in support of harmonious society and sustainable development. We believe it is a good thing not only for the environment but also for the whole economy.

Q: How do you see the importance of the Chinese market in your global business? Have you set any targets for the market?

A: In 2006 our sales in China were over $1 billion, and we aim to quadruple sales in the year 2010. Now the Chinese market accounts for 2 to 3 percent in our global business, but it is an enormous part of our future opportunities, and we have big plans to go much further.

We have set a target to increase our global sales revenue to $50 billion in the year 2010, and at that time the Chinese market will account for about 8 percent.

Q: What is your growth strategy for the Chinese market? Do you have any merger and acquisition plans?

A: We will pay close attention to organic growth. We have had diversified, successful joint ventures in China, which have grown rapidly in the past years. If you look at our first factory, Caterpillar (Xuzhou) Ltd, which started in 1994, it took 10 years to produce the first 5,000 machines.

But it took 11 months to make the next 5,000 machines, and last year we celebrated the production of 25,000 machines.

Q: Since energy saving and environmental protection has become a pressing issue in China, what are your plans in this field here?

A: If you take a look at Caterpillar in general, there are few companies who have the ability to participate in sustainable development as completely as Caterpillar does. We participate in main industry value chains from the production of a commodity right through the processing development to its final destination. We are very focused on recycling and emissions. We have set hard targets on greenhouse gas emissions for 2010, and we have set targets for water use and recycling.

In China with the rapid economic growth, the Chinese government is exploring more energy efficient ways to have sustainable development. Caterpillar has the world's leading technologies in energy and the environmental field, and we have brought many of those technologies to China.

For instance, we have delivered 60 coal methane gas-powered generators to the Sihe coal methane power plant in Jincheng city in North China's Shanxi Province.

The power plant will have an installed capacity of 120 megawatts, which is expected to be the largest of its kind in the world when fully operational. The project will improve mine safety and greatly reduce harmful emissions.

During the second strategic economic dialogue this May, China and the US agreed to develop up to 15 large-scale coalmine methane capture and utilization projects in China in the next five years, and we see big opportunities in the field.

(China Daily 12/21/2007 page15)