Asian Cat

You might think of Caterpillar as being a little US-centric, but the fact is that it did US$ 5 billion of business in the Asia/Asia-Pacific region last year, just over US$ 3 billion of which was equipment sales. Th at makes it the second biggest player in that part of the world behind Komatsu, but ahead of other big names from Japan such as Hitachi and Kobelco.

Cat manufactures throughout the region with numerous plants in China, as well as facilities in India, Indonesia, Australia and two factories in Japan through its joint-venture with Mitsubishi Heavy Industries, Shin Caterpillar Mitsubishi (SCM). These employ a total of 7500 people – about 8% of the company's global work force.

Although Cat's sales in Asia have grown a little slower than in other parts of the world in recent years, the first quarter of 2007 saw performance improve. Machinery sales were up +23% compared to the first three months of 2006, with only the Europe, Africa & Middle East region providing stronger growth for the company.

Th is positive view was confirmed by Rod Beeler, who is the Caterpillar vice president responsible for sales & marketing in the Asia Pacific region. “Business is very good,” he said. “You have countries like Australia and New Zealand, which are well developed. Then you've got China and India, which are seeing incredibly strong growth in all types of infrastructure – roads, rail, power or whatever you're interested in. Then you have SouthEast Asia, which also has strong infrastructure needs. Business is good right across the region, and we see the infrastructure development market staying strong for a number of years to come.”

Th is is all a far cry from the situation nine years ago, when the currency crash of late 1997 shattered confidence in the socalled ‘tiger economies’ of the region. Such a destabilising event of course prompts the question of whether it could happen again, but Mr Beeler thinks not.

“There is not the risk there was before. If you look at things like reserves, debt and trade balances, there is no question that those countries are all significantly stronger today than they were prior to the financial crisis. Th at gives us more confidence about growth in the future.”

“I think there will be bumps in the road, due to the political issues in these countries, but I think the overall trend is very positive. If you look at what the Government is doing in Indonesia, they're addressing a lot of tough issues, which is why their economy is strengthening. Once Th ailand addresses its political problems it will present tremendous opportunities. Vietnam is becoming more open to trade too,” he said.

Warming to the theme, Mr Beeler continued, “Each country is fascinating in its own right, with the various growth opportunities we see. For example, Indonesia is a country that has a large population, a large mineral wealth, a lot of infrastructure needs and an economy that gets stronger every day.

“If you look at Bangladesh, there's a lot of business for us with our gas engines, and we're also selling some earthmoving products there too. In Myanmar there are some interesting things happening in the construction and Jade mining industries. We've also sold some products recently in Laos.

“And then Australia is of course very important to us because of its very large mining industry.”

China

Another key difference now, compared to 1997, is of course that the Chinese economy is so much stronger, acting as a motor for the wider region. Although this is a largely positive development, it does also mean that the prosperity of the Asia Pacific area in general and therefore the continued growth of the various countries' construction markets will depend a lot on the continued growth of China.

Although the boom in China this decade may lead some to worry that a bust is inevitable, Mr Beeler is positive on the country's future growth. “I think China is going to continue to grow. I think the infrastructure needs and the way the economy is being managed means I don't really see any significant risks on the horizon. The five-year plans continue to stress road building, waterways, power particularly and all those infrastructure types.

“If you look back in history, the stronger your infrastructure is, the stronger your economy will be in the long term. If you can get goods from Point A to Point B eficiently, be it by road, rail, water or air, that helps your economy. If you look at any infrastructure type you'd care to list, China has significant plans to put a lot of investment in, and they have the money to do that. An unusual global event would be about the only thing that would slow China down,” he said.

Like all the other major equipment manufacturers, Caterpillar continues to build its presence in China. While one would expect there to be a lot of cultural differences to overcome, Mr Beeler said the companies' approach is not significantly different to the way it operates in other parts of the world.

“Our strategy is to bring our global business model to China,” he said. “We continue to expand our manufacturing base in China. Cat Financial has been there for more than two years. We have just introduced remanufactured components – we think they will be very popular – and we've just opened a parts distribution facility outside of Shanghai.

“My point is we're doing what we know provides value to customers. We've introduced the Cat Rental Store to China. Our dealer network is growing rapidly in terms of both facilities and capabilities. We've seen a lot of evidence – customers have voted with their money if you will – that what we're doing seems to be working, so we're pretty confident.

“We're not going to exactly copy what we've done in Europe or North America, but what we are seeing is that a Chinese customer wants the same services that a customer in any other part of the world wants or needs. So we're going to deliver the same level of support and services, but the way we do that might be a bit different to be sensitive to the market forces in China.”

Bright future

What is particularly striking about Mr Beeler's views is how he sees positive prospects throughout Asia-Pacific. Although he talks about “bumps in the road” – last year's coup in Th ailand being a prime example – his conviction is clearly that the region's construction markets are heading for growth for the foreseeable future. IC