Interview: Caterpillar group presidents Stu Levenick and Gerard Vittecoq

10 May 2011

Caterpillar group presidents Stu Levenick and Gerard Vittecoq.

Caterpillar group presidents Stu Levenick and Gerard Vittecoq.

The last big revolution in the construction equipment industry was high pressure hydraulics in the 1970s, which led to the development of hydraulic excavators, so some 40 years on we should be due another major shift. According to Caterpillar group presidents Stu Levenick and Gerard Vittecoq, such recognised components as the mechanical drive and perhaps even the diesel engine could soon be as obsolete as horses and steam engines.
Gerard Vittecoq is responsible for Caterpillar's energy and power systems group, which includes gas, diesel and electrical power systems for industries as diverse as rail, marine and power generation, as well as construction and mining machinery.
According to him, the need for greater fuel efficiency in the face of rising oil prices is driving a range of changes in technology to not just improve familiar machine designs, but to leap into other areas that look fundamentally more promising than traditional diesel engines and mechanical drives.
"I think there are three major areas of technology change," he said, "The first is the switch from hardware to software as a means of improving efficiency
"The second is the move from diesel to natural gas - a kind of rebalancing - which I think is inevitable. There is inherently less CO2 produced when you burn gas compared to other fossil fuels, plus shale gas is being discovered in safe countries. For Europeans, shale gas in Germany and Poland is a lot more attractive than oil from Libya or Russia.
"The third shift is from mechanical drive to electrical power conversion. Who would have believed a few years ago that a diesel electric dozer would be more efficient and economical than a mechanical one? But it [Caterpillar's D7E] is.
"Personally I think everything will go electric. Cars are going electrical, trucks are going electrical, and it will happen with planes and boats too. Mining is already there in a large part with diesel electric mine trucks.
"With diesel to electric conversion, you can get more gains when you optimise the whole system than you can with a traditional mechanical system. You also have the engine running at a steadier constant speed, so you have fewer emissions, less fuel consumption and more durability. There are so many fundamental drivers that will lead people to change their habits."
Mr Levenick added, "There are various product roll-outs underway with diesel electric drives. There will be other technologies as well - hybrid drives for example. Hybrids to us are anything that involves energy recovery and you'll see huge changes in fuel efficiency as we are able to capture waste energy.
"There is a discussion about CO2 emissions and regulation that we're involved in. You can't run a diesel engine without creating CO2, so it becomes a question of fuel efficiency. I think with other pollutants like NOx [nitrous oxides] we've got as low as we can go. In some parts of the world our engines are actually air cleaners."


March's ConExpo exhibition in Las Vegas, US saw Caterpillar put a huge emphasis on sustainability. It is a broad term encompassing concepts like fuel efficiency and machine design as well as efficient manufacturing processes and the reduction of pollution.
"When you say the word 'sustainability' in different parts of the world, you get a different reaction," said Mr Levenick, "It's huge in Europe, where people have bought into environmental issues, but in the US it's not so popular - it's perceived as high cost.
"Fuel efficiency is just part of it, but it's also about efficiency in general. The case we try to make is the variety of things we can do to increase efficiency - from the connected worksite, to remanufactured components, lower lifecycle costs and the general efficiency of the worksite - could you do the same job with fewer machines? That all forms part of the economic argument."
Perhaps one of the more interesting areas where Caterpillar is involved as part of this sustainability drive is machine rebuilds. The idea is that rather than scrap a machine, it can often be given an extra life - or several new lives - by replacing worn key components and structures. In fact efficiency may be improved by updating to new systems and software.
"There's always an argument that you're going to cannibalise your new machine sales if you do this. My view is this is a long-term business, and we want to be in the lifecycle of the product. It's good to give people options where they can buy new, or used, or remanufactured - the more options you can give people, the more they're going to want to work with you."
"The big trucks will be rebuilt every 25000 hours, and we have trucks that have well over 100000 hours on them, so they have four or five rebuilds. In a lot of those cases, we'll upgrade them with every rebuild," said Mr Levenick.
He continued, "The larger you go, the more economic it will be to rebuild whole machines. As you work your way down the product line, you're getting more into remanufacturing components rather than whole machines. There are other arguments in favour of rebuilds too, such as the upgrades we can add to older machines, which is something we do a lot on the big stuff. Today the focus of rebuilding machinery in our 'Certified Used' programme is around 20 tonne excavators and upwards. It is working its way down as we get better and better at it."
This shift towards machine rebuilds, a business where Mr Levenick describes the margins as "Pretty good," is just one of a number of changes for Caterpillar that have been happening over the last few years. Acquisitions of companies like tunnel boring machine (TBM) manufacturer Lovat, railway engine manufacturer Progress Rail and its biggest ever deal, the
US$ 8.6 billion purchase of Bucyrus, which is due to gain final approval in the coming months, mark a steady change in direction.
At the same time, the company has moved away from building smaller machines like telehandlers and some mini excavators itself, preferring instead to be supplied these by partners like JLG and Wacker Neuson
Explaining the rationale behind these, Mr Levenick said, "If you look at where we're spending our money, it is things like energy, mining and infrastructure. These are nice businesses with high barriers to entry and high margins, and they really fit our business model.
"As you work your way down, you may find businesses that are less attractive, but you have to be in there on a strategic basis. We think it's important to be in the small machine business because a lot of our customers want those machines, and it is also a way that competitors enter the industry.
"But there may be another way to be in that business than doing it yourself. To do that cost effectively and profitably, that might mean leveraging someone else's scale, which is what you've seen with JLG and Wacker Neuson. We're not signalling that we're going to a contract manufacturing model, but it's a good option in some cases."
Mr Vittecoq added, "If you look at a mini excavator, it is more about assembling components from a shelf and there is less engineering content. Those are the criteria - we look at what the best fit is with what we know."

Sustainable future

No one is saying that diesel electric construction machines will be a feature of every site this year or next year, but Mr Levenick and Mr Vittecoq put up very persuasive arguments about why this will happen sooner or later. Design, prototyping and testing all takes time of course, but the double whammy of rising fuel prices and legal drivers may mean this happens sooner than we may think. iC

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