An Interview with Caterpillar CEO Doug Oberhelman

In an interview with the Chicago Tribune, Caterpillar CEO Douglas Oberhelman says that Illinois didn't even make the first cut — a list of more than 20 states — in the company's continent-wide search for a new factory to manufacture small tractors and mini-excavators.

The Peoria-based company, the state's largest manufacturing employer, announced in February it had chosen Athens, Ga., as the home for the new factory and would relocate 1,400 jobs there from Japan. The company broke ground on the project Friday.

He added that the state hasn't made the first cut in any of company's factory location efforts for several years. For instance, the company passed on Illinois in 2010 when it looked to expand Electro-Motive Diesel's locomotive manufacturing operations. The company chose Muncie, Ind., instead.

"Look at the basics," Oberhelman said in an interview at a Caterpillar factory in East Peoria. "The (state's) fiscal situation was a disaster, maybe worse than now. Workers' comp was really bad, and we had a tort situation still known for attracting plaintiffs from all over the world. It goes on and on."

Employment at Caterpillar in Illinois, where it has three large factories, has remained steady in the last decade. The company has 23,560 full-time employees in Illinois today; 238 more than a decade ago.

That might seem OK, given the how tumultous that decade was. But when examining the company's overall employment numbers, it is clear Illinois has missed opportunities. Caterpillar's global employment rose by 74 percent, from 72,004 to 125,099, in the last decade.

The company, the world's largest maker of earthmoving equipment by revenue, ended 2011 with record profits. The company predicts it will top that record in 2012, given it ended 2011 with a $29.8 billion order backlog, another record.

"We have seen the Asian economies booming in the last three years," Oberhelman said. "We've seen South America booming. We've seen Africa and the Middle East booming. And that's more than offset the slower growth in the U.S. and all the problems in Europe."

Each product on the assembly line in the East Peoria factory is adorned with a sticker of the flag of the nation for which it's destined. A tour revealed multi-story tall machines, known as track-type tractors, with the flags of Austrailia, South Africa and Sweden, among others.

As a large exporter, Oberhelman said manufacturing sites near ports do have advantages, but ones the Midwest could be attractive if the state's fiscal situation improved. Oberhelman said his ardent advocacy on the issue has played well with Caterpillar's customers and, in some cases, with politicians.

"I think in Illinois every single politician knows how bad it is," Oberhelman said. "We have had leadership over a long period — bi-partisan leadership — that has failed its citizens. When you talk to politicians one-on-one, they don't disagree. Then they get into Springfield or Chicago, and things fall apart. For some reason, we haven't seen progress, starting with a balanced budget in this state."

Oberhelman provoked a firestorm last year when a letter he wrote Illinois Gov. Pat Quinn leaked to the media. In the letter, Oberhelman suggested Springfield politicians were making it harder for Caterpillar to remain in the state and attached letters from three other governors trying to woo the company's operations.

He identified workers' compensation expenses and uncertainty over whether state lawmakers would allow the temporary income tax increases enacted last year to expire in 2014 as the primary reasons not to build new facilities in the state.

"We have to replace (the tax increase) by 2014 with savings somewhere, and we're heading in the wrong direction," Oberhelman said. "So what do I tell the employees we would bring here for investments? That our tax rate is going to go down? I question that."

Source: Melissa Harris - http://articles.chicagotribune.com/2012-03-16/business/ct-biz-oberhelman-intvw-20120316_1_caterpillar-factory-illinois-caterpillar-ceo-doug-oberhelman

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