Caterpillar Considers Re-Shoring Excavator Manufacturing

March 15, 2010
New plant would triple domestic output, free existing capacity to supply China

Caterpillar Inc. announced it is studying the feasibility of building a new hydraulic excavator facility in the U.S. Though it gave no outlook to the timing of a decision, nor of a the potential project’s schedule, the builder of construction and mining equipment said the plant in discussion would triple its current domestic capability for hydraulic excavators, increase its employment levels “significantly,” and make available existing capacity in Japan to supply rising demand in China and Asia.

"The study is based on the current analysis of where the global excavator market is heading and how Caterpillar should position itself for continued leadership in the excavator industry," stated Caterpillar vice president Gary Stampanato.

Caterpillar manufactures a range of construction and mining equipment, as well as diesel and natural-gas engines and industrial gas turbines.

Such a move by Caterpillar could be seen as an example of “re-shoring,” the strategy that sees manufacturers reconfigure global supply chains to serve domestic operations and markets more efficiently. The decisions are driven by several factors, including rising costs for transportation, fuel, and labor, and higher rejection rates for foreign-made goods.

Re-shoring, also referred to by various other labels, will be the subject of an event organized by the National Tooling and Machining Assn. (NTMA), the Precision Metalforming Assn. (PMA) and the Association for Manufacturing Technology (AMT), to help OEMs and custom manufacturers locate competitive U.S. job shops to manufacture parts and tooling.

The NTMA/PMA/AMT "Re-Shoring Fair” takes place May 12, in Irvine, CA.

Caterpillar said the study is part of a long-term strategy to determine “the appropriate global footprint” for producing hydraulic excavators competitively. It produces various hydraulic excavator models at plants in Belgium, Brazil, China, France, Indonesia, Japan and Russia, for various applications worldwide. But, it produces only produces two models at its Aurora, Ill., plant. It also produces wheel loaders, soil and landfill compactors, wheel dozers and components there.

If Caterpillar decides to build the new domestic plant, it would manufacture the two models now made in Aurora, as well as several additional excavator models now produced in Japan and exported to the United States.

"The excavator business is highly competitive and continues to evolve with a diverse and growing number of manufacturers around the world," Stampanato added. "As the global leader in the construction and mining equipment industry, it is imperative for Caterpillar to refine its excavator manufacturing strategy in order to provide customers with the products that will make them more productive and profitable."

A new U.S. excavator plant would be the primary North American source for excavators, and Caterpillar's Akashi, Japan, plant would have the capacity needed to serve rising demand in the Asia-Pacific region. Caterpillar even raised the possibility that Akashi may need to increase capacity to help meet that demand.

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