Caterpillar plans to build diesel engines in China

Aug. 30, 2007

Caterpillar Inc. ( said it plans to build 100,000 state-of-the-art small and medium diesel engines per year in Wuxi, Jiangsu province, China.

Caterpillar has signed a non-binding memorandum of understanding with the Wuxi National High-Tech Industrial Development Zone outlining a significant multi-year investment to develop and manufacture Perkins and Caterpillar branded engines in Wuxi. The first of the planned engine operations in Wuxi will focus on production of the Perkins 400 Series, three and four-cylinder diesel engines.

“Opening this engine facility in China will further leverage the global reach of the 400 Series engines, which have become very popular with original equipment manufacturers (OEMs) around the world,” said Hans Haefeli, Caterpillar vice president with responsibility for the Industrial Power Systems Division, which includes the Perkins Engines business. “This new facility will make the 400 Series engines more readily available for original equipment manufacturers with operations in China and the Asia Pacific region.”

Perkins Shibaura Engines, a joint venture between Perkins Engines Company Limited, a Caterpillar company, and its long-time small engine partner, IHI Shibaura Machinery Corporation, will manufacture the 400 Series Perkins engines in Wuxi. The engines will be sold primarily to OEMs in Asia who produce small construction, agriculture, turf and material handling machines as well as generator sets.

Caterpillar also announced plans to manufacture medium size diesel engines in Wuxi and plans to focus engine research and development in Wuxi for engines that meet the emissions requirements for Chinese and other customers. The medium size engines under consideration for production in Wuxi would be used in Caterpillar core construction equipment, for power generation, in commercial marine applications and would be sold to OEMs for agriculture and other industrial uses. Once the engine facilities in Wuxi are fully operational they will have the combined capacity to produce in excess of 100,000 diesel engines per year.

“As the global technology leader in the production of clean diesel engines, Caterpillar is committed to establishing a major investment to manufacture these world-class and clean diesel engines in China,” said Doug Oberhelman, Caterpillar group president with responsibility for engines. “As Chinese customers face future emissions reduction requirements, Caterpillar will utilize its technology leadership to provide machines and engines that will meet their needs as well as enable sustainable development.” The engine campus in Wuxi fits into Caterpillar’s comprehensive global engine strategy, and it is a key element in the rapid establishment of Caterpillar’s proven business model in China. Construction of the engine facilities in Wuxi is subject to a final agreement being reached between Caterpillar and the Wuxi government and to other applicable approvals. “For more than 30 years, Caterpillar customers in China have benefited from the unparalleled value that comes with owning and operating Caterpillar machines and engines,” said Rich Lavin, Caterpillar vice president with responsibility for Asia Pacific manufacturing operations. “The plan to build these engines in China demonstrates our long-term commitment to this critically important market and to our customers.” Caterpillar core products manufactured in China include hydraulic excavators, track-type tractors, motor graders and paving products, large diesel engines used primarily for marine and power generation applications and generator sets for use in China and the Asia Pacific region. Caterpillar also manufactures components at several facilities in China. In addition, Caterpillar holds a minority stake in Shandong SEM Machinery Co., Ltd. (SEM), one of China’s leading wheel loader manufacturers. In addition to its core machine, engine and component manufacturing locations, Caterpillar operations in China also include logistics, remanufacturing, financial leasing, training, marketing and research and development. Caterpillar’s independent dealer network also provides sales and product support to customers across greater China. About Perkins Shibaura Engines Perkins and Japanese manufacturer IHI Shibaura Machinery Corporation (ISM) launched a joint venture company, Perkins Shibaura Engines, Ltd., and a manufacturing facility in 1996 adjacent to the Perkins manufacturing plant in Peterborough, UK. The original product was the Perkins 100 Series engine. ISM has been manufacturing agricultural equipment and engines since the 1940s and is one of Japan’s leading suppliers of small engines and tractors. ISM is part of IHI Corporation, one of Japan’s largest industrial companies. Perkins Engines is a wholly owned subsidiary of Caterpillar Inc. and the world’s leading supplier of off-highway diesel and gas engines in the 4 – 2000 kW (5 – 2600 hp) market. Perkins’ key strength is its ability to tailor engines precisely to meet customers’ requirements. More than 400,000 engines are manufactured every year -- that’s one every minute -- to 21,000 different specifications.