Caterpillar Moving Forward with $240 Million in New Plant Construction in the South

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Researched by Industrial Info Resources (Sugar Land, Texas)--In these tough economic times, Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois) has been forced to make operational changes at a rapid pace to keep up with the changes in the market. To this end, more than 22,000 job cuts have been made by the construction- and mining-machinery giant in the past month. On Wednesday, the company announced an additional 2,000 employees would be offered a voluntary early retirement package based on the individual's age and length of service. While Caterpillar hopes to re-hire some of these former workers once the stimulus package is passed, the company is prepared to weather the storm regardless.

There has, however, been some bright news coming from the manufacturing giant. Caterpillar is nearing the start of construction of a $100 million grassroot plant in Seguin, Texas. The 900,000-square-foot facility will be home to manufacturing lines relocated from Illinois and South Carolina plants and will also include some additional new lines. When completed at the end of 2010, the new plant will assemble, paint and test construction equipment.

Burton Construction (Dallas, Texas) was recently selected to act as the design-build firm for the new facility. Equipment purchasing and subcontractor selection is expected to begin immediately, and actual site-work will begin in the middle of March of this year. Once the plant is operational, more than 1,400 jobs will be created.

Caterpillar, which has not been forced to cut this many jobs since the mid-1980s when the company was losing as much as $1 million a day, has stated that it expects a fall of up to 32% in their fourth-quarter 2008 profits. The company has also stated that worldwide earnings could end up being cut by more than half in the current economy.

As with any good company, though, Caterpillar is continuing to invest in its facilities so that the company will be in a position to take advantage of the economic rebound that is expected to occur. In addition to the Seguin plant, Caterpillar is also planning to invest $140 million in a facility in North Little Rock, Arkansas.

In this case, Caterpillar will not build a grassroot facility, but will rather take over the former Deluxe Video Service Center on Faulkner Lake Road and make modifications to the 700,000-square-foot building. Caterpillar will also install new equipment in the renovated facility to eventually manufacturer motor graders for the construction sector.

Current schedules call for Caterpillar to finalize the design and put together financing for the project in Arkansas in the coming month. The selection of a general contractor will take place in March, and actual construction is scheduled to begin in June. Equipment purchasing and the selection of subcontractors to perform the modifications to the facility and install the required equipment will begin in April, once the funding has been released. The new plant is expected to open its doors for business in early 2010, creating 600 jobs.

Despite the economic downturn and the layoffs and cutbacks that have been forced on Caterpillar, the company is showing resilience and foresight by planning for the future. Even while asking people to step away from their jobs, Caterpillar is willing to put up more than $200 million on new ventures in the South that will help the company spring out of the lean times when the economy recovers. If more companies were following Caterpillar's example, perhaps this down economy would not only be not quite as down and would possibly recover much faster.

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