Caterpillar
Caterpillar, 1995-2001
Background Information
This case deals with Caterpillar, Inc. who has been building the world's road and rail network for more than 75 years; and in partnership with Caterpillar dealers, is driving positive and sustainable change on every continent. A Fortune 100 company, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company is a technology leader in construction, transportation, mining, forestry, energy, logistics, electronics, financing and electric power generation.
After a three consecutive years (1982-1984) of tremendous loss, Caterpillar managed to come back as a high-tech globally competitive, growth company. Throughout the tenure of two very successful CEOs – George Schaefer and Donald Fites – and over a period of about 15 years, the company reinvented itself. George Schaefer introduced cost-cutting measures and employee involvement programs, outsourced machined, parts, and components, and began modernizing Caterpillar’s plants. On the other hand, Donald Fites diversified the company’s product line and reorganized the company structurally. He also completed Caterpillar’s modernization program, revitalized its dealership network, and altered the company’s approach to labor relations.
Key Issues
George Schefer and Donald Fites faced and overcame many obstacles during their eras. Schefer had to face 1). a global recession, 2). a costly strike, and 3). an unfavorable change in exchange rates. Fites faced costly labor strikes as well, but also had to overcome 1). a slump in the company’s earnings as well as 2). lower industry-wide demands in both the domestic and international markets.
Donald Fites retired in February of 1999, leaving newly elected CEO, Glen Barton, to face many challenges.
· Barton could not count on Caterpillar’s continual prosperity due to the downturn of the U.S. construction industry.
· During Barton’s first year (2000), the company’s sales declined by 6 percent and earnings by 37 percent. Also, Caterpillar’s share price traded close to its 52 week low in March of 2000.
· Caterpillar needed a strategy implemented that would allow it to withstand the forecasted grind of our economy and the construction industry as a whole. Barton needed to decide whether the strategies of the previous CEOs needed to be refined, reversed, or totally restructured.
Current Strategies
Named to the Dow Jones Sustainability World Index in September 2002, Caterpillar is recognized for successful integration of long-term economic, environmental and social aspects into business strategies that benefit all stakeholders. Caterpillar's commitment to social responsibility ensures our ability to meet today's needs without sacrificing the ability to meet the needs of future generations.
Caterpillar is committed to generating attractive returns for our shareholders. Strategic growth initiatives involving our machine, engine and service businesses are expected to drive these returns over the next several years.
Globalization
Caterpillar’s products and components are manufactured in 50 U.S. facilities and in 65 other locations around the globe. By 1965, Caterpillar had established foreign manufacturing [next page]