CAT Opens Two China Facilities - Analyst Blog
Caterpillar Inc. (CAT) has announced the opening of a proving ground and a large wheel loader manufacturing facility in Tongzhou, Jiangsu Province in China. The opening of the two new facilities in China is aimed at supporting the company's growing operations in the region as well as in other growth markets.
The Asia-Pacific Proving Ground (APPG) facility will provide validation and product development services for Caterpillar machinery produced in the region. On the other hand, the large wheel loader manufacturing facility will cater to the needs and requirements for quarry and mining applications in China and growth markets.
The Cat 986 large wheel loader, which is to be produced at the large wheel loader facility, was designed at Caterpillar's Wuxi R&D center and validated by the APPG. It is the first Caterpillar machine designed, validated and built in China exclusively for China and global markets.
The Tongzhou site is favorably located at the mouth of the Yangtze River to the East Sea and provides a logistics advantage in terms of shipping. Machines can be shipped from the Asia-Pacific region and from inland China to the proving ground for testing, and then complete the shipping of the machines to marketplaces in China and around the world. Furthermore, the site is located near Caterpillar's existing manufacturing facilities in China, as well as the majority of the company's existing supply base in China.
Including these new facilities, Caterpillar currently has 23 existing manufacturing facilities, 4 new facilities under construction, 4 R&D centers and 3 logistics and parts centers and employs more than 15,000 people are under its employment across the country.
Caterpillar continues to systematically strengthen its business in China and remains committed to providing the lowest owning and operating costs in the industry. However, signs of a slowdown in China have triggered concerns lately as it will have a negative effect on infrastructure and construction spending. This will in turn negatively impact on Caterpillar's sales in the near term. However, the long-term story remains intact as growing economies promote the expansion of roads, new buildings and reliable energy, which drives the demand for machinery.
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base. Caterpillar operates two divisions - Machinery and Power Systems and Financial Products. Caterpillar currently retains a Zacks Rank #4 (Sell). Joy Global, Inc. (JOY), H&E Equipment Services Inc. (HEES) and The Manitowoc Company, Inc. (MTW) retain a Zacks Rank #3 (Hold) in the same industry.