Caterpillar Plans to Invest in Chinese Equipment Manufacturers

Peoria, Ill.-based Caterpillar last week announced a multi-year framework for investments that can provide the basis for the company to expand its business in China significantly.

The company signed a non-binding memorandum of understanding with the PRC’s Shandong Engineering Machinery – the seventh largest wheel loader producer in China. Subject to approval from China’s government officials and the satisfactory completion of due diligence, these negotiations are expected to pave the way for Caterpillar to increase its presence in China.

Caterpillar is also engaged in preliminary discussions with other Chinese producers of construction equipment and power systems, and expects this could result in additional future investments.

“We expect these investments to accelerate our expansion in the China market, which represents the largest growth opportunity in the global construction equipment industry today,” said Glen Barton, Caterpillar chairman and CEO.

Caterpillar also plans to develop a state-of-the-art Caterpillar Innovation Center, which will be managed and wholly owned by Caterpillar. The company expects to rapidly implement other aspects of its business model in China, including financing, rental and used equipment businesses. The company is expanding its logistics services – another key component of the Caterpillar business model – through a partnership announced June 2003 with Caterpillar dealer Lei Shing Hong. Subject to approval from China’s government officials, this joint venture is expected to provide a wide range of logistics services for Caterpillar and third parties in the greater China region.

Caterpillar currently operates eight facilities – both joint venture and wholly owned businesses – in China. The company distributes its products through five independent Caterpillar dealers.

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