A month after Caterpillar Inc. (NYSE:CAT) announced 2,500 job cuts on top of it's already planned 31,500, the bullish heavy equipment manufacturer is acquiring as it thinks sales will rise between 10% and 25% next year.
Riding better-than-expected third-quarter results, Peoria, Ill.'s CAT is
acquiring JCS Co. Ltd. JCS is a subsidiary of Jinsung TEC Co. Ltd., a South Korea-based manufacturer that specializes in producing undercarriage components for
earthmoving and other off-road machinery. Terms were not disclosed but in 2008, JCS brought in $85 million in revenue.
A Caterpillar VP said in a statement that "this strategic acquisition will improve Caterpillar's supply chain and component capacity in support of Caterpillar's long-term machine capacity expansion plans in Asia." The Wall Street Journal says that
outside of South Korea, CAT competes with South Korea's Doosan Group, an industrial conglomerate that includes a construction equipment unit. WSJ also said Caterpillar has been lobbying for Congressional approval of a U.S. free-trade agreement with South Korea that would allow Caterpillar to import equipment into South Korea without tariffs.
Caterpillar doesn't have a manufacturing facility in South Korea but it does have them in in China, India, Indonesia and Australia.
And why not make bets on Asian expansion.
For example, China was one of the only places that experienced growth -- though slowed -- in the recession. Senior executive Rich Lavin told XinhuaNet.com that
he predicts China's GDP will enjoy 8% to 10% annual growth for the coming years. He also called China absolutely critical because it's the largest construction equipment industry in the world.
Caterpillar CEO Jim Owens expects a recovery to be on the way, saying at the time CAT announce 3Q earnings that the company is already planning for an upturn. In late September, as noted in a
previous blog, a CAT joint venture with Navistar International Corp. (NYSE:NAV), named NC2 Global LLC, said it's pursuing a JV with China's Anhui Jianghuai Automobile Co. to make and sell heavy equipment in China.
While Asia-Pacific is a sweet spot, the U.S. is another story -- that's where all of the additional 2,500 job cuts will take place. In April, the world's No. 1 construction equipment maker posted its first quarterly loss in 17 years ($112 million) For the third quarter, it posted a profit of $404 million on sales of $7.29 billion. -
Baz Hiralal Press release on CAT acquiring JCSRich Lavin on growth in China
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