Detroit – If you want to know what the world means in Peoria, ask Caterpillar Inc. CEO Doug Oberhelman.
A rising U.S. dollar is forcing the construction and mining equipment maker to cut revenue estimates for this year, partly because currency exchange from foreign markets translates into fewer dollars on the corporate books.
A slower 7 percent growth rate in China "is a long-term positive," he says, that is "more sustainable" and good for Caterpillar and China, the largest heavy-equipment user in the world and a critical market for the 90-year-old company.
Falling oil prices are putting money in the pockets of American consumers and juicing expectations for the U.S. economy, but they're creating a challenge for some of the Peoria, Ill.-based Caterpillar's customers and its forecasts.
Welcome to Cat's world. A maker of construction equipment, engines and mining equipment, the $55 billion behemoth claims facilities in 20 countries, chases business in 180 around the world and still sources some of its biggest machines from plants in Illinois.
Its market is everywhere, from American road contractors hoping state legislators (like Michigan's) find the means to upgrade crumbling infrastructure, to Chinese construction projects and planned Russian pipelines (now blocked by U.S. sanctions on cronies of President Vladimir Putin).
Cat sold tractors to "Soviet Russia" in 1929, just as Ford Motor Co. did Model Ts to fulfill the first Stalin-era Five-Year Plan from a plant in Nizhni-Novgorod (as the photo hanging on my office wall documents — "first Soviet Ford," the banner partly says).
The iconic Cat brand boasts global cred, ranking alongside Boeing Co. airliners and Ford's Blue Oval as symbols of American industrial might, innovation and longevity. Caterpillar's been in Brazil for 60 years, China for 40 and sold equipment in Tunisia, Lebanon and South Africa for 80.
But it's the present and future that matter. Big business is negotiating a remarkable period of global volatility that is challenging industries with global footprints and commercial aspirations in places like Russia, South America, even Europe.
For now, the brightest spot is the recovering U.S. market in terms of jobs, growth and business investment. Auto sales remain strong, Detroit's automakers strongly profitable; but the Detroit Three, like Cat, book the majority of their sales outside the United States, meaning global volatility carries meaningful implications for bottom lines and growth.
From Caterpillar and Ford to General Motors Co. and their foreign-owned rivals, regional hotspots, gyrating currencies, sanctions on Russia, the opening of Cuba and sliding oil prices are changing business assumptions, investor sentiment and consumer behavior.
"No other commodity is more essential to the global economy and more volatile than oil," Oberhelman told the Detroit Economic Club on Wednesday. "In my 40 years at Cat, global and economic volatility related to oil has been the rule, not the exception.
"But now we're seeing the global source of oil move from the unstable Middle East to the more stable North America," he continued. "This country was built on cheap energy, and we need to find a way to keep that going. Lower prices allow a lot of things to happen."
They also can create unintended consequences, such as suppress demand for politically correct electric vehicles; boost demand for politically incorrect pickups and SUVs; lower revenue collection from state and federal gas taxes.
Change is a constant at Cat. In recent weeks it bought a minority stake in a Chicago-based data analytics firm, Uptake, that the heavy-equipment maker hopes will help develop a system to diagnose problems in products and transmit the data worldwide to customers, dealers and its own engineers.
It's also weighing the implications of Obama administration sanctions against Russia, actions that are not being matched by the home government of Cat's largest competitor there — Japan's Komatsu Ltd.
"Unilateral sanctions mean U.S. companies can't do business" in a place like Russia, Oberhelman said, nevertheless endorsing the administration's moves. "But companies from other companies often can and do."
The net result: targeted U.S. sanctions against key Russian sectors are freezing Cat's business in a critical market, a move that could have long-term negative implications should Caterpillar come to be viewed as an unreliable supplier.
Meantime, Cat will adjust because it has to — until the world changes, which it always does.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.