The Chilling Thing Caterpillar’s President Said about China…”Those good years won’t come back.”
by Wolf Richter
WolfStreet.com
November 17, 2015
Caterpillar, one of the icons of American industrial might and a “bellwether” for the global economy, has been having a hard time. It forecast that sales would drop 5% in 2016, an IBM-like fourth year in a row of declining sales, the worst such spell in its history.
Now Caterpillar threw in the towel on its formerly most promising market, China. Not for the current year, or even next year – those are already toast. But for future years. And for the entire industry.
It isn’t just CAT’s problem; the industry as a whole is getting whacked in China because of China’s economy. That’s Tom Pellette, Group President of Caterpillar Inc., with administrative responsibility for Construction Industries, told the Financial Times in an interview.
He cited some terrible industry-wide numbers for China, without disclosing Caterpillar’s own: in 2015, sales of hydraulic excavators between 10-90 tons are expected to be in the “23,000 range,” he said. Back during the China heyday in 2010, the industry sold over five times as many: 120,000 excavators. This would include excavators from Japanese, German, and Chinese competitors. In March 2011, the industry sold 27,000 units – in just that month! – more than in the entire year 2015!
Those were the good times when China’s huge stimulus program from the Financial Crisis was reaching corporate pockets.
“That shows how far off the peak we are,” Pellette said. The market might never get back to where it once had been, despite the official GDP growth rate in the third quarter of 6.9%, which would be considered a blistering hot pace in other major economies that have somewhat less opaque economic reporting.
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