Tags: Caterpillar | Oberhelman | oil | infrastructure

Caterpillar CEO Sees US Falling Behind

By    |   Friday, 20 February 2015 07:40 AM

CNN's Poppy Harlow interviewed Caterpillar CEO Doug Oberhelman to get his views on a variety of subjects related to the state of and outlook for the U.S. and global economies.

Given the business Caterpillar is in, and the fact that Oberhelman would be familiar with the state of infrastructure worldwide, Harlow asked him whether the U.S. is falling behind, possibly living off the investments of the past. Oberhelman agreed that this is the case and cited as his favorite example the poorer quality of airports like Kennedy as compared with those of Dubai and China and the difficulty in getting goods to our airports due to our infrastructure, such as the potholes in our roads and that our train system intersects with our road system. He argued that infrastructure investments provide short-term jobs and enable long-term improvement in U.S. competitiveness, but he called the issue "a tough one," because someone has to finance the projects.

Readers might reflect on the fact that many of the companies that financed past projects ultimately went bankrupt. Also, they can tick off their own examples of obsolete infrastructure, such as town squares and shopping centers with clock towers where the clocks are stuck at different times and don't work, things that one would normally associate with underdeveloped countries.

Other articles on this blog have reported the assessments of various experts on the balance between the benefits of low oil prices to consumers and some sectors of the economy with collateral damage to other sectors. Oberhelman weighed in with the view that he "can't imagine how a 2 percent interest rate, with mortgage rates where they are today, and $2 to $2.50 gasoline will be bad for our economy." He demurred when invited to predict how long gas prices can remain so low.

Oberhelman added that Caterpillar is trying to structure its business so that it can handle oil prices anywhere from $20 to $80 per barrel, taking into account the fact that "new fracking has come to a screeching halt." He said that Caterpillar has already cut jobs in response to cutbacks of oil projects, but this could be partially offset to the extent that a decline by half in the cost of asphalt would lead municipalities to undertake paving projects the previously could not afford. In summary, be named, Houston, South Dakota and Pennsylvania as areas that would suffer from the fall in oil prices, but elsewhere he hailed the impact as beyond what the Federal Reserve could do by way of stimulus.

Caterpillar is notoriously considered a play on growth in the Chinese economy. As growth slows from unsustainable double-digit rates to a reported 7.4 percent on its way to lower rates over time, Oberhelman is sanguine about the opportunities presented by an economy with 1.2 billion to 1.3 billion people and a growing middle class "that wants to live like we do." He estimated that Caterpillar has a hundred competitors for this business, and he stressed that they have all of the elements of their business positioned to operate in China. Readers might want to pause near the end of the segment and contemplate the cluster of huge skyscrapers that constitute just one development.

(Archived video can be found here, here and here.)

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CNN's Poppy Harlow interviewed Caterpillar CEO Doug Oberhelman to get his views on a variety of subjects related to the state of and outlook for the U.S. and global economies.
Caterpillar, Oberhelman, oil, infrastructure
Friday, 20 February 2015 07:40 AM
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