Caterpillar exporting China-made goods

Wed Aug 8, 2012 7:29pm EDT
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By Ernest Scheyder

NEW YORK (Reuters) - Caterpillar Inc (CAT.N: Quote) has begun exporting Chinese-made machinery to the Middle East and Africa, part of a plan to offset a dip in China's economic growth, a top official at the company said in an interview.

The move by the world's largest maker of construction equipment is only temporary and the company still expects China to remain its fastest growth market, Richard Lavin, who oversees Caterpillar's business in China, told Reuters.

Lavin declined to name specific countries in the Middle East and Africa where the Chinese-made goods are headed, or list the amount of product, but noted front-end loaders and excavators comprise the bulk of exports.

"The global economic situation, especially the situation in China, has presented us a short-term opportunity to serve very specific markets with some supplies over the last half of 2012," he said. "But that is not part of overall strategy for China."

China's economy has been pressured this year by a drop in its domestic property market and high inflation, with the economic growth rate slowing to 7.6 percent in the second quarter, the slowest pace in more than three years.

That is reflected in waning demand for the machinery Caterpillar makes at its 18 Chinese plants, and caused a glut of inventory.

While Caterpillar's Chinese sales are small -- in the first quarter they only comprised 3 percent of total revenue -- the company has been aggressively growing in the country and believes the country will fuel growth for years.

Worries about China's slowdown overshadowed Caterpillar's strong first-quarter profit and did little to bolster second-quarter results earlier this year.   Continued...

A scratched and worn Caterpillar logo is pictured at the back of a bulldozer in the rental equipment yard of Holt Caterpillar, the largest Caterpillar dealer in the United States, in San Antonio, Texas March 19, 2012. REUTERS/Richard Carson