Demand Up for Caterpillar Equipment

This is a partial transcript from "Your World with Neil Cavuto," December 2, 2004, that was edited for clarity.

NEIL CAVUTO, HOST: We've been debating this. When is a falling dollar a good thing? Could it ever happen? When it allows foreigners to buy maybe more of your things.

That's apparently happening at Caterpillar, huge demand for its earth-moving equipment, boosting sales, earnings and expectations and the company's once ignored stock. Not a bad way to celebrate a 75th anniversary on the New York Stock Exchange (search).

The man who was doing the honors, Jim Owens (search), the chairman and CEO of Caterpillar, joins us now.

Mr. Owens, very good to have you. Congratulations. Happy anniversary.

JIM OWENS, CHAIRMAN/CEO, CATERPILLAR: Thank you, Neil. Pleasure to be here.

CAVUTO: I understand you were CEO 75 years ago. So you've obviously maintained your youth.

OWENS: Oh, yes.

CAVUTO: Let's talk a little bit. I've read interesting statistics that if you were to buy Caterpillar back in 1929 on this day. It was about $56 or so. But if you hang onto it for adjustments and everything else, it would be worth north of $14,000 today. That's not a bad haul.

OWENS: Not bad. Pretty good growth. More to come.

CAVUTO: And you know, you say a lot more to come, apparently. But the numbers seem eye popping; spell it out.

OWENS: Well, we've had a terrific year in 2004. I think we're No. 1 on the Dow in terms of sales growth this year and No. 3 in terms of earnings per share growth. So it's been a spectacular year.

Overall, our sales this year will be up about 30 percent. So we'll add over $6 billion in top line sales this year. We're terrifically proud of that. That a great team effort with 76,000 people around the world.

CAVUTO: Did the dollar help you, Mr. Owens? I know in the third quarter when that was reported about $102, $107 million of that was the forward impact of the currency.

OWENS: Sure.

CAVUTO: How beneficial is the dollar?

OWENS: Well, the weak dollar drives, certainly, our top line sales, because all of the sales, for example, that we make in euro or yen in foreign markets translate into more U.S. dollars. But of course, we have cost in those currencies, also.

So — but, yes, we're one of the — generally speaking we're one of the top 10 U.S. exporters, so a weaker dollar helps to position us competitively in the global markets.

CAVUTO: I asked a lot of your fellow honchos, sir, so I'll ask you. All things being equal, would you prefer the dollar as it is now or as it was when it was a lot stronger?

OWENS: Well, I'm not — I wouldn't call myself an advocate of the weak dollar. I think the dollar is probably a little under valued relative to the euro today and probably a little over valued relative to some of the Asian currencies today.

So it needs to adjust a little bit in the Asian marketplace to help bring about a better trade balance. But overall, we at Caterpillar are comfortable with — with the dollar where it is and we're competitive, certainly, in the global markets today.

CAVUTO: All right. Now, are one of those markets China? We have a great deal of dispute back and forth as to whether it is really realistically letting the dollar be represented in that place (ph).

OWENS: Well, we have tremendous business opportunities in China. We've had very strong sales growth in recent years. We're developing a manufacturing presence of product support and distribution capability in country. Most of our investments in China are to serve the Chinese domestic market.

CAVUTO: Right.

OWENS: So we're incurring cost in Renminbi and selling in Renminbi. So...

CAVUTO: And that's their currency, we should stress here. But the criticism, as you know, sir, has been that they have unfairly pegged the dollar to run at an unrealistic level and that they are taking advantage of that on the global trade stage.

OWENS: I know. I've heard that criticism frequently. I wouldn't be surprised to see — I would encourage the Chinese to consider repegging the dollar, strengthening, essentially, the Renminbi, which would then create an opportunity for the other Asian currencies to strengthen. I think the peg of Renminbi at an artificially low level against the dollar holds other Asian currencies down because of interregional trade competition.

CAVUTO: Is there pegged — when people buy big earth-moving equipment like your stuff, it's not cheap stuff. It means a commitment for going forward and an optimism going forward. Do you agree with that, that there is maybe the beginnings of a global economic recovery going on?

OWENS: Well, I think we're in the early stages of a very substantial economic recovery, Neil. We — we went through a very prolonged recessionary period in many of the industries that we serve, particularly global mining and under investment in infrastructure for an extended period following the Asian economic crisis in 1997.

Pretty significant recessions in Japan and the U.S. Of course 9/11.

So we're seeing a nice rebound in 2003, last half of last year and, certainly, this year with our sales up 30 percent. We think this recovery has a lot of legs left. We look for global mining, global oil and gas, global coal.

Many of the key markets that we serve we think will be strong for the next several years. And we look for the global economy with relatively low inflation, relatively low interest rates. We think it bodes well for investment in capital goods type markets that we serve. Development of that basic infrastructure and materials capability which enable economic growth.

CAVUTO: Your company is no stranger to trying markets when they appears dicey, including 75 years ago when you debuted, not that long after the big crash. So I guess you guys have a longer term perspective than most companies.

OWENS: We have a long reputation of being a gutsy company and a company that takes a long view of what it takes to be successful.

CAVUTO: All right. Jim Owens, I want to thank you very much for joining us. Congratulations.

OWENS: Thank you, Neil. It's a pleasure to be here.

CAVUTO: The man who runs Caterpillar, joining us from the New York Stock Exchange, where he ran the closing bell today. Jim Owens of Caterpillar.

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