Caterpillar speeds up its production

OMAHA - Caterpillar, the world's largest maker of construction and mining equipment, is increasing production as the global economic recovery spurs demand for its heavy equipment, especially in commodity-rich developing countries.

"We're in a revival. There's no doubt about it," chief financial officer Dave Burritt said. "We're heading up, and it's driven by the emerging markets. No doubt."

The Illinois company offered an upbeat outlook for its business and the world economy after reporting first-quarter earnings of US$233 million yesterday, reversing last year's loss in a quarter weighed down by layoff costs.

Caterpillar's yellow-and-black heavy machinery is sold in so many places and used by so many industries that its results are considered an indicator of the overall health of the economy.

The jump in demand Caterpillar is seeing - particularly in developing regions like Asia and Latin America and for mining equipment worldwide - won't necessarily translate quickly into many US jobs because the company has some excess capacity.

But it has rehired about 2000 people since eliminating 19,000 fulltime jobs and about 18,000 contract and part-time workers last year.

Caterpillar's results echo that of other big companies such as Intel and Whirlpool, which have turned in stronger earnings for the first three months of the year and predicted international growth this year.

Caterpillar's sales fell 11 per cent overall to US$8.2 billion in the quarter, but in Asia, sales jumped 20 per cent.

Manufacturing costs were US$566 million lower this year, which helped make the first-quarter profitable even with lower revenue. The company says orders in the first quarter were stronger than the revenue total showed.

Higher commodity prices will drive more demand for Caterpillar's mining equipment. Officials said some models of mining equipment are already sold out and orders are being taken for next year.

Analyst Jeff Windau said the real test will be whether the spending by customers is sustainable.

- AP