Caterpillar expands its manufacturing in the South

Peoria, Ill.-based Caterpillar Inc., the world's largest manufacturer of construction equipment, has announced plans to build a new $120 million facility in Victoria, Texas, to make excavator machines, according to The Wall Street Journal. The plant will take on production of some equipment currently made in Illinois and Japan.

This is the company's fourth expansion project that has been announced during the past two weeks. It also has announced plans for a new plant in Winston-Salem, N.C.; expansion of a construction equipment plant in Sanford, N.C.; and a new engineering-design center in Rapid City, S.D. The new plants are expected to add more than 1,000 jobs with 500 jobs being created at the Victoria plant, which will manufacture certain models of excavators.

The Victoria plant is part of a shift in U.S. manufacturing production from the Midwest to the South, where there are fewer unions.

"It's a major shift in manufacturing strategy for Caterpillar," says John Stark, a Chicago-based forecaster for the construction machinery industry. "It's all driven by cost reductions. It's not just labor costs; it's the cost of shipping, exporting and attempting to shorten the distance between the supplier base and production facilities."

Excavator production is being phased out at a plant in Aurora, Ill., which has about 250 workers involved with excavator production who are represented by the United Auto Workers union. Caterpillar does not expect layoffs because the Aurora plant manufactures other products and will begin producing other mining machinery.

The Victoria plant is viewed as representing a partial return to the U.S. of production that had been shifted overseas. Moving production back to the U.S. allows manufacturers to benefit from local incentives and lower prices from suppliers affected by the weak U.S. economy. State and local authorities in Texas are providing more than 320 acres of land, tax breaks and more than $3 million cash to Caterpillar.

Date : 8/19/2010