Cat’s Strategy to Offset Slumping Global Sales
Peoria, IL – Construction and mining equipment maker Caterpillar Inc. is looking to offset a major decline in its overseas sales with a new strategy aimed at steeping up the marketing of remanufactured equipment, particularly in developing markets where both tariff and non-tariff trade barriers exist.
Overall, the company saw its global machinery sales decline by almost 10 percent during the three months ending in July with the greatest drop coming in Asia, where sales dropped 30 percent in both May and June, the company reported.
Construction sales for the period were down by 16 percent in China and by 14 percent in Latin America, it said.
But, the company has developed a new strategy to beef-up its sagging global business revenues by 20 percent by 2020, compared to a 2013 baseline.
According to its 2013 Sustainability Report, Caterpillar commonly faces a particular type of non-tariff barrier when remanufactured goods are classified as used goods, which cannot be imported under any circumstance or can only be imported after complying with special inspection, certification, or licensing regulations.
The tariff barriers it also faces, the report said, usually hinge on the excessive fees or taxes levied by some countries that significantly increase their customer’s cost of choosing a viable remanufactured product.
Both types of trade barriers most often come into play when customers seek to export their core parts and return them to Caterpillar in exchange for a remanufactured engine or component.
The company argues that as all of its remanufactured products carry the same durability, performance, quality and warranty equal to that of a new component, they should be treated as such.
That’s the line that Caterpillar management is reportedly taking with policymakers, government regulators and customs officials in several countries in an effort to open up their markets and expand remanufacturing options for the company’s customers.
To help it meet its 2020 growth goal, the company has developed a ‘job site efficiency’ (JSS) initiative “to help customers capture maximum value from their assets by improving on-site performance and sustainability,” particularly in the agricultural sector which now accounts for approximately 15 percent of Caterpillar’s total JSS volume.
According to the company, the results have been “significant.” On average, it said, agricultural customers have been able to reduce idle machinery times by 20 percent, and so-called “operator-caused events,” such as equipment wear and tear and safety issues, by 25 percent.
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