Chicago Tribune David Greising column: Caterpillar's lessons from China useful in U.S. too

May 01, 2009 (Chicago Tribune - McClatchy-Tribune Information Services via COMTEX) -- CAT | Quote | Chart | News | PowerRating -- Perhaps it's no surprise that Caterpillar Inc. is emerging as a touchstone for the ups, downs and farther downs of the current U.S. economy, but the emerging revelation is that Caterpillar is providing a glimpse into reasons why China's government stimulus plan is moving faster than the one in the U.S.

"In China, 'shovel ready' means shovel ready," James Owens, Caterpillar's chief executive, said while reflecting on Caterpillar's huge China business as he chatted with reporters at a recent Chicago Council on Global Affairs breakfast. In the U.S., he added, most shovel-ready projects likely will not start construction until 2010.

Owens is seeing the effect on his business. Take excavators -- lumbering machinery that nevertheless is a tiny part of Caterpillar's nearly $50 billion in sales. Caterpillar was selling 600 units per month in China before September. Then sales collapsed to anywhere from zero to five a month.

Sales picked up in February, as the Chinese stimulus spigot opened, and excavators again are selling at a record pace, Owens said.

The quick turnaround comes in part because the Chinese government essentially moved up the budget from the back two years of its five-year plan and is spending the money now.

The U.S. government has enough trouble passing an annual budget, much less a five-year plan. And even the parts of the $819 billion stimulus program targeted toward construction will not get there as fast.

Zoning ordinances, environmental permits and the like really mean something here. States, cities and counties have more say in where the money will go, and they are asked in many cases to kick in some of their own money to make projects feasible.

Even so, Owens likes some aspects of the China way and is using some of what he has learned to accelerate the flow of stimulus money into the U.S. economy.

Owens is taking steps to answer questions about what building projects will have the biggest economic impact. He has put Caterpillar's field forces on the lookout for infrastructure work that should go forward, directing sales teams to, heck, ask customers to identify projects that have permits, are ready to build, but need money to get started. A PhD economist himself, Owens will direct Caterpillar's economists to analyze the impacts of any projects that rise to the surface.

Owens plans to use his access as a member of President Barack Obama's Economic Advisory Board to present Obama with a list of projects that should go on a fast track.

Construction projects are ideal because the spending ends when the building stops. The inevitable boondoggles aside, there should be productive assets to show for the effort.

Owens heads a company that sells highway construction equipment. He is cutting employment by 22,000, still, even though Obama incorrectly said during a Peoria photo op that the stimulus program would bring back some of those jobs.

It is clear that self-interest drives Owens' efforts as much as his expressed desire to help boost the economy. But that's OK.

We've seen self-interest drive people to create toxic assets that torpedo the economy. Others have taken big bonuses -- directly from taxpayers, thanks to government bailouts -- for their efforts in creating the economy-killing junk.

Capitalism works best when self interest coincides with the public interest. If Caterpillar can help identify projects that are ready to go, get them funded and get them built, that's the sort of self-interest that -- multiplied many times, in many industries, in many different places -- can help get an economy moving again.

dgreising@tribune.com

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