There has been much talk and some evidence in favor of the proposition that manufacturing activity in the United States is on the rebound. Those who view this as a startling turnabout clearly dont know much about Caterpillar, the worlds largest manufacturer of construction and mining equipment.
Based in Peoria, IL, Caterpillar was losing more than a million dollars a day in the 1980s, but by 2012 had climbed to #46 on Fortunes list of the largest U.S. firms. Between January 2, 2001 and January 2, 2013, CATs stock price rose 493%, while its dividend per share rose 269%.
This is a very impressive performance. What are CATs secrets? Some attribute its success to its rigorous approach to labor relations; in the 1990s, it locked out the powerful United Auto Workers for eighteen months and obtained much greater freedom to manage the firm intelligently and to allocate its capital without union restrictions. Even more so, however, CATs success has been generated by a single-minded focus on product quality and service (one that enables it to set premium prices); its unmatched and highly productive network of dealers around the globe; its planning for the trough strategy that enables the firm to make quick, pre-planned adjustments to the ups and downs in the business cycle; and, its ability to sell outside of the U.S. (about 70% of CATs sales are made outside of the U.S.).
One of the less visible, but very important aspects of CATs management model is that every manager owns his own numbers. The company has created several dozen accountable business units whose performance is monitored closely, almost as if they were independent. These units must pay realistic transfer prices for any resources or capital they use and they are permitted to go outside the firm and make purchases if internal CAT providers dont meet their needs.
The American manufacturing landscape is littered with failures and bankruptcies. The Caterpillar Tractor Company, however, has demonstrated that American manufacturing firms can succeed. How CAT has done this, and what lessons other firms can draw from CATs example, are revealed in The Caterpillar Way along with more than two dozen Insiders Edge commentaries that focus readers on the most important takeaways.