Another in a series of byte-sized one-on-one visits with construction industry insiders. I traveled to Peoria to present Caterpillar’s seven Top 100 awards to CEO Doug Oberhelman and the Caterpillar product teams. After the presentation, Oberhelman took a few minutes to talk to me.
1. You have been reported as saying Cat dealers need to better monetize their access to machine data by offering asset-management services to machine owners and managers. What two or three things need to be in place at a dealership in order for an equipment manager to partner with them?
A couple of things we need from dealers are, we need talent in place. I’m often reminded of the visits to Palo Alto our people do when they go to Silicon Valley and see how the people look, act and work. It’s completely different than our traditional Caterpillar family.
We’ve really got to get talent that knows how to handle data, knows websites, knows the Internet, knows all those things to process all this data that’s coming in today and is going to magnify by a huge factor down the road.
And then the other thing is investment in systems. We’ll be pushing that from our end. We’re doing a lot of that internally as well. But I would say a year or two from now, we’ll look back and say, “[W]hat a great change we’ve seen come, for our customers and for our dealers.”
I do believe that the dealership can be in control, but remember that it’s the customer’s machine and data. We want to help them manage, manipulate and use that in a very, very friendly way.
2. Infrastructure, mining and residential construction are tough markets right now. As Caterpillar enters 2015, how are you balancing your focus on those market dynamics?
We are encountering some very big headwinds in 2015. The most remarkable news is that infrastructure in the United States, outside of oil and mining, is pretty good. In fact, it’s probably the best market in all markets of the world today. It’s not booming, it’s inching along nicely.
Now, a few things would really help this. An infrastructure policy out of Washington. States are broke and are having trouble raising funds to go after infrastructure. We have this wonderful stimulus and this great dividend from cheap oil. Imagine the cost of asphalt this summer versus last summer. And if we can find a way to take advantage of that, we’d stretch that paving dollar and that road dollar a lot further.
We have new products coming; we’re in the final throes of [Tier 4-Final]. That’s going to bring a lot of more … fuel-efficient products. Coupled with lower input costs on diesel fuel and asphalt, we could be setting ourselves up here for a nice couple of years in the U.S. construction market. We just need a little help with some more funding to find out how we get infrastructure done.
3. With the majority of machine engineering complete, equipment managers now know what to expect on new machines. Do you anticipate new-machine sales to be positively affected by the level of confidence this brings? How will rental sales respond?
As we’ve introduced our Tier 4-Interim and Tier 4-Final, we’ve had great response from our customers. If we can’t sell those in an environment of growing infrastructure and construction equipment sales in 2015, something’s wrong.
We’ve seen the rental business explode the last decade or so. The uncertainty of Tiers 3, 4-Interim, 4-Final; that’s getting behind us. That may have some impact.
Frankly, a very weak construction climate: I don’t think a lot of customers had 2, 3, 4 jobs that it would take to own a machine.
Thirdly, low interest rates and zero inflation: Typically, a lot of customers’ main asset is their equipment. With inflation, it gains in value over time; we haven’t seen that in 10 years.
This makes me think rental is here to stay. It will probably go up a little bit more as a percent of the total, and we’re looking at it as an opportunity that way.