Common Triggers for Progress Reports and Possible Solutions Bob DeLorme, EdS, RRT-NPS
MAKING PROGRESS POSSIBLE - IIS Windows...
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Page 3MAKING PROGRESS POSSIBLE
Engine Strategy
Mission:
• Provide Caterpillar machine product groups with power systems that contribute to the differentiation of their products.
• Participate in industry segments where we can achieve attractive returns.
• Achieve sustainable profitability in all segments.
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History of the Engine Business
1932 Produced first diesel engine for the Diesel Sixty Tractor
1935 Introduced Industrial engines
1936 Produced first natural gas engine
1947 Opened Industrial engine facility in Mossville, Illinois
1959 Introduced On-Highway Truck engines
1981 Acquired Solar Turbines
1982 Opened large high-speed engine facility in Lafayette, Indiana
1997 Acquired Mak Motoren
1998 Acquired Perkins Engines
1999 Acquired 100% of FG Wilson
2004 Introduced ACERT technology
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Engine Business Trends
$4.8
$6.5 $6.9 $7.1 $6.9 $6.7$7.4
$9.5
$11.1
$0
$4
$8
$12
(i n b
ill io n
s)
Net Sales *
10%
8% 7%
10%
5%
3% 3%
6%
10%
-3%
2%
7%
12%
Operating Profit %
1997 1998 1999 2000 2001 2002 2003 2004 2005
* Does not Include Cat machine engine intercompany transfers
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C0.5 to C4.4
Small High Speed0.5 to 4.4 Ltr225,000 units
C6.6 / C7 / C9
C11 to C18
C27 / C32
Medium High Speed6.6 to 32 Ltr249,000 Units
3500
C175
Large High Speed34.5 to 106 Ltr
10,000 Units
3600 / C280
M20 / M25
M32 / M34 / M43
Large Medium Speed56.5 to 1417 Ltr
1000 Units
Saturn Taurus
Centaur Mars
Mercury Titan
Turbines1.5 to 30K HP
300 Units
Engine Business
Leveraging Our Platforms
Electric Power On-HighwayTruck
Cat Machines Marine Petroleum Industrial
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100 200 1600010000300 500 750 1500 2500 4000 6000KW134 168 2144013400402 670 1005 2010 3350 5360 8040HP
MediumSpeed
C175
3500
Vees
Heavy Duty
Mid-Range
1100
Small
M20/25, M32, M43
C175
3500
C27/32, C43
C11, C13, C15, C18
C7,C9
400, 800
1100
MaKCatPerkins
Power Range Offering the broadest power range in the industry
3600
Turbines
Solar
Saturn, Centaur, Mercury, Taurus, Mars, Titan
2200033570
4000 4000
1300 - 2800 1300, 2300, 2500, 2800
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Engine Sales By Industry
Commercial 85%
Cat Machine15%
Internal vs. External
Distribution to End Users30% Electrical Power
29% On-Highway
24% Petroleum
9% Industrial
8% Marine
2005
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Electric Power• Stand By• Prime• Combined Heat & Power • Rental
On-Highway Truck• Heavy Duty Trucks • Mid-Range Trucks• Specialty Vehicles
Petroleum• Gas Compression • Well Drilling• Production / Pumping • Well Servicing
Marine • Pleasure Craft• Commercial• Ocean Going
Industrial• Agriculture• Construction / Material Handling• Pumps & Compressors • Rail
Engine Industry Participation
Cat Machine• Heavy Construction • General Construction• Mining• Quarry & Aggregates • Other
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North America
Latin America
Europe, Africa, Middle East
Asia / Pacific
$4.9 Billion
$3.6 Billion
$1.5 Billion
$1.1 Billion
Total 2005$11.1 Billion
Worldwide Engine Business Sales
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North America
Latin America
Europe
Asia / Pacific
236,500 Units231,000 Units
6,500 Units
11,000 Units
Total 2005485,000 Units
Worldwide Engine Production
•Kearney Mesa, California•Los Angeles, California•San Diego, California•Griffin, Georgia•Jefferson, Georgia•Thomasville, Georgia•Mapleton, Illinois•Mossville, Illinois•Pontiac, Illinois•Lafayette, Indiana•Greenville, South Carolina•Newberry, South Carolina•DeSoto, Texas•Mabank, Texas
•Tijuana, Mexico• Curitiba, Brazil•Piracicaba, Brazil
•Gosselies, Belgium •Peterborough, England •Shrewsbury, England•Stafford, England•Wimbourne, England•Kiel, Germany•Rostock, Germany•Larne, N. Ireland•Monkstown, N. Ireland•Springvale, N. Ireland•Riazzino, Switzerland
•Pondicherry, India•Bangalore, India•Guangzhou, China•Tianjin, China•Sagami, Japan (JV)
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Petroleum Industry
• Oil and gas prices expected to remain above investment thresholds and drive growth.• Broader based global demand with strong growth in China• Capacity increases by OEM manufacturers – gas compression / well servicing / drilling• Increased North America gas well drilling needed to offset declines in existing wells• Equipment shortages and high equipment day rates will continue
2007
Diesel Engines Natural Gas Engines
Petroleum Gensets & Packages
Frac Rigs
1991 1993 1995 1997 1999 2001 2003 2005 2007
2006 up 24%2007 up 19%
Solar Turbines
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1991 1993 1995 1997 1999 2001 2003 2005 2007
Marine Industry
2006 up 15%2007 up 10%
Cat 3000 Series
MaK M25
MaK M20
MaK M43
MaK M32
Cat 3126
Cat C9
Cat C12
Cat C18
Cat C32 Cat 3500 Cat 3600Cat C280
• World trade growth continues to drive oceangoing freight. • Strong Petroleum market causing increased need for supply boats• Contracts for new vessels remain strong. • Increased deliveries of offshore, service and feeder vessels• Rising personal wealth driving the global mega-yacht market
2007
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Electric Power Industry
• Slower U.S. economy causes flat North American demand• Continued demand for capacity constrained higher kW units • Healthy corporate profits / low interest rates drive strong European sales• Commodity prices support widespread infrastructure investment in
Latin America / Africa / Middle East • Strong Asian economic growth driving genset demand
20071991 1993 1995 1997 1999 2001 2003 2005 2007
2006 up 8%2007 up 8%
FG Wilson Genset
Olympian Genset
Cat Switchgear& UPS
FG Wilson Genset
Solar Gas Turbine
Cat Power Module
Cat Diesel Genset
Cat Natural Gas Genset
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Cat 3600
1991 1993 1995 1997 1999 2001 2003 2005 2007
Industrial Industry
2006 up 4%2007 up 2%
• North America flat with slower U.S. economy • European Ag market flat to down • General industrial investment up in Europe with low interest rates• Growth opportunities in China & India – particularly in smaller end
2007
Perkins 400
Perkins 800
Perkins 1100
Cat C0.5
Cat C2.2Cat C6.6 Cat C7 Cat C9 Cat C13 Cat C15
Cat C18
Cat C32
Cat 3500
Cat C4.4
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Cat C13
Cat C11
Cat C7
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
HeavyDuty
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
MidRange
North American On-Highway Industry
2006 up 7%2007 down 45%
2006 up 10%2007 down 25%
Cat C9
Cat C15
• Significant downturn from emissions regulation change • Flat freight tonnage driven by slower North American growth
2007
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Value to Customers• Reliability
• Durability
• Performance
• Operating Costs
• Emissions Reduction
• Noise Reduction
Elements of ACERT
ACERTTM Technology
Combustion
After Treatment
Leveraging ACERTtechnology throughoutour engine product line
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2007 On-Highway Truck Engines
• Operating Over 160 Engines
• Driven Over 11 Million Miles
• Maintaining Fuel Efficiency
• Expecting EPA Certification
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Precision Combustion Cat Designed Injection Technology
Cat Common Rail Fuel System (Mid-Range)Clean Gas Induction
Reduced NOx / Better Fuel Economy
Reduce HC, PM
Reduce NOx, PM Recover Energy
Air Systems ManagementSeries Turbo charging
Variable Valve Actuation
Advanced ElectronicsElectronic Control Module
Effective AftertreatmentDiesel Particulate Filter
Cat Regeneration System
2007 Platform – Changes from 2006 Product
System Integration
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Self-Regenerating DPF Filter• Filter is heated by auxiliary means• Regenerates under all conditions• Optimal fuel economy
• Operational over wide range of conditions• Self-contained on engine• No lag between fueling and ignition• Improved combustion control
Cat Regeneration System
Effective Aftertreatment
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On-Highway Truck Engine Manufacturing Profile
Mossville, Illinois Engine Center• Product: 10 – 18 Liter Engines
• Design / Machining / Assembly
Greenville, North Carolina Engine Center• Product: 7 – 9 Liter Engines• Assembly
TruckCat Machine
OtherIndustries
2006 Sales 2006 Sales
TruckCat
Machine
Other Industries
Cat C7 Cat C9Cat C13
Cat C11
Cat C15
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2007 Actions To Offset Truck Engine Decline Actions we’re taking to
manage our cost structure
Mossville Engine Center
• Reduce contracted services (production & R&D)
• Temporary shutdowns
• Reduce salaried/management
• Eliminate supplemental positions
Greenville Engine Center
• In-source Marine engine packaging & finishing
• Reduce contracted services
Cat C7 Cat C9
Cat C13
Cat C11
Cat C15
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Less Than 7 Litre Engines
•400 Series:• 2, 3 and 4 cylinder• 0.5 litre to 2.2 litre• 11hp to 67hp
•1100 Series:• 3, 4, and 6 cylinder• 3.3 litre to 6.6 litre• 50hp to 275hp
•800 Series:• 4 cylinder• 4 litre• 58hp to 93hp
• Expanded & Re-designed 0.5 – 2.2 ltr product range• New common platform 3.3ltr / 4.4ltr / 6.6ltr with variants for emerging markets.• Expanded power range from 180 to 275hp• ACERT Technology available from 80hp
Offering an expandedproduct line under 7 litre
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North America38% Growth Since 2000 Europe / Africa /
Middle East3% Growth Since 2000
Asia / Pacific2 X Growth Since 2000
Latin America4 X Growth Since 2000
2005 Units
North America
Europe,Africa,
Mid East
Latin AmericaAsia Pacific
Less Than 7 Litre Growth 14% growth since 2000,continued growth
through 2010
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EPG• Power Growth• Larger single unit
Up to 4000 kW
797
Machine• Lower Cost Per Ton • 2011 Emission Regulations• Range up to 4000 hp
Marine / Petroleum• 2013 Emission Regulations• Power Growth
Rail• Market Opportunity• Power Growth• 2012 Emission Regulations
Large High Speed Product Line Expansion – C175Market Drivers..
Emissions
Power Density
Operating Cost
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0 500 10001500200025003000350040004500
Power (bkW)
CAT C175
CAT 3500
0 500 1000 1500 2000 2500 3000 3500
Power (bkW)
CAT C175
CAT 3500
0 500 1000 1500 2000 2500 30003500 4000 4500
Power (ekW)
CAT C175
CAT 3500
0 500 1000 1500 2000 2500 3000 3500 4000 4500
Power (hp)
CAT C175
CAT 3500
Competitor A
Marine Petroleum
Machine
C175 Power Range
EPG
Competitor B
Competitor A
Competitor ACompetitor A
Competitor B
Competitor BCompetitor B
Providing morepower to our
customers
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'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Capacity Expansion to Meet Demand3500 Series Engines
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Ship
men
ts Balanced Demand• Marine• EPG• Mining Vehicles• Petroleum
EPG Driven• Dotcom• Telecom• Data Centers
Capacity
Capacity Increases2005 – 2007
• 6 Sigma Improvements
2008 • Capital Investment
32% capacity increase from
2005
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Kiel Engine Center – Medium Speed Business
• Competes in a $3B marketplace• Product Offerings from 1020 kw to 16,000 kw• MaK brand recognized as a medium speed engine leader • Solid growth expected
• Continued strength in Marine• Electric Power and Petroleum markets
• Enhanced product offering• Petroleum – 12CM34• Petroleum/Electric Power – 16CM34 (Gas)• Marine/Electric Power - 16M43 (2008)
• China strategy
• Low cost source for M20/M25 engines
• Moves manufacturing closer to market
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Solar Turbines - Complete Customer Solution
Field ServiceField Service
Contract Management ServicesContract Management Services
OverhaulOverhaul
Turbines 2 to 21 kHP Compressors
Construction ServicesCustomer Services
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• Increases HP range to 30,000 HP (22 MW)
• 40 % Efficiency
• Low emissions & wide fuel range
• 2009 Availability
Titan 250
• Superior combined heat & powerproduction in 5 to 6 MW range
• High efficiency
• Excellent economic value
Taurus 65
Expanded Solar Turbine Offerings
Petroleum
Electric Power
Customer Services• Remote diagnostic monitoring
• Allows world-class integrated sitemanagement
• Supports continued long-term servicegrowth