New Caterpillar CEO Faces Tough Decisions as Company Digs Out

Shutterstock photo

By Bob Tita and Andrew Tangel

Among Jim Umpleby's first big jobs as Caterpillar Inc.'s chief executive will be cleaning up the fallout from his predecessor's expansion plans.

Doug Oberhelman, who is leaving the top job at the end of this year after bold overseas expansion plans ran afoul of the global commodity bust, has set out to cut 10,000 jobs and $1.5 billion in annual expenses, as well as close up to 20 plants through 2018.

Those cutbacks and negotiations will presage a broader reckoning over how aggressively to chase the next boom in construction and mining or narrow to the equipment-making giant's focus on smaller, higher-profit business lines.

Caterpillar's sales of bulldozers, excavators, giant mining shovels and huge dump trucks have slowed for four consecutive years. Many analysts expect them to fall again in 2017. Caterpillar faces a fortified set of competitors in China and Japan ratcheting up product offerings in case the market rebounds.

For the past three years, Mr. Umpleby presided over Caterpillar's engines business: a low-profile division that is also Caterpillar's most profitable. Engines have accounted for up to two-thirds of the company's annual operating profit in recent years and 40% of equipment sales.

Identifying similar pockets of strength in Caterpillar's cyclical markets is likely to define Mr. Umpleby's tenure, particularly if markets for Caterpillar's earth-moving and mining equipment remain soft.

"They could identify opportunities that are not immediately obvious now, " said Joe O'Dea, an analyst for Vertical Research Partners.

Despite his 35 years at Caterpillar, Mr. Umpleby's time in San Diego and overseas mean he isn't well known to many at the company's Peoria, Ill., headquarters. His promotion was a surprise to some.

Caterpillar has declined to make Mr. Umpleby available for comment. A Caterpillar spokeswoman declined to say whether he would speak with analysts next week after the company releases its third-quarter earnings.

The spokeswoman said Mr. Umpleby would review the company's strategy with Caterpillar's leadership team. "You should expect to hear more about the strategy in early 2017," the Caterpillar spokeswoman said in an email, noting Messrs. Oberhelman and Umpleby will remain in their current positions through the end of the year. "We're all focused on finishing the year strong."

Colleagues described Mr. Umpleby, who grew up the son of a steel mill foreman in Highland, Ind., as a methodical manager and careful listener. Don Ings, a former Caterpillar executive who has known Mr. Umpleby for more than 30 years, said the company's fortunes may turn positive during his tenure.

"Doug was dealt a deck of cards," Mr. Ings said of Mr. Oberhelman. "Jim's going to be lucky enough that his deck of cards is going to include the upcycle [for machinery] and Caterpillar is very, very-well positioned to achieve greatness during that cycle."

Mr. Umpleby's Caterpillar career started in 1981 when it acquired Solar Turbines, a subsidiary prized for its high margins. He later served as the San Diego-based division's president. The oil-price decline has damped Solar's sales recently, but the division hasn't slipped as much as others.

"Those gas turbines continue to operate on offshore facilities, oil and gas pipelines," Mr. Umpleby told investors at a conference in August. "We're pleased with where we are at this point in the year."

Mr. Umpleby will have to answer to Dave Calhoun, who will replace Mr. Oberhelman as chairman of the board at the end of March. It is the first time Caterpillar will have a separate chairman and chief executive in 26 years.

Mr. Calhoun, an executive at Blackstone Group LP, was once seen as a potential successor to Jack Welch as chief executive General Electric Co., where he spent much of his career. In 2006, Mr. Calhoun became CEO and later chairman of the television-ratings company Nielsen Holdings.

Nielsen's stock is up 16% this year, outpacing the S&P 500, which is up about 5%.

"If I had to pick a chairman of any company that needed turning around, I'd pick Dave," said Jim Kilts, Nielsen's chairman when Mr. Calhoun was CEO.

Write to Bob Tita at and Andrew Tangel at

  (END) Dow Jones Newswires
  Copyright (c) 2016 Dow Jones & Company, Inc.

This article appears in: Commodities
Referenced Symbols: CAT

More from Dow Jones Business News


See headlines for CAT

Follow on: