Caterpillar Expects Lower Sales

WINSTON-SALEM (AP) — Caterpillar Inc. expects sales and profits to be lower this year than last year, executives told shareholders at the company's annual meeting.

Glen Barton, chairman and chief executive of the earth-moving equipment and engine manufacturer, said Wednesday that continued economic problems in Southeast Asia and other areas and weak commodity prices were behind the lower forecast.

Earnings are expected to be down between 10 percent and 15 percent, Barton said. Caterpillar, based in Peoria, Ill., had earnings of $1.5 billion on revenue of $21 billion in 1998.

About 200 people attended the meeting. Caterpillar executives said they chose Winston-Salem in part because the company has five North Carolina factories.

Shareholders defeated a resolution that would have forced Caterpillar to adopt guidelines for dealing with countries with human-rights violations.

Another defeated resolution called for Caterpillar's board to be elected every year. Board members now serve staggered three-year terms.

Barton said Caterpillar's growth is tied to the global economy.

Half of its sales come from outside the United States. Barton said he expected the percentage to increase to 70 percent by 2010.

Richard Thompson, who heads Caterpillar's engine division, said the company's $2.2 billion in purchases of other engine-making companies during the past several years was paying off. He said the moves allowed Caterpillar to offer customers a wider range of products, from trucks to boats and power-generating equipment.

Shareholders also were briefed on Caterpillar's entry into the already crowded market for compact construction equipment, which is growing much faster than the market for larger earth-moving equipment. Besides being sold through dealers, the small excavators and loaders also are being rented, a first for Caterpillar.

"This is the first time we've launched a new product line and a new way to market them," said group president James Owens. Owens said he expects about $150 million in sales this year, and about $800 million within five to seven years.

Two of the company's fastest-growing business lines are financial services and warehousing. Cat Financial's assets have increased from $4.5 billion to $11.1 billion in five years, and its net income has increased from $32 million to $112 million, executives said.

Caterpillar signed a contract with the United Auto Workers last year after a long, acrimonious strike. Barton told shareholders that Caterpillar was restoring its relationship with employees.

"We're in the process of bringing everyone in to understanding the nature of our business," Barton said.