Company calls President Obama's package limited, says 'China got it right'
By Kevin Doyle
When President Barack Obama was seeking approval of his $787 billion stimulus package, he visited the Peoria, IL plant of embattled heavy equipment manufacturer Caterpillar, Inc. on Feb. 12, the final day of his push.
Furthermore, Caterpillar’s Chief Executive Officer Jim Owens is a member of the president’s Economic Advisory Board. So it had to be especially difficult for the new president on Tuesday when Caterpillar – the world’s largest maker of construction equipment – in conjunction with reporting its first net loss in 16 years, called the Obama program disappointing and less effective than measures approved by China.
“The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure,” Caterpillar said in economic commentary with the first-quarter earnings report.
“You can measure America’s bottom line by looking at Caterpillar’s bottom line,” Obama said during the February visit. “What’s happening at this company tells us a larger story about what’s happening in the American economy.”
White House press secretary Robert Gibbs said the spending represents “the single greatest infrastructure investment in this country” since President Dwight Eisenhower started the interstate highway system in the 1950s. Obama agrees “infrastructure needs have been neglected,” Gibbs said.
The stimulus bill had to be balanced between infrastructure projects and other measure to boost the economy, Gibbs said. The president and Congress will address additional spending on such projects when the next highway bill comes up.
Full-year profit will be about $1.25 a share excluding severance and other costs, or half the company’s January forecast, Caterpillar said, attributing the lower forecast in part to uncertainty about stimulus plans and said the effect of U.S. measures would be “fairly limited.”
Caterpillar said the U.S. may disburse as much as $70 billion this year to build infrastructure, about 6.5 percent of last year’s total construction spending and not enough to offset the drop in private projects.
Caterpillar said it expects some benefit this year from China, which enacted a stimulus package and cut its central bank interest rates to match the 2004 low, accelerating monetary growth. The actions will let China’s economy grow at a rate of more than 7.5 percent this year. The majority of China’s financial aid is being spent on infrastructure.
Source: Bloomberg.net