Cat expresses worry over economy

Paul Gordon

While Caterpillar Inc. remains in a position of strength, the meltdown of U.S. financial markets could put the company's customers and the entire economy at risk, Chairman Jim Owens told members of Congress on Wednesday.

The crisis could adversely affect not only the overall U.S. economy, but the global economy, as well, Owens said in letters delivered to each member of the U.S. House and Senate.

In the letters, which were obtained by the Journal Star, Owens expressed disappointment that the House rejected the bailout plan Monday and urged Congress to pass legislation that addresses the crisis.

He sent separate letters to House members who voted against the bailout - saying he was disappointed to see they voted against it - and to those who voted to approve it. Owens further sent a letter to senators urging them to support the plan on which the Senate voted Wednesday evening.

"I'm concerned about the current state of the financial markets in the United States - and how this crisis may affect the global economy in which we operate. Over the past year, Caterpillar has been closely watching the situation, and we've become increasingly concerned about weaknesses in both the financial system and the overall economy," Owens wrote.

He said Caterpillar's conservative management philosophy has kept it able to continue providing products and services, but expressed concern the same may not be true of its customers if the crisis continues.

"I'm very concerned about the effect of this crisis on our customers - thousands of small business owners and contractors who are using Caterpillar equipment to build roads, bridges, hospitals, homes, offices, retail stores and more across America. Until our financial markets are strengthened, the health of our customers, many others on 'Main Street' and the entire U.S. economy is at risk.

"Time is critical. We need cooperation now between private businesses and public policymakers to do what's right for America," Owens said.

Caterpillar spokesman Jim Dugan declined comment on the Owens letters other than to confirm they were sent and that they specifically noted which members rejected the plan and which voted to approve it.

"Caterpillar is monitoring the current situation and shares the concern over the turmoil in the financial markets and its potential impact on the broader economy," Dugan said.

Dugan declined to discuss how the current credit crunch - whereby business and personal loans are tougher to get and where rates are increasing - is affecting Caterpillar.

Caterpillar Financial Services Corp., the wholly owned Caterpillar subsidiary that does equipment financing for company customers, "regularly issues medium term notes in the normal course of business. Our standard practice is to not discuss the strategic reasons for a particular issuance or the decisions involved in the exact timing of any issuance," he said.

It is public record, however, that Cat Financial borrowed $1.3 billion last week, money it then uses to finance equipment purchases for its customers. It's also known that Caterpillar paid much more interest for that money than it would have just a year ago.

Reuters reported last week that Caterpillar will pay $15.6 million more for those medium term notes that it would have last year.

Paul Gordon can be reached at (309) 686-3288