The month before Doug became the CEO of a 42 billion dollar company; Caterpillar purchased EMD for 820 million dollars and combined it with Progress Rail Services. This represented the latest in a series of purchases started by his predecessor, Jim Owens. Nevertheless, according to the company website and media reports, the purchase of EMD fitted into his new growth strategy of buying companies and then cutting costs and increasing sales.
Unlike most of the 104,000 workers at the company, Doug has never made anything. His father was a sales rep for John Deer and he studied finance at Millikin University, a small school located near Decator, Illinois. Caterpillar had a plant across town and when he finished school in 1975 it was natural for him to find work with a local employer.
Doug worked hard and over the next ten years he was posted to Japan, Florida and Canada in various financial roles. However, it seems that his time in South America during the 1980s debt crisis had the most significant impact on his career. He realized the importance of servicing his equipment as a way of his customers until the good times returned.
In 1995, Doug came back to head office, located in Peoria, and was promoted to Chief Financial Officer. Three years later, he became VP for the engine division. This gave him the opportunity to manage something more than money and also exposed him to the responsibility of managing the core of Caterpillars business. In 2002, Doug became group president for essentially all things that were financial.
Doug must have done well with handling the money because in late 2009, Jim Owens announced that he was going to retire in 2010 and that Doug would be his successor.
According to a media profile, Doug spent the next year on developing a new strategy for the company. Apparently, the company sales were very cyclical; people buy expensive equipment in good times and then keep repairing them in bad. As a result, profits would swing wildly, up 52% one year and then down 53% another. To deal with these wild swings, Doug told senior managers to model survival strategies based on sales dropping by 80%. The model also required that Caterpillar to produce the lowest cost products on the market, measured over the lifetime of the product.
Key to this low-cost strategy was the extensive use of their network of nearly 200 dealers around the world. Like car dealerships, these independent businesses would be the focus for everything: market development, sales, and follow-up customer service. Doug realized that for every hour that heavy equipment was not in operation, the customer was losing large amounts of money. So, quick repairs became an essential part of their sales and revenue strategy. Dealers maintain large stocks of parts so that customers did not have to wait for deliveries.
Another part of Doug strategy was to use the good times to expand into other areas that were fast growing and very profitable. Product areas identified were: mining, eco-friendly engines and railroad equipment. Growth markets that were identified: China, India and Brazil. Again, the dealer network was considered key to developing these markets.
Doug has been CEO for little more than one year. During 2010, sales and revenues were almost 43 billion dollars with profits approaching 3 billion dollars. As a result, he earned 10 million dollars and I understand that his top six officers earned nearly 67 million dollars. Sales and revenue numbers for 2011 will be released on January 26, 2012 and everything suggests that things will be even better.
Doug must feel like he is king of the world.
One last number, Caterpillar is demanding 30 million dollars in wages and benefits cuts from EMD workers.