UPDATE 1-Caterpillar selects Athens, Georgia, for new plant

Fri Feb 17, 2012 12:39pm EST

Feb 17 (Reuters) - Caterpillar Inc has picked a site near Athens, Georgia, for a plant that will build small tractors and excavators, investing $200 million to shift some production from Japan, the machinery maker said on Friday.

The facility will employ 1,400 people once it is fully operational in about five years. Construction will begin in the next 45 days.

Another 2,800 jobs will be created among suppliers and other employers, according to the company and Georgia state officials.

Caterpillar will export small track-type tractors from the facility. The company moved production from Japan to be closer to customers in North America and Europe, and Athens was picked because of its proximity to the ports in Savannah, Georgia, and Charleston, South Carolina.

The move by Caterpillar comes as President Barack Obama has increasingly positioned so-called insourcing as a key theme heading into the upcoming presidential election. Obama has proposed closing tax breaks for companies that move U.S. jobs overseas, while providing incentives to firms that bring work home, particularly in high-tech manufacturing.

The insourcing sentiment was echoed this week by top executives who gathered at an event organized by General Electric Co. Some said that U.S. manufacturers moved their production out of the country too quickly over the past decades and now see a competitive advantage in building up their footprints back home.

Caterpillar's decision, however, did not come without controversy.

The Peoria, Illinois, company indicated in recent weeks that higher state income tax rates were a factor in its decision to locate this plant outside of its home state. Illinois Governor Pat Quinn shot back, saying he believed the decision was based solely on Caterpillar's logistics requirements.

Caterpillar first signalled its desire to move work from Japan in November, and at the time said it would also consider sites in Canada and Mexico with good access to ports. It said it did not expect job cuts at its plant in Sagami, Japan.

A month later, the company said it had decided to locate the new facility on U.S. soil.

Caterpillar shares were little changed in Friday trading.

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