Caterpillar sees strong China sales enduring

BEIJING (Reuters) - Caterpillar Inc CAT.N expects weakness in rich-country economies to persist into 2009 but its sales in China will remain strong, Jim Owens, chairman and chief executive of the U.S. construction and mining equipment firm, said on Thursday.

A Caterpillar heavy equipment is parked at a storage yard in Denver July 22, 2008. REUTERS/Rick Wilking

Caterpillar raised its full-year earnings guidance in July as strong growth in emerging countries offset the impact of rising commodity prices and weakness in economies in North America, Western Europe and Japan.

Speaking to reporters in Beijing, Owens said he did not expect the U.S. housing market to pick up substantially until 2010.

But he said Caterpillar was struggling in China to meet a backlog of orders.

“Pretty much our manufacturing operations here and in Asia to support the China market have been running at capacity,” he said.

The company expects sales in China to double to $4 billion by 2010 from around $2 billion this year.

Sales prospects would remain strong even as Chinese rivals upgraded their product lines to compete with Caterpillar’s longer-lasting equipment, Owens said.

“I fully expect that our sales growth in china will continue at a very high level for many years to come,” he said.

Caterpillar plans to invest an initial $20 million in a research and development centre in the southeastern city of Wuxi to support China and the Asia Pacific region, he said. Owens said he expected a shakeout in the domestic construction machinery sector in coming years.

“The Chinese industry over the next 20 years will be consolidated down to a few companies that compete worldwide,” he said.

Asked whether Caterpillar was looking for takeover targets, Owens said: “We will only acquire companies that want to be acquired. So we are not out looking to make a hostile acquisition.”

Caterpillar, a component of the Dow Jones industrial average and a U.S. business bellwether, expects global sales this year to top $50 billion, Owens said.

On July 22 it said full-year revenues would be around that mark.

($=6.828 yuan)

Reporting by Michael Wei; Editing by Alan Wheatley