Caterpillar chief: Indiana growing more competitive

The top executive of Illinois-based Caterpillar Inc. said Tuesday that Indiana has emerged as one of the most competitive states for economic development—to the point where it can hold its own against such Sunbelt powerhouses as Texas, Georgia and the Carolinas.

Speaking to Economic Club of Indiana, and in comments during a follow-up interview with IBJ, Chairman and CEO Doug Oberhelman said former Gov. Mitch Daniels launched a near “revolution” in state government and that successor Mike Pence appears to be staying the course.

“Illinois could learn an awful lot from Indiana,” he said. “Indiana can compete with just about anybody."

“I’d continue exactly on the same path,” he added. “I’d measure everything and try to be league-leading on every single metric.”

The giant maker of earth-moving equipment has about 3,000 employees in Indiana.

Its Lafayette plant is the only location in the world where Caterpillar assembles its three largest engines. The company also builds railroad locomotives in Muncie, after moving a Canadian operation once owned by General Motors there in 2010 and recruiting from the deep automotive labor force in northeastern Indiana. And Caterpillar remanufactures diesel engines and components in Franklin.

Oberhelman, also a director at Indianapolis-based Eli Lilly and Co., made news in recent years for sharply rebuking Illinois Gov. Pat Quinn over what Oberhelman considered mismanagement. So pointed were the complaints that speculation swirled Caterpillar might leave its long-time home in Peoria.

Those concerns—and other states’ chops-licking—waned as the company began planning a new headquarters building in Peoria’s downtown, but on Tuesday Oberhelman repeatedly hammered familiar themes of competitiveness.

China and many other rising nations are spending astonishing amounts on airports and other infrastructure while a dysfunctional U.S. Congress can only manage to fund road budgets a few months at a time, he complained.

“Who would build a house if the bank only assured funding for part of it, say for the foundation and the framing, and then asked you to trust that the rest of the money would come next spring,” he said.

An immigration system that sends the brightest students back home after graduating from American universities is also stunting job growth, he said. So is a mind-boggling tax code and a sluggish rate of completing trade agreements.

Moreover, Oberhelman lamented that the first person to walk on the moon, Neil Armstrong, attended a one-room schoolhouse, yet half of the applicants for Caterpillar factory floor jobs are rejected for lack of basic skills.

Indiana at least is moving in the right direction, he said: Budgets are balanced, pensions are reasonably funded, bond ratings are pretty solid.

When Caterpillar opted to move production of some small tractors and excavators from Japan to Athens, Ga., in 2013, Indiana was among the most competitive states for the investment along with Texas, Alabama, Georgia and South Carolina. The company chose Athens for its proximity to an ocean port, he said.

Indiana’s passage of right-to-work legislation in 2012 was another step toward making the state more competitive, Oberhelman said, but he added that Caterpillar wouldn’t consider right-to-work heavily in site-selection decisions because many states have competitive labor climates.

Caterpillar has no immediate plans of consequence for its Indiana facilities, he said.

In fact, Lafayette may never add square footage, he said, even though more engines will be made within the existing footprint as developing nations increase  demand for engines for power generation and other uses.

Likewise, the Muncie plant will stay about the same size despite expectations that the plant will build more locomotives for international markets.