(Updates with details about Owens' tenure as CEO, quote from analyst, stock price.)
By Bob Tita
Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- Caterpillar Inc. (CAT) said Thursday that Douglas Oberhelman, president of its engine and services business, will replace Chairman and Chief Executive James Owens next year.
The construction equipment maker has been eyeing a successor since last year, when Owens signaled that he planned to step down in 2010, and was widely expected to make an internal promotion.
Oberhelman, 56, will take on the CEO-elect role on Jan. 1, overseeing a company forced to throttle back after an extended period of growth fueled by the global commodities boom and robust U.S. housing construction.
Demand for its construction and mining equipment collapsed in the wake of the global economic slowdown, forcing deep cost and workforce cuts.
Owens, 63, is an economist and one of the most vocal U.S. executives on the issue of free trade. As a major exporter of U.S.-built machinery equipment, Caterpillar benefited from several tariff-elimination agreements between the U.S. and developing countries enacted during the Bush administration.
He will pass the chairman's job to Oberhelman in October 2010, and formally retire under the company's age-limit policy for chief executives.
The selection of Oberhelman didn't surprise company observers.
"He was the leading candidate," said Lawrence De Maria, an analyst for Sterne, Agee and Leach. "He's well-respected internally and outside of the company."
Oberhelman joined Caterpillar in 1975 and has held a variety of executive roles, including chief financial officer and management positions for the company's operations in Latin America and Asia. He was elected a group president in 2002.
As president of the engine business, Oberhelman guided Caterpillar's expansion into sideline businesses the company considers complementary to its core operations, particularly the acquisition of Progress Rail Services in 2006, a railroad equipment remanufacturing business. He also oversees the gas turbine engine business, another market the company considers attractive for expansion.
Oberhelman helped broker the company's joint venture with truck maker Navistar International Corp. (NAV) after the two companies had spent years embroiled in patent litigation over engines. He is chairman of the venture, NC2 Global LLC, which will build Caterpillar-branded commercial trucks and engines for overseas markets.
Oberhelman was also involved in Caterpillar's decision to exit the North American truck engine business at the end of this year, rather than face a costly emissions upgrade of its engines to comply with tougher federal regulations on diesel engine exhaust.
"Doug's expertise in all critical facets of our business make him uniquely qualified to lead Caterpillar in today's global economy," Owens said in a written statement.
Owens, who has been chief executive for nearly six years, started his career with the Peoria, Ill., company in 1972 as a corporate economist. Like Oberhelman, he cycled through numerous executive positions, including president of Solar Turbines Inc. during the early 1990s. His three-year stint at Caterpillar's San Diego gas turbine maker is credited with Owens' interest as CEO in businesses outside of the company's traditional construction and engine markets.
Owens' tenure will likely be remembered for the company's roller-coaster-type highs and lows. He took over as the cyclical manufacturer was emerging from a prolonged sales slump early this decade. Caterpillar's sales and profits soared in recent years as construction growth and rising prices for mined commodities provided unprecedented demand for the company's yellow machinery.
Caterpillar's annual revenue grew from $22.8 billion in 2003 to $51.3 billion in 2008. Its earnings per share over this period increased more than three-fold to $5.66 per share last year. But demand for construction equipment collapsed this year. Caterpillar expects total revenue for 2009 to be about $32.5 billion, a 37% decline from 2008.
Caterpillar has slashed production in response to the falling sales. The company has idled plants and laid off more than 30,000 full-time and temporary employees since late 2008.
But Owens' bullish outlook for the company, particularly in developing countries, has helped to bolster Wall Street's confidence about the company, despite its plunging sales and profit this year. Since the beginning of the year, Caterpillar's stock price has increased about 28%. The stock was recently trading down 1.4% at $57.16.
Owens also will be remembered for winning key concessions from the United Auto Workers union that ended nearly a decade of labor unrest that included two strikes by the union during the 1990s.
In January 2005, the union ratified a six-year contract that established a lower wage scale for new hourly workers. For the first time, active union members also were required to contribute toward the cost of their health insurance coverage.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com