Fortune 100 Co. Tripped Up In China

Back in 2013 I wrote about what I saw as 5 Pillars of the New Financial Reality.  One of them was don't get too sucked into China.

Alas, that post came too late to save Caterpillar CEO Doug Oberhelman.  He's out and a big bet on China is most of the reason.

“Everybody was convinced that this time would be different,” said Ken Banks, who retired in 2013 as manager for Caterpillar’s electric mining shovels. “They thought the Chinese market was so hot, that commodity prices would continue to be very strong and Caterpillar would increase sales substantially.”

The year 2012 would prove to be a peak for Caterpillar. Soon after, miners began shelving equipment-buying plans as commodity prices fell. China’s growth slowed. Then oil prices fell, along with demand for related equipment.

Caterpillar now faces its fourth straight year of falling sales, the longest decline in its history. Its stock is up 29% this year—the best-performing in the Dow Jones Industrial Average— but trades 25% below its 2012 peak.

“Everybody was surprised by the size of the downturn and the length of it,” Mr. Oberhelman, 63 years old, said at a September mining trade show in Las Vegas. “I firmly believe we couldn’t have forecast that at the time” of the Bucyrus deal. The company declined to make Mr. Oberhelman available for comment for this article.

 BTW, my 5 Pillars post from 2013 holds up very well.