Caterpillar CEO optimistic on Europe

GlobalPost

While concerned about the tough business environment in Europe, the CEO of Caterpillar, the world's largest maker of construction equipment, hopes the "sun will rise" over the continent.

"At the moment we are very concerned about it [Europe] but we're doing okay," CEO Douglas Oberhelman told CNBC. "Our market now is stable and some countries are better than others. We've seen nice things in France and Germany... but Italy has been depressed for a long time."

He added: "All in all there is hope that we are sizing it right and at some point the sun is going to rise and we'll do well again."

The euro zone was in the limelight again as the Cyprus bailout crisis left investors fearful of a contagion effect.

Oberhelman disagreed with the view that the Cyprus bailout terms, which tap private investors for cash, would provide a template for dealing with other indebted European nations.

"It's deleveraging in its most brutal form. We've seen it country after country. This is the latest one, there will probably be a few more. I really don't think this will be a template for the rest of Europe... Ultimately we'll get through it and the good news is that this is one more behind us," he said.

In January the firm reported a profit fall of 55 percent year on year for the fourth quarter of 2012, due to a charge connected with accounting fraud at a Chinese subsidiary and weak demand among its dealers. Caterpillar's bulldozers, tractors, and other machines have been accumulating in warehouses due to slowing economies in China, Europe, and the US

Cracking China

Another difficult region for Caterpillar has been China, where the firm has struggled to achieve a significant foothold. But Oberhelman said China's slowing growth last year - at 7.8 percent - actually provided a boost for the company.

"The reason we haven't made greater inroads [in China] is because the level of growth has been so fast that no company can keep up. In the past few years with the slowdown we have done a lot better, our market share is up. As the economy goes from double digit growth to 7, 8 or 9 percent, we are very happy to see that because it helps with consolidation and the construction industry here is starting to look a lot like others around the world," he said.

At a recent meeting with China's new leaders, who took over in the middle of March, Oberhelman said he talked about the need to create a more level playing field for foreign companies in China.

"They recognize that. They have a lot of state-owned entities that are doing very well, they need to develop the small and medium enterprises in a bigger way which is where a lot of the entrepreneurialism and innovation is. I think they understand that," he said.

Oberhelman added that tensions between China and the US over accusations of cyber-hacking provided one of the largest barriers to international trade and relations between the two economies.

"We are hacked every day some of it is innocent some of it is not... We really need policy to help trade between us and soothe relations," he added.

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