Caterpillar pumps more into Chinese R&D facilities

WUXI, Jiangsu - Caterpillar Inc, the world's largest manufacturer of construction and mining machinery, expanded its multi-functional research and development (R&D) center in Wuxi, Jiangsu province, into its second-largest globally, in anticipation of robust growth in the Chinese construction-equipment market.

Meanwhile, Caterpillar also started construction of a proving ground (an equipment-testing area) for the Asia-Pacific region and a production site for large-wheel loaders in the neighboring city of Nantong, Jiangsu province, on Thursday.

"China is the largest construction-equipment market in the world, and is also where our future lies. Caterpillar continues to invest in China to help our Chinese customers succeed and to position Caterpillar for long-term leadership in China," said Tana Utley, Caterpillar's vice-president and chief technology officer.

However, the company refused to disclose further investment details, saying that it is in a quiet period prior to the release of its 2011 financial report on Jan 26.

Utley said that investment in the Wuxi R&D expansion project will be similar to that of the initial phase, which finished in December 2009 and cost the company more than $50 million. "And we expect to add several hundred engineers to our current team of 500 employees here," she added.

The Wuxi R&D center will add a number of engine-test cells for light, medium and heavy duty equipment, as well as high-horsepower engines. It will also include more labs for fuel systems, electronics, hydraulics, cooling, roll-over protection and virtual reality, as well as other components and systems labs.

"Through the Wuxi center, we are committed to developing sustainable and cost-competitive local R&D resources to help Caterpillar compete in China and other growth markets," said Sun Xiaobo, director of Caterpillar's Product Development & Global Technology Division.

On Tuesday, Richard Lavin, one of the company's group presidents, was quoted by Reuters as saying that Caterpillar expects China's heavy-machinery market to grow by 10 percent in 2012. "Caterpillar's future is in China," said Utley. "So it's likely that we will further add investment to expand Wuxi's R&D facilities in China soon."

According to Kevin Thieneman, president of Caterpillar Asia and chairman of Caterpillar China, the US machinery company has 16 facilities in the country, with nine more under construction. It has invested more than $2 billion in the world's largest construction-equipment market so far.

The Chinese government announced investment of 4 trillion yuan ($632 billion) to stimulate the domestic economy in late 2008, with 83 percent of the package going into infrastructure construction.

Booming demand led to a surge in production of construction equipment in China to more than 234,000 units in 2010, accounting for more than half of the company's global total.

Statistics suggest that public infrastructure spending in China will grow by nearly 160 percent in the country's 12th Five-Year Plan period (2011-2015), from 2.6 trillion yuan in 2010 to 6.7 trillion yuan in 2015.

"China's appeal for an environmental-friendly society and technological improvement also provides opportunities for Caterpillar to further develop in the country," said Thieneman.

China said in its 12th Five-Year Plan for the machinery industry that it will encourage the development of high-end machines and equipment, in addition to green technologies.

Seeing the potential, the Swedish construction-equipment producer Volvo Group established a product design and research center in Jinan, Shandong province in October, which will be responsible for R&D in emerging markets.