Dow Jones Newswires-WSJ | Sales at Caterpillar Inc. are expected
to rise 10 percent-25 percent this year on inventory restocking and a
stronger global rebound than was initially expected, James W. Owens,
the company’s chairman and chief executive, said Tuesday.

Yet Owens, who will be retiring as CEO in June, cautioned the outlook
remains uncertain and assigned a 25 percent chance to a “Great
Recession”-type of event in which Caterpillar’s sales, which were $32.4
billion in 2009, increase to just $35 billion by 2011.

The company’s current “base case” scenario is for sales to reach $55 billion to $60 billion during that time, said Owens, speaking before a lunchtime crowd at a conference held by the National Association for Business Economics in Arlington, Va.

“We have to be really nimble,” he said.

Asked about price pressures, Owens said he expects them to be minimal. In 2009, the company’s total material costs declined on a world-wide basis, and he said he expects that to happen again this year.

“We’re not seeing a lot of risk of inflation,” said Owens, an economist by training who has served as Caterpillar’s chief executive since 2004.

Avoiding deflation, a situation in which prices and wages enter a downward spiral, “is critically important,” said Owens. “Modern industrial economies don’t know how to deal with deflation — I think the Fed gets that.”

The biggest force driving the company’s sales increase this year is the inventory cycle, he said. Caterpillar reduced nearly $3 billion in dealer inventory last year, and the absence of a similar decline this year “means a big pop in sales.”

Owens had high praise for the Federal Reserve’s actions during the credit crisis under Chairman Ben Bernanke.

“I don’t think I could be more complimentary of what the Federal Reserve has done, in particular seeing us through this horrific recession,” he said. “The decisions may not have been perfect but I think they have served us extraordinarily well in preventing an outright depression.”

He said he wished more of the roughly $800 billion stimulus package had been directed at infrastructure investment, which the U.S. sorely needs, but said he supported the stimulus package overall and such criticisms were largely just “picking at the margins.”

He also underscored the need for keeping corporate taxes low so the U.S. can retain multinational firms, and going forward with free-trade agreements that promote exports and create U.S. jobs.

Caterpillar, the world’s largest manufacturer of construction and mining equipment known for its signature yellow machinery, also has been diversifying from a manufacturing to service-oriented company.

Its service businesses accounted for nearly 50 percent of the company’s sales in 2009, Owens said, thanks to divisions in financial services, renting and leasing, refurbishing of used or broken equipment, and recent acquisitions such as Progress Rail, which provides world-wide maintenance of railroads.