Interview with Douglas Oberhelman, CEO of Caterpillar

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Douglas Oberhelman

Doug Oberhelman, chairman and chief executive officer of Caterpillar Inc., talks during an interview at the East Peoria plant earlier this week. (Zbigniew Bzdak/Chicago Tribune)

A. Yes, I did.

Q. Other CEOs, namely Sears Holdings and CME Group, have bluntly threatened to leave. What do you think of that?

A. I think it's up to them.

Q. What do you think about the deals they've struck?

A. Again, I think it's up to them and the state. I like to think Caterpillar has taken a different road. One of the reasons I've tried to be vocal, firm, and, I hope, represent a fair shake is to improve the environment overall, so that we don't have to get in a situation where I am forced to do something I don't want to do, like Sears, or like others.

Q. The most important thing I wanted to come out of this interview with is an honest narrative about how you decide where to open new factories. How did you make the decision to move 1,400 jobs from Japan to the new plant in Georgia? Do you use outside consultants?

A. We do. The outside consultants start with a very broad sheet of paper. In this case, we hired (Harvest Group LLC in Germantown, Tenn.) for this particular plant. This is the first time we've used that group. I was very happy with them.

We lay out what we want, and where we're coming from. That is, we're bringing jobs in from Japan. The types of supply chain we need. The types of employees we need. In this case, (it was) 1,400. We think that will generate another 2,000, 3,000 or 4,000 supplier jobs. (They look at) the workforce that's available, and the training that's available to further develop the workforce that's there. What's the business climate? (They look at) everything from the tax rate, to the workers' comp rate, the unemployment comp rate, (and) the situation around tort.

Q. Do they come back to you with a ranking?

A. You'll get a couple of cuts. I think we started with 20-plus states, and Illinois was not one of them, right out of the get-go, and hasn't been for several years. And I'll come back to that.

First, I want to make this point. We started with 20-plus states. The consultants got to know us, our criteria, what we are going to do there. They have a lot of experience ... They made a cut, a second cut, of about a dozen and half states. At that point they came to us and made a recommendation: Look at these six states.

In this case, the division that was in charge of the particular products (we're going to make in Georgia) then got into what I would call deep due diligence in those handful of states.

Q. So Illinois was not in the initial 20 you gave to the consultants?

A. No. No. They were not in the original 20-plus that the consultants screened for the criteria they thought we needed.

Q. Wow. And you said they haven't screened Illinois for several years. These consultants haven't?

A. No, no consultant has, for any (new) site selection in the last three or four years for Caterpillar. When we've worked with other consultants in the past, Illinois didn't make it through the first cut. We've announced probably a half dozen new factories in the last couple years. (Editors' note: In the last two years, Caterpillar says it has announced new factories or expansions to existing factories at 33 locations, half of those in the United States. This includes expansions in East Peoria and Decatur announced in late 2011 that will add 300 jobs.)

We've had several different consultants, and their process is more or less all the same. We sit with them. We hire them. We tell them what we want, what we're doing, how many people, the types of skills we need. Those consultants will bring a short list back to us, and we go into deep due diligence.

Q. So the consultants initially screen all 50 states?

A. In the Georgia case, we also considered a couple of provinces in Canada and Mexico.

Q. What states were in the final six?

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