Name: Here's Caterpillar's Outlook for 2016
Uploaded: 2015-11-24
Duration: 4 min 33 s
Description: CEO Doug Oberhelman sits down with Fortune's Susie Gharib to talk about projections for the upcoming year.

 Doug, you've been very candid with investors recently. You said to them, don't look for a big rebound next year. And the sales will be, in 2016, 5% lower than this year. So that's four years in a row that you've had down sales now. We know that Caterpillar is used to economic cycles. But what can you do in a down cycle like this one, especially you don't know how long it will last? What we've done is really try to take advantage of tough times and do things in tough times you wouldn't be able to do normally. Things around lean manufacturing for instance. We're really making headway in our plants on throughput-- things like our dealer initiatives to make sure our distributors around the world are doing all they can and are being very efficient. And finally the big one that I have a lot of fun with right now that will change our company over the next decades is all things digital. This world is changing so fast around us. We can't let this downturn slow us down and some of the things we have to get done. So we're using some of that in a really tough environment as we see sales shrivel for four years in a row. What's China's role in all of this? I mean, how much is the slowdown in China responsible for the slowdown in Caterpillar? The biggest indirect impact of China was mining on our mining business. Certainly as China has slowed, the demand for coal, iron ore, copper, all commodities has slowed down, which has meant mines are slower which has meant they're buying less mining equipment from us. And that's really been the biggest impact we've seen for China. Construction equipment has also slowed as we've seen. Their economy grow from 13%, 14%, year after year for a long time, to something 7% or less. And so as we work through that transition, we all feel that. And that's really what we're facing today. It's really hard to know how China's economy is doing. We get a lot of mixed messages. What do you think is the growth projection for China's economy for the new year? The Chinese talk about 7%, 6 and 3 quarters of 7. I don't know we're certainly not growing 7%. I would love to be growing 7% in China. But the fact is, it's a big economy, second largest economy in the world. They've got to grow. It influences the world. So we should all be hoping that they manage that economy through growth. And I think they will over time. But right now, it's sure a tough transition for them and for the world. And the downturn in the oil and gas business has also had an impact on the engine's sales and equipment sales that Caterpillar makes. Do you see that changing in the new year? Do you see a pickup in the energy market? The oil business for us has stopped. On every fracking site in the big shale zones in the United States, three or four of them would have three or four pieces of Caterpillar equipment grading the site, preparing the site, getting it ready for the well. That's all stopped. Gas, on the other hand, has been pretty good. There's been a lot of conversion of coal plants to natural gas. The pipeline system is growing. There's been some big LNG installations put in the south and on the west coast. I think the answer to your question is where does oil prices go? If they go back up to $50, $60, $70 in the next couple of years, we'll see a revival of that business. It won't be the boom it was at $100. It'll be good. It just seems like the bearish sentiment in the oil market seems to be disappearing. Is that how you see it? I don't know about the bearish sentiment. But I think a realistic place for oil is probably $50 to $70, somewhere over a long term. It's a sweet spot for the economies, in my opinion. I passed a gas station coming here today. It was a $1.88 for gasoline. Consumers have to feel that. And that's helping our economy in some way. So there's positives that offset the negatives that we're seeing certainly in the oil business. Doug, there's a lot of talk about some American highway bill maybe next year. What's the word from Washington? What are you hearing? You think this is going to happen? I think it will happen. And we've just heard in the last couple of days, it looks like there's going to be a reconciliation process and conference. We're going to see a six-year bill with probably two or three years of funding. But you have to remember, we haven't seen a multi-year bill in close to 10 years. Let's say that lawmakers greenlight this highway bill. Does that mean that the slump at Caterpillar will be reversed? I wish that were the case. We wouldn't really start to see that until next spring after the North American winter. And at that point, it's going to take a while because it takes-- none of these are really shovel ready as we've all come to realize over time. But certainly, it will be a plus and it will help us. And the US is not weak. It's not strong. A little impetus like that would be very good. 

CEO Doug Oberhelman sits down with Fortune's Susie Gharib to talk about projections for the upcoming year.

Here's Caterpillar's Outlook for 2016

Leadership

CEO Doug Oberhelman talks projections for the upcoming year.