Caterpillar adds capacity in China as demand grows

Caterpillar Inc., the world's largest maker of construction and mining equipment, said it's increasing production capacity for excavator components in China, the fastest-growing major economy.

The extra capacity will reduce the percentage of components obtained from outside China, Jim Dugan, a Caterpillar spokesman, said today in an e-mail that didn't provide further details. It plans to shift some sourcing of complex parts for its Chinese factories from Japan to China, the Financial Times reported today, citing Rich Lavin, the company's head of emerging markets.

Caterpillar imports about 40 percent of the components for its Chinese excavator factories from Japan and plans to cut that by at least a quarter within five years, according to the report. The move comes as manufacturers, including the Renault SA-Nissan Motor Co. alliance, shift production overseas in response to the appreciating yen and a stagnant Japanese economy.

Caterpillar, based in Peoria, is vying with Komatsu Ltd. and Hitachi Construction Machinery Co., Japan's two largest makers of construction equipment, and Doosan Infracore Co., South Korea's largest producer of the equipment, to expand sales in China. Locally, Komatsu has operations in Rolling Meadows and Oak Brook and Cat has operations in Aurora.

Industry demand for excavators in China will grow 32 percent to 96,000 units for the year to March 2011, accounting for 49 percent of the total, according to an Oct. 26 estimate by Hitachi Construction Machinery.