Illinois 200: Caterpillar's long central Illinois history, and its HQ move to the suburbs

 
By Steve Tarter
Of the Journal Star
Updated 10/6/2018 5:58 PM
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  • East Peoria's Building SS is the manufacturing home of Caterpillar Inc.'s D10 bulldozer. The company celebrated the 40th anniversary of the D10 in 2017.

    East Peoria's Building SS is the manufacturing home of Caterpillar Inc.'s D10 bulldozer. The company celebrated the 40th anniversary of the D10 in 2017. FRED ZWICKY/JOURNAL STAR

  • A Caterpillar wheel loader moves through Washington, Illinois, during a July parade honoring first responders who helped the city rebuild after a tornado leveled more than 1,100 homes in 2013.

    A Caterpillar wheel loader moves through Washington, Illinois, during a July parade honoring first responders who helped the city rebuild after a tornado leveled more than 1,100 homes in 2013. FRED ZWICKY/JOURNAL STAR

  • The Holt 45 Long Track prototype tank rolls through Peoria during a parade on Nov. 11, 1918.

    The Holt 45 Long Track prototype tank rolls through Peoria during a parade on Nov. 11, 1918. COURTESY OF CATERPILLAR INC.

  • The main office building for Caterpillar Inc. in Peoria no longer houses top executives. The world headquarters are now in Deerfield.

    The main office building for Caterpillar Inc. in Peoria no longer houses top executives. The world headquarters are now in Deerfield. RON JOHNSON/JOURNAL STAR

Peoria wasn't always a company town. It was a distillery town, a farm implement town and a river town before the Caterpillar Tractor Co. set up shop.

A bond developed between company and town that became a mutually beneficial relationship.

Caterpillar rose to international prominence on the strength of rugged, reliable earthmoving machines while the Peoria area gained jobs -- not only in bustling factories but at the headquarters of a Fortune 100 company, a rare distinction for a city of a population of 100,000.

But in 2017, that symbiotic relationship underwent a dramatic change when Caterpillar ditched plans for an expansive office project in downtown Peoria that Caterpillar had promised with great fanfare just two years earlier. Instead, the corporate headquarters would move to Deerfield.

Peoria would remain Caterpillar's "home," the company stated, emphasizing that 12,000 employees would remain in central Illinois, while some 300 executives and staff members would work out of corporate offices in the suburbs of Chicago.

Peoria Mayor Jim Ardis expressed appreciation for the employees that stayed behind but called the news "a punch in the gut." State Sen. Dave Koehler said, "It's something that everyone feared but had hoped would never happen."

The city now has fears of future announcements from Caterpillar management, headed by new CEO Jim Umpleby and board chairman Dave Calhoun, who heads the Blackstone Investment Group, that more jobs might be sent out of town.

While Peoria was jolted by Caterpillar's actions last year, it's no secret that the U.S. manufacturing scene has changed mightily since 30,000 people were employed at central Illinois Caterpillar plants in the early 1970s. That was a time when most of Caterpillar's machines were assembled in Illinois -- in plants at Joliet, Aurora and Decatur as well as across the Peoria area.

Now Caterpillar has more factories overseas -- 76 -- than it does in the United States where 62 plants operate. Caterpillar maintains 25 plants in China alone. When it comes to opening plants in this country, Caterpillar follows the trend of big manufacturers that set up shop in the Sun Belt.

U.S. plants opened by Caterpillar in recent years have been in Georgia and Texas while the company recently moved its mining division from Milwaukee to Tucson, Arizona.

Caterpillar Inc., the name the company adopted in 1986, has expanded beyond bulldozers. Along with making a major commitment to mining, Caterpillar is now heavily involved with equipment used for oil and gas exploration, electric power generation and marine engines.

But it wasn't always that way.

By the time the Caterpillar name was a registered trademark in 1910, the Holt Caterpillar Co. had established a plant in East Peoria in a building that previously housed the Colean Manufacturing Co., a firm that made steam-powered tractors before going bankrupt.

Benjamin Holt's family business started in the mid-1880s in California. Holt Caterpillar started up a division in the Midwest, moving to central Illinois with just 12 employees. Fifteen years later, the Holt firm merged with rival C.L. Best Gas Tractor Co., another California-based company, to form the Caterpillar Tractor Co. in central Illinois.

After the 1925 merger, C.L. Best became Caterpillar's first CEO, a position he held until his death in 1951. "Clarence Leo Best -- no one called him Clarence. His friends called him Leo. At work, he was C.L.," said Lee Fosburgh, Caterpillar's archives director.

Fosburgh pointed out that it was Best who got Caterpillar off on the right foot, with his Best Tracklayer Sixty becoming the Caterpillar Sixty, the workhorse tractor that helped establish Caterpillar in the earthmoving marketplace. "Best helped lead the push toward the company's adoption of the diesel engine. He came up with concepts and ideas right up until his death -- at age 71," Fosburgh said.

Former CEO Doug Oberhelman said Best's business acumen was one of the big reasons for the company's success. He noted that Best went to Wall Street for the initial public stock offering on Dec. 2, 1929 -- just weeks after the stock market crash that precipitated the Great Depression.

Oberhelman presided over the company's greatest sales year ever, $65 billion in 2012, but his 2010 acquisition of Bucyrus International, a Milwaukee-based maker of large mining equipment, for $8.8 billion proved ill-timed, coming as mining around the globe went into a tailspin.

As a result, Oberhelman presided over the closing and consolidation of 20 plants worldwide and a dramatic reduction in the company's workforce. Between 2012 and 2015, Caterpillar laid off 31,000 people.

Caterpillar's China strategy proved more successful. "We're going to play offense and we're going to win," Oberhelman in 2010. By 2014, the company that sold 34 pipe-laying machines to China in 1975 had 25 plants there. But the Chinese market, once so hot, went cool.

But Caterpillar has shown an ability to weather storms. In April, Caterpillar posted the highest first-quarter profit in the company's 93-year history with a 31 percent increase in company revenues.

While a hub for Caterpillar operations, central Illinois became a battleground between Cat labor and management in the 1990s, which were marked by two lengthy strikes. Since then, the United Auto Workers has seen its influence -- and numbers -- decline. There were 9,500 UAW members who voted on a six-year contract at 11 Caterpillar facilities in Illinois and Pennsylvania in 2011. In April 2017, only 5,000 UAW members voted.

And things are changing in downtown Peoria. Property that had been set aside for Caterpillar's new headquarters is slated to be home to OSF HealthCare, which plans to place between 700 and 750 employees at the site at a cost between $80 million and $100 million.

• Journal Star reporter Steve Tarter can be reached at starter@pjstar.com. Illinois 200 is a project of the Illinois Press Association and the Illinois Associated Press Media Editors. Find previous stories at dailyherald.com/topics/Illinois-Bicentennial/.

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