Caterpillar Focuses on Adding Value and Meeting Market Needs

The company further expands its global business model in China

BEIJING, People’s Republic of China (PRC) - Caterpillar Inc. (NYSE: CAT) Chairman and CEO Jim Owens announced today Caterpillar’s plans to add to its China-based research and development (R&D) operations to increase the technical support for products serving markets in China and the rest of the Asia Pacific Region. This additional R&D effort is part of Caterpillar’s strategy to support the expanded manufacturing footprint being implemented in China and the growing market demand in emerging markets. Owens also said the company will increase the capacity of Shandong Engineering Machinery (SEM).

For the last thirty years, Caterpillar has been playing an increasing role in China from equipment import to deploying its global business model including manufacturing, product design, distribution, research and development, sourcing and product support. Caterpillar’s global business model is focused on creating value for its customers.

“Caterpillar’s operations have benefited from China’s remarkable economic growth and we are proud to be a part of this historical transformation,” said Owens on the final day of his most recent visit to China. “China is also our home,” added Owens. “We look forward to making an even bigger contribution to the economy and people of this country.”

Caterpillar Establishes Multi-Functional R&D Center in Wuxi

Caterpillar has selected the city of Wuxi in Jiangsu province as the location for a multi-functional research and development center serving Caterpillar’s ventures in China and the rest of the Asia Pacific Region. The Wuxi R&D center will focus on product and process development, validation, localization and technological training. Among its many functions, the new center will have an engine test facility with performance and emissions development capability, an advanced materials laboratory, an electronics laboratory, a system and machine integration facility and validation capability. The center will be built in multiple phases with the first phase to be complete at the end of 2009.

“This is an important milestone in support of Caterpillar’s growth in China,” said Tana Utley, Caterpillar’s Chief Technology Officer and vice president with responsibility for the Technology & Solutions Division, which is responsible for Caterpillar’s global R&D programs. “We are committed to bringing the best products and services to our customers in the region.”

The center is strategically located near Caterpillar’s component manufacturing facility in Wuxi that began production in June 2006 and the Wuxi engine campus with its first phase of production scheduled toward the end of 2008. It is also near the medium wheel loaders and motor graders manufacturing facility in Suzhou and the small-sized hydraulic excavator manufacturing facility in Nanjing. The Suzhou facility is currently under construction, and construction for the Nanjing facility will begin in 2009. Both facilities are expected to be Leadership in Energy and Environmental and Design (LEED) certifiable once operational. The LEED Green Building Rating System is a voluntary, consensus-based national rating system for developing high-performance, sustainable buildings.

In 2005, Caterpillar established an R&D Center in Qingdao, Shandong Province for product and process development in China. Caterpillar also has a design center in Xuzhou established in 2003, primarily focused on product improvement. Both centers are also expected to expand to support growing manufacturing operations. This commitment to technical excellence in China will provide a focal point for product development and will accelerate the introduction of Caterpillar technology into its design and production processes in the region.

Caterpillar Increases Investment in SEM to Expand Capacity

Demonstrating its commitment to support its growing customer base in the Chinese construction equipment industry, Caterpillar announced today a multi-million dollar capacity expansion for SEM. The investment will allow Caterpillar to meet growing demand and provide a broader product portfolio to wheel loader customers. To support this capacity expansion, the company will purchase additional land, and construction is expected to begin in 2009.

“This investment demonstrates Caterpillar’s long-term commitment to China, to our customers and our employees,” said Tom Bluth, vice president with responsibility for Caterpillar’s Asia Pacific manufacturing operations. “We expect to triple SEM’s capacity once the new facility is operational.”

Caterpillar purchased a minority stake in SEM in 2005. The success of the partnership and the integration of SEM into the Caterpillar family led to the purchase of the remaining shares earlier this year.

“Caterpillar has a long history in China and we look forward to a prosperous future,” said Bluth, “We will continue to look for ways to contribute to the communities where we all work and live.”