MAKING PROGRESS POSSIBLE - IIS Windows...

MAKING PROGRESS POSSIBLE

Caterpillar Engine Business

Doug OberhelmanGroup President


Engine Strategy

Mission:

• Provide Caterpillar machine product groups with power systems that contribute to the differentiation of their products.

• Participate in industry segments where we can achieve attractive returns.

• Achieve sustainable profitability in all segments.


History of the Engine Business

1932 Produced first diesel engine for the Diesel Sixty Tractor

1935 Introduced Industrial engines

1936 Produced first natural gas engine

1947 Opened Industrial engine facility in Mossville, Illinois

1959 Introduced On-Highway Truck engines

1981 Acquired Solar Turbines

1982 Opened large high-speed engine facility in Lafayette, Indiana

1997 Acquired Mak Motoren

1998 Acquired Perkins Engines

1999 Acquired 100% of FG Wilson

2004 Introduced ACERT technology


Engine Business Trends

$4.8

$6.5 $6.9 $7.1 $6.9 $6.7$7.4

$9.5

$11.1

$0

$4

$8

$12

(i n b

ill io n

s)

Net Sales *

10%

8% 7%

10%

5%

3% 3%

6%

10%

-3%

2%

7%

12%

Operating Profit %

1997 1998 1999 2000 2001 2002 2003 2004 2005

* Does not Include Cat machine engine intercompany transfers


C0.5 to C4.4

Small High Speed0.5 to 4.4 Ltr225,000 units

C6.6 / C7 / C9

C11 to C18

C27 / C32

Medium High Speed6.6 to 32 Ltr249,000 Units

3500

C175

Large High Speed34.5 to 106 Ltr

10,000 Units

3600 / C280

M20 / M25

M32 / M34 / M43

Large Medium Speed56.5 to 1417 Ltr

1000 Units

Saturn Taurus

Centaur Mars

Mercury Titan

Turbines1.5 to 30K HP

300 Units

Engine Business

Leveraging Our Platforms

Electric Power On-HighwayTruck

Cat Machines Marine Petroleum Industrial


100 200 1600010000300 500 750 1500 2500 4000 6000KW134 168 2144013400402 670 1005 2010 3350 5360 8040HP

MediumSpeed

C175

3500

Vees

Heavy Duty

Mid-Range

1100

Small

M20/25, M32, M43

C175

3500

C27/32, C43

C11, C13, C15, C18

C7,C9

400, 800

1100

MaKCatPerkins

Power Range Offering the broadest power range in the industry

3600

Turbines

Solar

Saturn, Centaur, Mercury, Taurus, Mars, Titan

2200033570

4000 4000

1300 - 2800 1300, 2300, 2500, 2800


Engine Sales By Industry

Commercial 85%

Cat Machine15%

Internal vs. External

Distribution to End Users30% Electrical Power

29% On-Highway

24% Petroleum

9% Industrial

8% Marine

2005


Electric Power• Stand By• Prime• Combined Heat & Power • Rental

On-Highway Truck• Heavy Duty Trucks • Mid-Range Trucks• Specialty Vehicles

Petroleum• Gas Compression • Well Drilling• Production / Pumping • Well Servicing

Marine • Pleasure Craft• Commercial• Ocean Going

Industrial• Agriculture• Construction / Material Handling• Pumps & Compressors • Rail

Engine Industry Participation

Cat Machine• Heavy Construction • General Construction• Mining• Quarry & Aggregates • Other


North America

Latin America

Europe, Africa, Middle East

Asia / Pacific

$4.9 Billion

$3.6 Billion

$1.5 Billion

$1.1 Billion

Total 2005$11.1 Billion

Worldwide Engine Business Sales


North America

Latin America

Europe

Asia / Pacific

236,500 Units231,000 Units

6,500 Units

11,000 Units

Total 2005485,000 Units

Worldwide Engine Production

•Kearney Mesa, California•Los Angeles, California•San Diego, California•Griffin, Georgia•Jefferson, Georgia•Thomasville, Georgia•Mapleton, Illinois•Mossville, Illinois•Pontiac, Illinois•Lafayette, Indiana•Greenville, South Carolina•Newberry, South Carolina•DeSoto, Texas•Mabank, Texas

•Tijuana, Mexico• Curitiba, Brazil•Piracicaba, Brazil

•Gosselies, Belgium •Peterborough, England •Shrewsbury, England•Stafford, England•Wimbourne, England•Kiel, Germany•Rostock, Germany•Larne, N. Ireland•Monkstown, N. Ireland•Springvale, N. Ireland•Riazzino, Switzerland

•Pondicherry, India•Bangalore, India•Guangzhou, China•Tianjin, China•Sagami, Japan (JV)


Market Outlook by Industry


Petroleum Industry

• Oil and gas prices expected to remain above investment thresholds and drive growth.• Broader based global demand with strong growth in China• Capacity increases by OEM manufacturers – gas compression / well servicing / drilling• Increased North America gas well drilling needed to offset declines in existing wells• Equipment shortages and high equipment day rates will continue

2007

Diesel Engines Natural Gas Engines

Petroleum Gensets & Packages

Frac Rigs

1991 1993 1995 1997 1999 2001 2003 2005 2007

2006 up 24%2007 up 19%

Solar Turbines


1991 1993 1995 1997 1999 2001 2003 2005 2007

Marine Industry

2006 up 15%2007 up 10%

Cat 3000 Series

MaK M25

MaK M20

MaK M43

MaK M32

Cat 3126

Cat C9

Cat C12

Cat C18

Cat C32 Cat 3500 Cat 3600Cat C280

• World trade growth continues to drive oceangoing freight. • Strong Petroleum market causing increased need for supply boats• Contracts for new vessels remain strong. • Increased deliveries of offshore, service and feeder vessels• Rising personal wealth driving the global mega-yacht market

2007


Electric Power Industry

• Slower U.S. economy causes flat North American demand• Continued demand for capacity constrained higher kW units • Healthy corporate profits / low interest rates drive strong European sales• Commodity prices support widespread infrastructure investment in

Latin America / Africa / Middle East • Strong Asian economic growth driving genset demand

20071991 1993 1995 1997 1999 2001 2003 2005 2007

2006 up 8%2007 up 8%

FG Wilson Genset

Olympian Genset

Cat Switchgear& UPS

FG Wilson Genset

Solar Gas Turbine

Cat Power Module

Cat Diesel Genset

Cat Natural Gas Genset


Cat 3600

1991 1993 1995 1997 1999 2001 2003 2005 2007

Industrial Industry

2006 up 4%2007 up 2%

• North America flat with slower U.S. economy • European Ag market flat to down • General industrial investment up in Europe with low interest rates• Growth opportunities in China & India – particularly in smaller end

2007

Perkins 400

Perkins 800

Perkins 1100

Cat C0.5

Cat C2.2Cat C6.6 Cat C7 Cat C9 Cat C13 Cat C15

Cat C18

Cat C32

Cat 3500

Cat C4.4


Cat C13

Cat C11

Cat C7

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

HeavyDuty

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

MidRange

North American On-Highway Industry

2006 up 7%2007 down 45%

2006 up 10%2007 down 25%

Cat C9

Cat C15

• Significant downturn from emissions regulation change • Flat freight tonnage driven by slower North American growth

2007


Product Update


Value to Customers• Reliability

• Durability

• Performance

• Operating Costs

• Emissions Reduction

• Noise Reduction

Elements of ACERT

ACERTTM Technology

Combustion

After Treatment

Leveraging ACERTtechnology throughoutour engine product line


2007 On-Highway Truck Engines

• Operating Over 160 Engines

• Driven Over 11 Million Miles

• Maintaining Fuel Efficiency

• Expecting EPA Certification


Precision Combustion Cat Designed Injection Technology

Cat Common Rail Fuel System (Mid-Range)Clean Gas Induction

Reduced NOx / Better Fuel Economy

Reduce HC, PM

Reduce NOx, PM Recover Energy

Air Systems ManagementSeries Turbo charging

Variable Valve Actuation

Advanced ElectronicsElectronic Control Module

Effective AftertreatmentDiesel Particulate Filter

Cat Regeneration System

2007 Platform – Changes from 2006 Product

System Integration


Self-Regenerating DPF Filter• Filter is heated by auxiliary means• Regenerates under all conditions• Optimal fuel economy

• Operational over wide range of conditions• Self-contained on engine• No lag between fueling and ignition• Improved combustion control

Cat Regeneration System

Effective Aftertreatment


On-Highway Truck Engine Manufacturing Profile

Mossville, Illinois Engine Center• Product: 10 – 18 Liter Engines

• Design / Machining / Assembly

Greenville, North Carolina Engine Center• Product: 7 – 9 Liter Engines• Assembly

TruckCat Machine

OtherIndustries

2006 Sales 2006 Sales

TruckCat

Machine

Other Industries

Cat C7 Cat C9Cat C13

Cat C11

Cat C15


2007 Actions To Offset Truck Engine Decline Actions we’re taking to

manage our cost structure

Mossville Engine Center

• Reduce contracted services (production & R&D)

• Temporary shutdowns

• Reduce salaried/management

• Eliminate supplemental positions

Greenville Engine Center

• In-source Marine engine packaging & finishing

• Reduce contracted services

Cat C7 Cat C9

Cat C13

Cat C11

Cat C15


Less Than 7 Litre Engines

•400 Series:• 2, 3 and 4 cylinder• 0.5 litre to 2.2 litre• 11hp to 67hp

•1100 Series:• 3, 4, and 6 cylinder• 3.3 litre to 6.6 litre• 50hp to 275hp

•800 Series:• 4 cylinder• 4 litre• 58hp to 93hp

• Expanded & Re-designed 0.5 – 2.2 ltr product range• New common platform 3.3ltr / 4.4ltr / 6.6ltr with variants for emerging markets.• Expanded power range from 180 to 275hp• ACERT Technology available from 80hp

Offering an expandedproduct line under 7 litre


North America38% Growth Since 2000 Europe / Africa /

Middle East3% Growth Since 2000

Asia / Pacific2 X Growth Since 2000

Latin America4 X Growth Since 2000

2005 Units

North America

Europe,Africa,

Mid East

Latin AmericaAsia Pacific

Less Than 7 Litre Growth 14% growth since 2000,continued growth

through 2010


EPG• Power Growth• Larger single unit

Up to 4000 kW

797

Machine• Lower Cost Per Ton • 2011 Emission Regulations• Range up to 4000 hp

Marine / Petroleum• 2013 Emission Regulations• Power Growth

Rail• Market Opportunity• Power Growth• 2012 Emission Regulations

Large High Speed Product Line Expansion – C175Market Drivers..

Emissions

Power Density

Operating Cost


0 500 10001500200025003000350040004500

Power (bkW)

CAT C175

CAT 3500

0 500 1000 1500 2000 2500 3000 3500

Power (bkW)

CAT C175

CAT 3500

0 500 1000 1500 2000 2500 30003500 4000 4500

Power (ekW)

CAT C175

CAT 3500

0 500 1000 1500 2000 2500 3000 3500 4000 4500

Power (hp)

CAT C175

CAT 3500

Competitor A

Marine Petroleum

Machine

C175 Power Range

EPG

Competitor B

Competitor A

Competitor ACompetitor A

Competitor B

Competitor BCompetitor B

Providing morepower to our

customers


'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Capacity Expansion to Meet Demand3500 Series Engines

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Ship

men

ts Balanced Demand• Marine• EPG• Mining Vehicles• Petroleum

EPG Driven• Dotcom• Telecom• Data Centers

Capacity

Capacity Increases2005 – 2007

• 6 Sigma Improvements

2008 • Capital Investment

32% capacity increase from

2005


Kiel Engine Center – Medium Speed Business

• Competes in a $3B marketplace• Product Offerings from 1020 kw to 16,000 kw• MaK brand recognized as a medium speed engine leader • Solid growth expected

• Continued strength in Marine• Electric Power and Petroleum markets

• Enhanced product offering• Petroleum – 12CM34• Petroleum/Electric Power – 16CM34 (Gas)• Marine/Electric Power - 16M43 (2008)

• China strategy

• Low cost source for M20/M25 engines

• Moves manufacturing closer to market


Solar Turbines - Complete Customer Solution

Field ServiceField Service

Contract Management ServicesContract Management Services

OverhaulOverhaul

Turbines 2 to 21 kHP Compressors

Construction ServicesCustomer Services


• Increases HP range to 30,000 HP (22 MW)

• 40 % Efficiency

• Low emissions & wide fuel range

• 2009 Availability

Titan 250

• Superior combined heat & powerproduction in 5 to 6 MW range

• High efficiency

• Excellent economic value

Taurus 65

Expanded Solar Turbine Offerings

Petroleum

Electric Power

Customer Services• Remote diagnostic monitoring

• Allows world-class integrated sitemanagement

• Supports continued long-term servicegrowth


• Broadest Product Offering

• Strong Financial Results

• Well Positioned for 2007 and Beyond

Summary

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