Caterpillar Inc. is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. This multi-national corporation was created as a result of the 1925 merger of US firms Holt Manufacturing Company and C. L. Best Tractor Company, becoming the Caterpillar Tractor Company. With 2012 sales and revenues of $65.875 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company is also ranked number 42 overall in the 2013 Fortune 500. With a global dealership network in more than 180 countries, the company is able to provide more than 300 products to its customers around the world. There are more than 125,000 employees executing Caterpillar’s vision and business strategy.

Caterpillar began its presence in the Kingdom of Thailand 36 years ago to provide its technical services and product knowledge to authorized Caterpillar dealer, Metro Machinery, across the country. To serve its customers better, Caterpillar (Thailand) Limited was incorporated in April 1998. Caterpillar has made significant investments in its manufacturing footprint in Thailand including the construction of two new manufacturing facilities that began construction in May 2011 at Hemaraj Rayong Industrial Land in Rayong province. One plant already has commenced limited production since October 2012 while the second facility is scheduled to start operations in May 2013.

Over the next five to seven years, these two Caterpillar factories are expected to reach full production. The company is investing about $300 million in the two plants, which when completed and fully operational will be among the largest in the ASEAN region and will employ up to 1,700 workers. These new facilities will promote Caterpillar’s growth. More than 95 per cent of the products will be for export, especially to Indonesia, India, the Asia-Pacific region, the Middle East, Russia, South Africa, Latin America and North America. The emerging growth of Asia and the competitive advantages of Thailand in terms of logistics and infrastructure, along with the strong support demonstrated by the Government, had encouraged the company to invest in the Kingdom. For Caterpillar the future has arrived.

Recently Thailand Investment Review interviewed Mr. Philip Lowe Pennington, General Manager Asia of Caterpillar Integrated Manufacturing Operations Division, and Thailand Country Manager. A number of issues were discussed, ranging from the company’s corporate values to the condition of the construction/mining equipment industry in Thailand as well as to the relationship between Caterpillar and the Thailand Board of Investment. Likewise, current topics such as the availability of skilled labor, the ASEAN Economic Community, and the Government’s proposed mega-infrastructure projects were covered during the interview.

Mr. Pennington started by emphasizing that as a company Caterpillar possesses global recognition but confronts a multitude of competitors around the world. Consequently, the company must adapt to the changing business environment consistently. However, its supply-chain is top class and it has a well-established presence across the Asia-Pacific today, such as in ASEAN, China, India, and Australia. Furthermore, the diverse human resource base of the company permits Caterpillar to magnify its strengths throughout the globe and to build strong local networks. In fact, Mr. Pennington stressed that 70% of Caterpillar’s revenues today are outside of the US, therefore making it obvious that the company is not just an American entity but rather a global one.

He continued by declaring that Caterpillar is evaluated by results and is held accountable by results. Indeed, its corporate values – integrity, excellence, teamwork, and commitment – guide the company’s actions and permit it to achieve success. “We will never blemish the name of Caterpillar”, remarked Mr. Pennington, acknowledging the challenges of conducting business in developing markets. For him Caterpillar is not just a brand; it is all about enhancing the performance of the company, providing a return to the investors/shareholders, and satisfying the customer with a quality product.

According to Mr. Pennington, Caterpillar decided to invest in Thailand as it foresaw long-term competitiveness. The upcoming ASEAN economic integration to eliminate trade barriers will promote the growth of the company along with that of the region’s economy. Interestingly, the recent increase in Thailand’s minimum wage to Bt300 a day had no effect on Caterpillar’s investment decision. However, Mr. Pennington said the company was concerned about labor shortages and a lack of skilled technicians, which could hamper its expansion. He called for the Government to invest in skilled training, particularly English for professionals, to ensure sufficient human resources to serve the growth of industries and investment in the Kingdom.

Regarding the Thailand Board of Investment, Mr. Pennington paid extensive tribute to their counterparts at the organization. Prior to 2011, Caterpillar had no manufacturing footprint in Thailand. Yet the BOI facilitated the company’s entrance into the Kingdom by assisting it on a number of levels, from the processing of the required investment documentation to visa applications for Caterpillar’s international service employees to networking with local businesses. In fact, for Mr. Pennington, the BOI increases the competitive advantage of Thailand vis-à-vis its regional neighbors, as he stated, “It’s an asset for the country”. True, an attractive incentive package is essential, yet the customer service offered by the BOI to Caterpillar has further heightened the importance of Thailand to the company’s long-term plans in the Asia-Pacific.

As for the upcoming inauguration of the ASEAN Economic Community in 2015, the benefits far outweigh the risks for both Thailand and Caterpillar. Mr. Pennington was abundantly clear that Caterpillar always has been a strong and vocal advocate of trade liberalization, and that the lowering of barriers/restrictions across Southeast Asia is a win-win situation. Uniformity of trade and commercial relations is a positive for it improves economic efficiency across the ASEAN community. Regional integration is a plus for Thailand as well as for Caterpillar. Indeed, Mr. Pennington observed that the country already was well positioned to take advantage of the AEC being that its national infrastructure, central geographic location, logistics, and talented work force are real advantages to be sharpened. He also mentioned in passing the ASEAN-lead Regional Comprehensive Economic Partnership and, looming in the distance, the Trans-Pacific Partnership. Thailand is a global player.

In closing, Mr. Pennington expects that the Government will continue to develop the country’s economic assets, to upgrade its industries, and to reinforce the foundations of the economy. Additionally, the Government’s proposed mega-infrastructure projects are an opportunity for Caterpillar not only to do more business in Thailand but also to firm up its presence in the Thai market. Mr. Pennington pointed out that the company has made significant investments in recent years to expand its footprint in the Asia-Pacific with 30 plants in operation and another three in the pipeline. Caterpillar is well-positioned for future growth and success in Thailand.