Catepillar Case

4 Pages 1099 Words

Caterpillar Case

Between the 1980’s and 1990’s, Caterpillar was experiencing problems that could shake the foundation of their company’s stability and future. Several strategic analyses were done on the company along with solutions to get the company back on its feet.
Some of the problems Caterpillar was experiencing included, core operations were too costly, some of their equipment was old, their production process was slow, their production design activities were too costly and they were having union disagreements.
In the 1980’s, Caterpillar’s name was recognized globally and they were considered a leader in the heavy-duty construction equipment industry. They were facing an industry collapse and union difficulties. Global demand was dropping and the yen was weak which allowed their biggest rival, Japan’s Komatsu Ltd., to undercut prices by 40% and Komatsu began gaining market share. This coupled with a lengthy, debilitating strike with the Union Auto Workers (UAW) in 1990-91 made the situation worse.
Donald Fites, who was named CEO of Caterpillar took an aggressive stance toward the UAW and put a strategy in place to rebuild Caterpillar as the industry leader.
Mr. Fites strategic plan began with, seeking low-cost and speed enhancing leadership advantages. He would do this by integrating production activities across multiple models to gain economies of scale, speed up production processes with newer technology, and reduce inventory costs with increased JIT accommodated with speedier production activities:
Mr. Fites began overhauling in Caterpillar’s manufacturing in the core truck and tractor operations. Almost $2 billion was invested to modernize his U.S. plants with new state of the art machinery, which helped to slash time, and vastly simplified production. Cat can now build 20 different models from the same basic design and coupled with the increased use of temporary workers in the nonunion plants h...