Caterpillar CEO talks never-ending journey
By Mike OsengaJanuary 14, 2021
As the unlikely and unprecedented year of 2020 drew to a close, Caterpillar CEO James (Jim) Umpleby III sat down with CONEXPO-CON/AGG 365 sister publication Diesel Progress (remotely, of course), and in a wide-ranging interview, discussed Caterpillar in the time of Covid-19, its ongoing investment in digital technologies, as well as corporate culture, customers, mechanical developments and where the global equipment manufacturer goes from here.
Umpleby has been chairman of the board of directors and chief executive officer of Caterpillar Inc. since December 2018. He was named CEO in January 2017 and was elected chairman of Caterpillar’s board in December of 2018. He has led the company through a number of significant challenges during his tenure, with the global pandemic being at the top of the list.
Also on his watch, Caterpillar, which generated revenues of nearly $54 billion in 2019, launched a new corporate strategy in 2017 centered around operational excellence, expanded offerings and services, and profitable growth. Further, the company relocated its corporate headquarters from Peoria, Ill. to Deerfield, Ill. and continued its transition from the world’s largest engine and machinery manufacturer to one that also puts an increased emphasis on services and analytics, as well as connectivity and autonomy.
Caterpillar and Covid-19
How has Caterpillar and its workforce adjusted to the demands of the global pandemic?
Umpleby: I couldn’t be more proud of our team. Most of our office employees have been working remotely. We made some investments in technology over the last few years and it really has served us well.
If you would’ve asked me three years ago if we could have pulled this off (working remotely), I probably would have said no, but we really haven’t missed a beat.
Caterpillar facilities operate as essential businesses all around the world. If we can’t keep the lights on, if we don’t have fuel or engine parts for trucks to deliver medicines and groceries, if we don’t have machines to maintain sewer systems or provide clean water, the world has a big problem. We’ve been just so proud of our team, and the way they’ve been resilient and worked their way through these challenges.
When the pandemic first broke, our senior leadership team was meeting every day because we were dealing with so many issues as governments were trying to decide how to deal with this.
Obviously, it hasn’t been easy. Employees in our production and distribution facilities, and our other support employees, have continued to come to work through this pandemic. We’re following applicable government directives and taken best practices from the government authorities, plus some others. For example: masks, frequent cleaning and disinfecting and staggered shifts and breaks. We’ve moved people apart to create some social distancing, as well.
Culture and Covid-19
With Caterpillar operating in every region of the world, what cultural challenges did you face while responding to the changes and demands of a global pandemic?
Umpleby: We take safety seriously everywhere. As a result, we adopted standard practices around the world.
We always comply with the regulations and guidance of local governments. That’s very important. But the pandemic hit at different times. It hit China first, so our Chinese employees were the first who had to navigate the effects of the pandemic.
We put together a global team very early on to coordinate and keep track of what’s going on in the world - the regulations, infection rates, hospitalizations and all the rest - and they provide suggested guidelines for how we’re going to respond.
In this day and age, buying a piece of equipment is just the beginning for those who own and operate machines. In what ways does Caterpillar support its customers after the sale of equipment?
Umpleby: We’ve invested heavily in our digital capabilities and continue to do so. We set a target for ourselves to have one million connected assets and achieved that in 2019.
When we embarked on our strategy in 2017, services were one of the three main elements of that strategy. For us, services are everything that we do to make a customer successful after we sell that first piece of equipment. A lot of things go into that.
We’re continually investing in new ways to leverage connectivity, to make our customers more successful, whether it’s avoiding unplanned outages, maximizing availability, maximizing utilization, minimizing downtime, and all the rest.
It’s a never-ending journey, and we’ll continue as technology advances to find new ways to make our customers more successful. It is a key part of what we’re doing.
Every customer has a different approach in terms of how they want to use data. Our job is to be flexible and to deal with each individual customer in a way that makes sense for them. Avoiding unplanned downtime is something that drives a lot of value for our customers.
Equipment health is something that we invest heavily in to provide to our customers. And it’s getting better all the time. Some customers want us to do everything on site to take care of their equipment. And some are, “no, send me a text or call me, or some other way to transfer data to me.” Again, we’re flexible based on customer needs.
Caterpillar has a long history with autonomous vehicles. Where will the company go from here?
Umpleby: In terms of what we’ve done with our autonomous mining trucks - we’re excited. I really believe this is an area where the industry has reached a tipping point.
For many mines of a certain size, most of those customers now want an autonomous fleet. We’ve had customers publicly state that they’re seeing productivity increases in the range of 30%, which is obviously very significant to their bottom line.
We have about 340 autonomous mining trucks running, and we expect to reach 400 by the end of the year. We like to say that we have more actual autonomous miles on our mining trucks than any car manufacturer has out there.
And we don’t think there’s any looking back. There are opportunities in the construction space as well for selling autonomy, for remote control, and we’re starting to do that as well.
We will continue to invest in technologies like that to make our customers more successful by making them more productive.
I’m very fortunate that my predecessors had the vision to invest in this technology. But what’s really been remarkable is how over the last two or three years it has really taken off and become very well accepted by our customers because of the productivity increases they can see. It really has been a game changer.
Mechanical vs. digital
With all the intense focus (and money) spent on developing digital systems, do the more standard mechanical and hydraulic systems start to take a back seat?
Umpleby: Not at all. We still invest significantly in both machines and engines, both for new products and to fine-tune our existing products. There are a lot of things we can do, from improving power density to burning alternative fuels.
And it’s not just engines and machines, but also our transmission and control systems, and the way we integrate those together to provide a competitive advantage and value for our customers. It’s an evolution.
For example, you look at our engines with the dynamic gas blending systems used in oil and gas. It allows customers to substitute up to about 85% diesel with natural gas, which gives them both an operating cost advantage and a flexibility advantage, given the fact that they need to truck in less diesel fuel.
We’re always looking at new kinds of fuels that we can burn like biogases. In some of our gas turbines, we can burn hydrogen to produce electricity. A lot of the advantage comes from our ability to integrate the various things that we manufacture.
In the eyes of some, Caterpillar has said comparatively little about electrification. How does that look from the CEO’s chair?
Umpleby: We’re always investing in new technologies. Our job is to be ready to meet the future needs of our customers. We’ve been engaged in electrification, and have had hybrid models for decades. So, they’re not new to us.
We have had things like electric underground mining equipment. Recently, a customer in California announced they purchased an all-electric switching locomotive from Progress Rail (a Caterpillar company).
In construction, we concur that it will likely happen first in smaller machines, or our Building Construction Products machines, in Europe especially. Again, our goal here is to be ready to meet the needs of our customers. And that’s what we’re doing.
A day in the life
Finally, what is a typical day like right now for the chairman and CEO of one of the world’s major manufacturers, working remotely?
Umpleby: Honestly, I spend most of my days doing what I’m doing with you right now, looking at a screen and having these kinds of conversations.
It’s amazing. I meet virtually with people that I often wouldn’t have an opportunity to meet with, or we would only see each other once a year, maybe every two years, because they were literally all over the world. So, I could sit in front of my computer and do Q and As, and we can look at each other.
I can start off in the morning talking to people in Europe and then North America in the afternoon, and in the evening talking to people in Asia.
There are some productivity enhancements in all that which I think will stick, that should stick, frankly. There’s an advantage in terms of productivity in being able to meet with people all over the world in a very short period of time without travel.
There are cost-saving opportunities. We’re a culture where we fly people around the world and get in a big room and have a conversation. Some of that will still exist, but I think we can replace a lot of those with virtual meetings, especially for internal meetings. I just think that face-to-face is still going to be quite important.
The days are pretty intense. I told one of my daughters it has been kind of like finals week in college but lasting for months.
Written by Mike Osenga, (now retired) editor-at-large for KHL’s Diesel Progress, this article originally appeared in the January 2021 issue of that publication.