For Caterpillar The Depression Has Never Been Worse... But It Has A Cunning Plan How To Deal With It

Tyler Durden's picture

Moments ago Caterpillar reported its latest monthly retail sales statistics and the numbers have never been worse: not only is the dead CAT bounce in US sales finally over, tumbling -8% Y/Y, after a -4% decline in September and hugging the flatline for the past few months, but sales elsewhere around the globe were a complete debacle: Asia/Pacific (mostly China) was down -28%, a dramatic drop from the -17% a month ago, EAME dropping -13%, and Latin America down -36%...

 

... but global retail sales just posted a massive -16% drop in the past month, after dropping 9% a year ago and another 12% in 2013, this was the biggest annual drop since early 2010.  As the chart below shows, CAT has now suffered a record 35 months, or nearly 3 years, of consecutive declining annual retail sales - something unprecedented in company history, and set to surpass the "only" 19 months of decling during the great financial crisis by a factor of two!

 

Worse, with the market no longer rewarding stock buybacks, Caterpillar suddenly finds itself flailing in the gale strength winds of what nobody can claims any longer is not a global industrial depression.

However, there is good news - while Caterpillar's revenues and cash flows may be plummeting with every passing month, at least the company has a cunning plan how to recover some inventory.

According to the WSJ, Caterpillar is eager to reassure shareholders it won't get burned on equipment leased to customers in China even as the economy cools there. CAT Financial Services President Kent Adams said during a conference call on Tuesday that the company keeps tabs on the position of machinery electronically through its Product Link system. 

"If a customer falls behind, we have the ability to derate the engine or turn the engine off, and we've set up a legal presence in all of the provinces of China."

In other words, any and all Chinese lessors who fall behind on their payments will suddenly find their excavator's engine shut down and no longer operable, stuck in the middle of a mine, quarry, or construction site with a paperweight weighing dozens of tons.

So this is great news right? After all, at least Caterpillar will have recourse to its equipment, and can "solidify" its balance sheet. The problem, as we showed last week, is that there already is an epic glut of CAT heavy equipment in the wild.

How epic? Here is a reminder of what CAT products sold recently at an auction:

Was: $2.9m | Now: $15,000: Caterpillar 992C wheel loader

 

Was: $2.7m | Now: $46,000: Caterpillar D11N crawler tractor

 

Was: $900,000 | Now: $47,500: Caterpillar 775D rear dump truck

 

Well, if all else fails, CAT's creditors will at least be able to convert their secured "claims" into all too physical inventory, even if that inventory's market value is now worth less than 99% of book.

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LawsofPhysics's picture

Fuck yeah!  Bigger, less expensive, toys!!!

Looney's picture

If CAT goes bankrupt, they can be bought by… FIAT?  ;-)

Looney

LawsofPhysics's picture

For now the answer most certainly is yes.

Is what it is and you and I both know that NOTHING changes until people stop accepting those paper promises!

until then, same as it ever was!

Looney's picture

Speaking of PAPER…

I wonder if Judas would’ve done his deed for thirty pieces of paper, instead of silver?  ;-)

Looney

LawsofPhysics's picture

who fucking cares, he is long dead, and on a long enough timeline...

stupid is as stupid does.  Does waste time and resources trying to "fix" it.

this is a hard lesson for most, especially when it comes to those couple idiots in their immediate family...

 

Money Counterfeiter's picture
Money Counterfeiter (not verified) LawsofPhysics Nov 19, 2015 10:39 AM

Fuck I want one of them trucks in my garage.  Can Caterpillar make them street legal? 

Greenie's picture

I was just thinking of that, Counterfeiter. Watch some fuuker cut me off, he/she it will get their just reward

Bunghole's picture

Replacement tires.

The loader alone will run close to $50,000 for new biscuits.

HowdyDoody's picture

But what's the unladen mileage on those tires?

Shocker's picture

CAT pretty much tells you how the recovery has been going the last few years.

We are so far from a recovery

Layoff List: http://www.dailyjobcuts.com

-

mtl4's picture

Fed says we're still not ready for a rate hike yet though.

Cruel Aid's picture

Thought they said they were but will pull the rug and qe at the drop of a hat

knukles's picture

They guys on GOLD RUSH should have woodies!

Four chan's picture

there's no way those retail prices are real.

Anonymous User's picture
Anonymous User (not verified) Four chan Nov 19, 2015 12:47 PM

There's a rumor CAT will start manufacturing fudge packing machine.

I suppose these ones here are some of the remaining Cat employees:

 

http://www.thepornster.net/video/445/bareback-fudge-packers

 

Kayman's picture

"there's no way those retail prices are real."

Well, that depends.

Do you really have a use for them ?

 Do these machines have 50,000 hours on them ? Even a rebuilt engine can be $100,000 plus.

Do you have to move them off the property they currently are on ?

Do you own 20 more machines just like them that you will be parking soon ?

K

 

813kml's picture

The CATs are street legal if you live in Detroit, an economical alternative to a Hummer.

mtl4's picture

That D11 would be A-Team approved transportation for sure!

bid the soldiers shoot's picture

Headlights, turn signals, wind shield, seat belts and, voila, you're street legal.  (Al least for golf carts you are,)

lincolnsteffens's picture

@ Looney

Minor correction... bought with fiat! ;-)

nope-1004's picture

I don't think this plan will be enforced.  I think it's a public press release to give a threat out to those using the equip, and also to boost investor confidence in CAT showing how they have a plan to handle dead beats.

But think like a crooked banker for a minute, if you're the CFO at CAT:  Would you rather show an account receivable on the books, or a bad debt?  At least an account receivable extends and pretends like there is a customer at the end, using the equip that someday 'will' pay.  But a bad debt or equipment shut down is a terminal accounting measure.  Won't happen IMO.

Antifaschistische's picture

exactly....and, what kind of plan is it anyway.  If a CAT customer has tough financial times, we're going to ensure their death by turning off their equipment!!  How does that improve CATs financial position?

daveO's picture

It would never work anyway. The users will just bypass the shut off relay(hotwire). 

ebworthen's picture

CAT will eventually be bought by the Chinese company that successfully re-engineers all that equipment while it was being leased from CAT.

New Chinese owners of U.S. plants will reduce wages, increase hours, and bust the Union - and Washington and Wall Street will be just fine with that.

dtwn's picture

It's not just CAT.  Komatsu is also showing declines.  It'd be interestign to see a longer time series of this data:

http://www.komatsu.com/CompanyInfo/ir/demand_orders/files/201508main_pro...

Bunghole's picture

Anybody selling heavy equipment in the USSA is fucked thanks to EPA's Tier 4 emmissions controls.

813kml's picture

I think those regulations only apply to VW.

conscious being's picture

Is CAT still making money on this custom built home destroying equipment, sold to Israel, used on Palestinians?

http://www.salem-news.com/gphotos/1289206312.jpg

FireBrander's picture

LOL!...CAT is smart...well, maybe not...When the Repo-man shows up to collect the equipment, I'm betting it will be stripped clean...CAT "spare part" listings on eBay are going to explode!

Which will kill spare part sales directly from CAT...sometimes "Smart" isn't as "Smart" as "Smart" thinks it is...

~~~~~~

Independent PBS film about China's "economy"...LOTS of desperate people...stealing everything that isn't nailed down... metal thieves galore...one small town had it's drinking water wellhead stolen...Local cops said it was likely stolen to be sold as scrap for pennies.

 

BlindMonkey's picture

Sub-prime CATs.  That is fucking terrific.  

Government needs you to pay taxes's picture

CAT mgmt is so rayciss.  Why?  B/c they chafe @ keeping the free shit army of Illinois in free healthcare, EBT, HUD, and fone vouchers.

sandhillexit's picture

You would think that if you elected a Prez from the state where a corporation has its headquarters that said corporation would have a good four, or eight years.  When Texas held the WH Vlad and W saw "eye to eye" and raised prices on the rest of us.  What's wrong with CAT management?  Downstate Republicans hate Chicago so much that they can't craft an infrastructure bill and get it passed?  nose, spite face.  

FireBrander's picture

"the company keeps tabs on the position of machinery electronically through its Product Link system"

Another executive dumbfuck.

1. Disconnect the battery - oops, tracking lost.

2. "Remove" the antenna - oops, position lost.

3. You're not tracking the machinery you stupid fuck, you're tracking the tracking equipment...so when you find the tracking equipment, all you may find of the machinery is the frame...lots of valuable spare parts on a CAT...and if you've disabled it, the owner CAN'T, and probably isn't in the mood, to MOVE IT TO A SECURE LOCATION..

Stupid fucks.

KellySpinner's picture

Yeah, corporate idiots thumping their chests. Like the rule-of-law actully works in China!  Ha ha.

The chinks will simply cut up the metal and salvage anything that's functional---if they aren't smart eoungh to disable the remote-control kill switch.

OldPhart's picture

In June we bought a Cat skid-steer loader, model 226B3.

Cost was $36k, interest rate is zero.

For mining, now is the time to make a purchase either with cash on hand or credit.  You can't beat zero (negative) cost of money.

My note schedule is a farce of zero interest rates.  It's amazing to see.

 

Seer's picture

Kind of depends on whether you can still get credit, with a company (and industry) that's in decline.  Also consider that most of the new stuff is way over-priced.

At this time it's really about blind hope, that things will "turn around;" that or being bought out by a larger entity that sees an opportunity to control more of the market (though making up losses on volume isn't such a great long-term strategy- again, the only salvation is that there's growth ahead [very low probability]).

Deres's picture

Maybe this slow but regular decrease of sales is not coming from the economy itself but because of losing a part of the market to competitors especially chinese products.

To be sure, we would to have all the sales of the sector to se if the trend is similar.

pitz's picture

How much do you wanna bet that the Chinese aftermarket will come out with electronics kits to replace the CAT mal-ware eventually? 

Sudden Debt's picture

for the 600 dollar iPhones, it took about 20 minutes after they came to market....

version 2.0 came out 30 minutes later.

 

HenryHall's picture

Yeah. And forcing the Chinese to start making their own spare parts is a really smart move too. Not.

Farqued Up's picture

#22 wire with some alligator clips will probably do the jumper bypass trick.

Truth Eater's picture

So, their protection is to make the deadbeat debtors' life harder.  Does not sound like much protection. 

Bullet-proof vest that stops bullets after they go through the body.

 

And there is no enterprising Chinese guy who will retrofit those engine computers to a simple ON.  Sure.

TuPhat's picture

That is probably already being done.

Dolus's picture
Baldrick: Have you got a plan, my lord?
Blackadder: Yes I have, and it's so cunning you can brush your teeth with it!
Anglo Hondo's picture

When you are in a hole, stop digging.  That's why CAT is not selling any new equipment.

Too many existing holes.

johnlocke445's picture

That's it? That's their big plan? So what! Caterpillar will simply be a bankrupt company with thousands of dead machinery sitting in China. How will simply turning off the machinery make those Chinese companies solvent again and able to pay their leases?

813kml's picture

It's the principle of the matter, US corporations have a sterling reputation to uphold.

It's for the children...of the stockholders.

MadVladtheconquerer's picture
MadVladtheconquerer (not verified) Nov 19, 2015 10:31 AM

Re the CAT 992C wheel loader:  I bid 1$.  The seller agrees to include a service manual.