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Caterpillar to Expand its 'Flagship' Factory in Xuzhou, China

CEO Doug Oberhelman said Cat is positioning itself 'for a 20- or 30-year run' in the world's largest construction-equipment market.

Concerns that the Chinese economy is cooling off aren't putting the brakes on Caterpillar Inc.'s growth plans in the world's second-largest market.

Peoria, Ill.-based Caterpillar (IW 1000/27) on Wednesday announced plans to expand its "flagship" manufacturing facility in Xuzhou, China.

The expansion project at Caterpillar Xuzhou Ltd. (CXL), which Cat expects to complete in 2016, will boost production of hydraulic excavators by 80% at the facility.

Cat said it also plans to begin manufacturing wheeled excavators at the plant in 2014.

Of Caterpillar's 17 factories in China -- another nine are under construction -- the CXL plant has become its "flagship for manufacturing operations in China with leading product quality, safety and employee engagement," the company said in a news release.

Cat will continue to produce wheeled excavators in Grenoble, France, the company noted.

In a recent interview on CNBC Asia's "Squawk Box," Caterpillar Chairman and CEO Doug Oberhelman noted that "we look at China as a very long-term market here."

"We want to be here in a bigger way, and of course we're investing all the time for really what will be a 20- or 30-year run," Oberhelman said on the program.

The CXL expansion comes on the heels of Cat's announcement in January that it plans to expand its R&D center in Wuxi, China.

But Oberhelman asserted that Cat's investment in China "also provides a base of operations in country to support our growing exports from the United States to China." He noted that Cat's exports from China to the United States have more than doubled over the past seven years.

"All the equipment we make in China is sold in China," Oberhelman told "Squawk Box Asia." "We've done very little exporting out of China as of yet."

Including its distribution operations, Caterpillar has some 22,000 employees in China, according to Oberhelman.

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