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Caterpillar Increases Production Capabilities in China

Caterpillar (NYSE: CAT) will increase excavator production in Xuzhou, China, as the company expands its international and domestic manufacturing capabilities.

Production of hydraulic excavators at the Caterpillar Xuzhou Limited plant will increase 80% by completion in 2016. By 2014 the company will be production wheeled excavators at the same plant, Chairman and Chief Executive Officer Doug Oberhelman said at an event in Xuzhou. The additional hydraulic excavator capacity is dependent on government approval.

“Our continued investment in China also provides a base of operations in country to support our growing exports from the United States to China,” Oberhelman said. “In the last seven years as we have grown our operations in China, Caterpillar's exports from the United States to China have more than doubled.”

Caterpillar production of wheeled excavators in Grenoble, France will continue as the new plant will serve the local market. Caterpillar has 17 China facilities and an additional nine under construction.

Expansions in Asia and the U.S.

In January Caterpillar announced plans to expand its Wuxi research and development center to include light to heavy duty engine tests, roll-over protection and hydraulic labs among other areas. The expansion is expected to be completed in June.

Caterpillar will nearly triple the square footage of its Sumter, South Carolina plant to procure more sizes of hydraulic cylinders. The $20-million expansion is expected to be complete by the end of the year, according to a press release issued in March. The company also plans to invest $200 million in an Athens, Georgia facility to build tracktype tractors and mini hydraulic excavators. Initial production will begin in 2013 and the plant will be at full capacity by 2018, Caterpillar said in a February press release.

Earlier this Month Caterpillar announced plans to become the sole owner of Caterpillar Japan by the end of June for $450 million dollars. It will be buying out Mitsubishi Heavy Industries, with whom it formed the joint venture with in the 1960s.

A research report from William Blair yesterday gave Caterpillar a $135 price target and an outperform rating. The stock closed at $110.76 yesterday.

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