Caterpillar Inc. Prepares to Improve One of its Greatest Competitive Advantages

It's no secret that Caterpillar has had a rough couple of years, but the company plans to improve one of its greatest advantages: its dealership network.

Mar 6, 2014 at 3:00PM

The Dow Jones Industrial Average (DJINDICES:^DJI) was trading 74 points higher, or 0.45%, by midafternoon after a three-month-low U.S. jobless claims report offered investors hope in a gradually strengthening economy. Initial unemployment claims fell to 323,000 last week, which was lower than economists' expectations of 335,000. "Initial claims returned to a more normal level, consistent with healthy labor market conditions," said Yelena Shulyatyeva, an economist at BNP Paribas in New York, according to Reuters.

With those figures in mind, and ahead of tomorrow's closely watched Labor Department payroll and unemployment report, here are some companies making big headlines today.

G

Caterpillar product floor. Source: Caterpillar.

Caterpillar (NYSE:CAT) is leading the Dow higher, trading up 1.6% by midafternoon. The move comes after the company's analyst day this week during which Caterpillar highlighted some of its competitive advantages. A big advantage has been Caterpillar's extensive national dealer network which helps customers avoid costly downtime. With the global economic downturn hurting business – revenue checked in at $66 billion in 2012 before dropping 16% last year, with flat guidance for 2014 -- Caterpillar plans to improve its dealership network to help revenue growth. This, though, could cause some pushback.

Caterpillar previously organized its dealerships by region, which produced huge disparities between profitability of the top and bottom performers. Management's goal is to now compare dealerships across the globe; dealers that continue to underperform a set plan will have until the end of this year to come up with a strategy to raise key performance metrics.

The risk Caterpillar runs is that poorly performing dealerships won't be able to step up to the improved sales plan, which could undermine its successful network. That said, Caterpillar expects the results to be worthwhile.

"This is not a plan to cull our dealers or drive consolidation -- although you can expect that some of that will occur," Caterpillar executive Stuart Levenick, who will manage the financial turnaround effort, told Reuters. "But we do expect results. If you are not aligned, if you're not progressing toward those results, then you can expect us to move judiciously to make changes. ... They all get that."

If Caterpillar can indeed find a way to propel its worst-performing dealerships closer to its top performers, it could see a huge boost to its top and bottom lines. In fact, the company claims the strategy could increase sales and revenue at the dealer level by $9 billion to $18 billion over the next four years. That would be a huge win for Caterpillar and its investors.

Cts

Cadillac's 2014 CTS. Source: General Motors.

In other news, General Motors' (NYSE:GM) successful Cadillac brand has been recognized as a "Customer Champion" by J.D. Power. It's the third time the Cadillac brand has earned the distinction; it is one of 50 companies across nine industries to win the award. 

"We believe that every interaction -- at our website, in the showroom or on the service lane -- represents a defining moment, an opportunity to differentiate ourselves and earn the loyalty of a customer," said U.S. Vice President of Cadillac Sales and Service Bill Peffer said in a press release issued this week. "This philosophy of defining moments is what drives our new products, and we strive to carry that through to our sales and service experiences."

This is good news for GM investors because Cadillac, and luxury lineups in general, are a must have in the global automotive industry. Luxury vehicles bring in higher transaction prices and profits, as well as incremental sales since they don't compete with high volume mainstream vehicles. Cadillac sales increased nearly 22% last year, more than any other brand under GM's umbrella. 

2 strong investments poised for success in the world's largest auto market.
U.S. automakers boomed after WWII, but the coming boom in the Chinese auto market will put that surge to shame! As Chinese consumers grow richer, savvy investors can take advantage of this once-in-a-lifetime opportunity with the help from this brand-new Motley Fool report that identifies two automakers to buy for a surging Chinese market. It's completely free -- just click here to gain access.

Daniel Miller owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers