Image: Caterpillar.

Tough times in the global economy have hurt heavy-equipment specialist Caterpillar (CAT 1.35%) badly, with the company seeing demand from its industrial customers plunge in light of anticipated weakness in many key markets. Still, Caterpillar isn't giving up on its long-term growth opportunities, and it remains optimistic that it's in a good position to benefit once the global economy turns itself around. Let's take a closer look at what Caterpillar management has said lately about how the company can improve in the near future.

"2015 is turning out to be another challenging year. We're serving several industries that at the moment are weak: mining, oil and gas, and in many parts of the world, construction." --Mike DeWalt, VP Finance Services

The problem with being a cyclical company is that when the business cycle is in the doldrums, the company's business suffers. Caterpillar has had to deal with tough conditions in nearly all of its focus areas, with downturns in mining and energy having proven to be particularly badly timed. China and Brazil have really had a big impact on Caterpillar's business, with poor conditions there having a dramatic impact on the entire company's results. For the most part, Caterpillar anticipated all these things playing out, but it had clearly hoped for a positive surprise that now appears unlikely to happen this year.

"We reorganized our procurement, our logistics, and our lean manufacturing group a while back, and we are really seeing the benefits of that. We've seen lower costs, material costs, for several years, but at rates that have been unheard of around here prior to that." --CEO Doug Oberhelman

In response to tough conditions, Caterpillar has aimed to cut costs, and it has had huge success thus far even though the numbers aren't readily evident given the company's overall weakness. Oberhelman believes that the benefit will be more obvious once things turn around, as a growth environment will highlight the fact that Caterpillar isn't just benefiting from cheaper raw-material costs but has actually made progress in meaningfully reducing expenses for its component manufacturing. Caterpillar's efficiency has helped keep it afloat and could accelerate growth when the economy turns around.

"The bigger issue with Greece is the amount of uncertainty it drives in [Europe/Africa/Middle East] and beyond, that is specifically in South Europe. Having that calm down, out of the headlines every single day, may help." --Oberhelman

Europe has been a particularly tough region economically, and the problems with Greece and its extensive debt have weighed on sentiment throughout the continent. Oberhelman pointed out that Greece itself isn't a big deal for Caterpillar, but the chilling impact on the rest of the region has been more substantial. If the European Central Bank and national governments can join forces and start to build a true economic recovery, then Caterpillar should see long-term benefits. Getting Greece under control is an important step in that process, but it's far from the only one.

"The [reciprocating generator] business for drilling and well-servicing [are] where the brunt of the decline is going to be felt. We had a pretty sizable backlog of that coming into the year, and that's actually helped sales in the first half." --DeWalt

As Caterpillar expected, the drop in oil prices has led to a downturn in purchasing from energy-industry customers, as falling revenue has forced those customers to put off capital expenditures. Caterpillar believes that the reciprocating generator business will continue to struggle in the second half of 2015, as it has worked down some of its backlog in that area and as oil prices have failed to recover. The company said that it hasn't gotten many new orders from the oil and gas industry over the past six months, and it is seeing investment start to dry up there. Until oil recovers, Caterpillar could continue to see further weakness from its energy clients.

"With the balance sheet today at 33% or 34% debt-to-capital with $8 billion in cash, taking $1.5 billion off in the third quarter [for buybacks] still leaves us in a great position going forward." --Oberhelman

Caterpillar has had to weigh priorities in managing cash, but it has aggressively looked at stock repurchases, saying it intends to spend $1.5 billion on buybacks during the current quarter. Certainly, the company doesn't want to overextend its balance sheet at what could be a key time, but Oberhelman is proud that Caterpillar's balance sheet is as strong as it is given the tough economic conditions in the industry. In his eyes, that leaves Caterpillar plenty of room to return capital to shareholders while staying healthy and able to capitalize on future opportunities.

Caterpillar doesn't have any illusions that it could take a while before its business fully recovers. By doing what it can about the things under its control, though, Caterpillar is setting the stage for an eventual recovery -- whenever it comes.