Business leaders are keeping a steady drumbeat of support for more transportation funding, but they’re finding it hard to be heard above the din raised by the health care debate.
The latest executive to pick up the drum is Caterpillar Chairman and CEO James Owens. He told reporters this week Congress and the White House should expand the surface transportation bill and treat it as a second stimulus package.
“They understand we need some sustained fiscal stimulus,” Owens told reporters after an Aug. 4 presentation to investment analysts, as reported online in a Dow Jones newswire story on CNN Money. “The country needs it. We’re not out of the woods completely.”
Owens isn’t alone — The U.S. Chamber of Commerce brought some of corporate America’s big guns to Capitol Hill last month to press for a multi-year bill that would pump hundreds of billions of dollars into all types of transportation projects.
But Owens is not just the head of the largest U.S. construction and mining equipment manufacturer, he’s a member of the Obama administration’s Economic Recovery Advisory Board, created in February and chaired by Paul Volcker. You’d think that would give his message a bit of weight.
He told reporters he’d discussed his ideas with the director of the National Economic Council, Lawrence Summers.
Congress just squeaked out a $7 billion fix for the Highway Trust Fund and sent it to the White House before leaving on its August recess. When it returns, the House and Senate will debate whether to extend the current highway bill for 18 months or tackle a major transportation reform bill this year.
Of course, Caterpillar may be the manufacturer that stands to benefit the most from increased construction activity spurred by the $787 billion American Recovery and Reinvestment Act and any federal transportation infrastructure funding.
The company expects a sharp reduction in revenue this year, thanks to the global recession and collapse of the housing bubble in the U.S.
Its second quarter profit plunged 66.5 percent from more than a billion dollars in the year ago quarter to $371 million. Sales fell 41 percent year-over-year to $8 billion.
For 2009, Caterpillar expects its revenue to drop to $32 billion to $36 billion, compared with $51.3 billion in 2008. Its sales are being hurt not just by weak user demand but its dealers’ reluctance to order new equipment as they burn their way through inventory.
Caterpillar dealers reduced their machine inventories by about $1.5 billion in the first half of 2009, the company said, and may cut another $1.5 billion by the end of the year. Caterpillar itself expects to cut its inventory by about as much, having eliminated $1.6 billion in stock in the first half, including $800 million in the second quarter.
Owens told reporters and analysts he expects worldwide efforts at economic stimulus to kick machinery sales into higher gear next year.
"We believe a recovery will come and that Caterpillar will benefit from the world's need for the products we make," said Owens.
After all, it’s no good having a shovel-ready project if you don’t have a shovel, or a at least a 30,000-pound wheeled excavator.