US Bulldozers Crawl Back. Weak dollar, cost-conscious global strategies help heavy-equipment companies dig out

CUSTOMERS shopping for a 19-ton, 10-foot-high, $130,000 bulldozer go through much the same routine as people buying compact cars. There's the ``fun and games'' of dickering, says Woody Lipscomb, general manager of a Case machinery outlet north of Richmond, Va. Prospective buyers can also kick tires or talk hydraulics at half a dozen other equipment dealers nearby, where the backhoes and cranes strike massive poses along Highway 1, the equivalent of ``auto row.''

During the bargaining these days, if the customer mentions a competing product, it may be Komatsu as well as Caterpillar, Mr. Lipscomb said.

As with autos, Japanese and other imports have gained a major foothold in the $14 billion-a-year construction equipment market in the United States in recent years. But several US companies, aided by the weakened dollar and a cost-conscious global manufacturing strategy, are showing some signs of recovery. A Commerce Department estimate shows overall shipments from US manufacturers for 1988 up 5 percent over the prior year, 2.4 percent in constant dollars.

Year-end and nine-month reports show earnings per share up, compared with 1987, at companies such as Deere & Co., Caterpillar Inc., Harnishchfeger Industries, Ingersoll-Rand, and Clark Equipment, which account for well over half of the US market.

The dollar decline has ``made the Japanese less competitive price-wise, and put us in a better position,'' Lipscomb said. A cross-town dealer who sells Komatsu equipment agreed: ``It has meant a tremendous amount. It has made the price of our equipment go up about 20 to 30 percent.''

But much of the US construction equipment industry is still digging out from the early '80s. The combination of a stalled economy, a strong dollar, and an avalanche of technologically superior, cheaper imports, mostly Japanese, swept away some manufacturers and nearly buried several others.

Familiar names such as International Harvester, Bucyrus Erie, and Galion vanished in a series of buyouts, mergers, and distress sales. Mighty Caterpillar, now strong, lost an estimated $1 billion between 1982 and 1985 in its struggle to maintain market share. Case has not reported a profit since 1982, and is still struggling. The farm and construction machinery producer, owned by Tenneco, showed operating losses of $259 million in 1987, $101 million for the first nine months of 1988.

Domestic manufacturers now face a far less certain world than at the beginning of the decade, and in many ways a smaller one. Commerce Department figures show that the value of US-manufactured construction machinery in 1988 was only a bit more than half the figure for 1979, in constant dollars. Employment in the industry shriveled from 175,000 to 90,000 in the same period.

Plants were operating at high capacity last year, the department's year-end analysis points out, but it notes: ``A large amount of former capacity no longer exists in the United States.''

``Realistically,'' the report said, ``any substantial return of this foreign production to the US appears unlikely.''

One sales and marketing manager, responding to a year-end Construction Industry Manufacturers Association (CIMA) survey, voiced the uncertainty: ``The industry is enjoying its recovery,'' said Michael Spear of the Gehl Company in West Bend, Wis. ``But it is doubtful you could view the entire industry as optimistic.

``It is generally felt that drastic increases in interest rates could throw us quickly back into the recession mentality. We have only recently accepted these times as stable and feel this period of growth could be short-lived.''

Construction equipment sales trends are closely attuned to several national economic factors: gross national product, housing starts, federal investments in infrastructure such as highways and bridges, and interest rates. The CIMA survey found that the latter tops the list of concerns.

The industry is very worried about what might happen to interest rates, said Fred Broad, the association's president. Some observers say the breathing space provided by favorable exchange rates may be at an end, especially because Japanese and European companies have begun to establish US manufacturing capacity.

``We think the break is almost over,'' wrote Frank Manfredi, an industry consultant, in a recent issue of his newsletter, Machinery Outlook. He noted that Komatsu, Kawasaki, Mitsubishi, Toyota, TCM (Mitsui Trading Company), and Kobelco have recently started producing in the US. Some US companies have sought competitive stability by returning the favor, buying into overseas companies, ``outsourcing'' parts or whole pieces of equipment - purchasing them from foreign manufacturers - or building overseas plants of their own.

``Even if you take the bastion of American capitalism, Caterpillar, and go through the product line model by model, you're going to discover pretty quickly that a considerable portion is coming from offshore plants that Caterpillar owns,'' Mr. Manfredi said. The company now sells excavators in the US under the CAT nameplate which are jointly manufactured with Mitsubishi in Japan, and Deere announced a joint venture with Hitachi to make excavators last year.

Komatsu and Dresser Industries, an American company, announced the largest such undertaking late last year, to challenge Caterpillar's dominance. Each company is contributing roughly half of a billion-dollar stake.

``Komatsu was having a great deal of difficulty importing into this country when the dollar went against them,'' said David Sutliff, an analyst with Salomon Brothers Inc. ``This tends to keep them in the market, and makes them more competitive in the States in the long run. It also solves part of Dresser's problem: a rather narrow and old line and a lot of old plants.'' Company spokesmen agree that Komatsu's huge research-and-development budget and manufacturing expertise will improve its offerings.

Finance, marketing, and production combinations are only part of the survival effort. Many American companies that weathered the hard times with plant closings and layoffs in the tens of thousands were also investing heavily in new products and production methods, including computerization and automation.

``It all seems to be moving in the direction of improving productivity and product quality, and beginning to approach but still not equal the kinds of quality that we see from some of the Japanese companies,'' Manfredi said.

The globalization of the industry blurs the simplistic ``us-vs.-them'' trade picture. For example, CIMA opposes retaliatory trade measures, in part because so much of the production of US companies is based overseas.

The contraction in US manufacturing capacity and a tidal wave of automation have taken their toll: the loss of nearly 1 out of 2 jobs, most of them during the past six or seven years.

Job security has been a pivotal issue in recent labor negotiations, United Automobile Workers spokesman Karl Mantyla said, and the union is beginning to exert pressure on profitable companies to rehire laid-off workers.

Contracts were signed last summer at both Deere and Caterpillar. These were the first settlements without a strike at the companies since the '50s, he said.