Cat Eats Bucyrus and Rocks

Nice piece over the weekend in the Milwaukee Journal Sentinel interviewing Steve Wunning, President of the mining division of Caterpillar Inc. (NYSE: CAT) about the integration of Bucyrus, now eight months underway.

Link here: http://www.jsonline.com/business/caterpillar-pleased-with-bucyrus-integration-2u4fq4o-142194715.html

Cat made two important integration decisions:

  1. Despite a history of the Bucyrus name dating back more than 125 years they chose to get rid of it, and
  2. They did so immediately.

The Merger Verger has seen this choice backfire on a large company buying a much smaller one to launch a new business line.  In that instance, the buyer did not have the goodwill that the seller had in its market place and the name change – together with a pompous “big player” approach to selling – sent customers packing.  That has NOT happened in the Cat/Bucyrus merger and the combination sounds like it’s hitting on all cylinders. 

The article does not address cost cutting in the integration process but one has to presume there was at least some operational overlap.  What is absolutely clear is the extent to which Cat paid attention to the revenue side. Try to imagine the sales lead time for a product like a large piece of mining equipment. Clearly, plans were being drawn up for integrating the selling effort long before the deal closed.  A key part of that process for Cat was communicating the benefit of the merger with customers, particularly on the Bucyrus side.  The result is that their demand is so strong, they are running short of product. 

Sidebar: Readers’ comments on the article are almost entirely from former Bucyrus workers lamenting the loss of the brand.  I too tend to mourn the loss of longstanding American brands but in this instance am certain that Cat’s leaders made the right – even if locally unpopular – choice.

Question: Is the reported shortfall of available product for sale a misstep in the integration process?  If there was an imbalance of focus on top line (odd, but possible), then yes.  If sales are exceeding expectations for the merger, then probably not.  That said, there is definitely something that has slipped somewhere if product is running short.  Anyone got any insight into Cat or similar situations?  We’d all love some color on this.

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One thought on “Cat Eats Bucyrus and Rocks

  1. Pingback: CAT’s Ratings Still Rock | The Merger Verger

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