Doug Oberhelman, CEO of Caterpillar Inc., & Kent Adams, VP | Terry Leadership Speaker Series

Yeah. Well, thank you Kent. And I first of all just say I'm thrilled to be here in Georgia. I'm thrilled to be here in Athens at University of Georgia. As you know, we're constructing a small little branch out of town here and I'm quite proud of that. That's a factory that will employ about 1,400 people when it's finished in about a year and a half. It'll make our small bulldozer line D345 and our small excavator line 3 to 8 ton machines that are all made today in Japan. And we move that factory from essentially Sagamihara, Japan outside Tokyo to Athens, Georgia. The market's here in the United States. There'll be some export and it's really I think an endorsement of what Caterpillar can do, but again, America can be competitive and we've talked a lot about that. I'll probably come back to that. So, I'm very proud of Georgia. We've had great relations with the community leaders, some of whom are here with Governor Deal to put this together. And I've been very very proud of the relationship we have with Georgia. How I started was not unlike all of you that are students or got started. I walked right out of college, four-year undergraduate in finance, thought I knew everything, ready to go and run the company, be the chairman of the board, and I landed in Peoria, which was about I had never been in Peoria, Illinois in my life, about 90 miles from where I went to school, and sat down as a credit analyst, and it turned out to be a one-year job. And it turned out to be in my 37 years of history, the worst job I had. And I couldn't wait for it at the end. It was a training job. And I got through it, and it was fine. But it led to my second job which was a job in trading foreign exchange and currencies. And in 1975, you know, the dollar had just recently floated. Currencies were fairly new. So it was great fun. I'm aging myself here for everyone. But the gold standard had been freed not too many years before that. So a lot of things had happened around finance and I felt like I was in the middle of it and I thoroughly enjoyed it. But I had great aspirations and those were to pay off my car and pay off my student loans. And that's all I thought I would get done. And that's really at 22 years old was heavy on my mind because I didn't have a lot of support, any support for that matter from my parents who were very working-class people. My dad was a John Deere salesman for him. And when I went to work for CAT, there was a little interesting set of discussions, but we still get along fine to this day. And I'm probably the only one that gives his dad John Deere or CAT stuff, and he gives me John Deere stuff at Christmas time to this day. So, we trade farms all the time. I had no aspirations. I didn't really understand probably what a CEO was or a chairman was. And I moved all over the world and lived been everywhere. And as I rose in the ranks at CAT, I was very lucky with my career and I've lived in three continents and I just cherish that beyond belief. It helped me more than anything. And then when I arrived in the executive office, which is the kind of the CEO and the next level down, there's six of us and have been about six of us 11 years ago. That's when I started to think, boy, this is kind of fun up here at this level. And one thing led to another and then here I am. A couple of years almost three years ago in fact three years ago next month we made the announcement that I would become CEO and chairman and that was one of the great I also I'll tell a little story on that one. We had that my predecessor is a great guy and I knew very well we all did and liked and respected and we knew the transition was coming. Of course in a big company, little company all these things or things going around. People get nervous and talk about this. Rumors go around all over the place. So every board meeting in 2009, we sort of thought maybe this is it. It wasn't. So the October board meeting of 2009 came and went. Nothing happened. We all went home after the meeting. Said, 'Well, it's probably going to be later. No problem.' And four days later, it was a Saturday morning at well I received an email from my boss, the CEO at the time about 9:00 on a Friday night, which is somewhat unusual. He said, 'Doug, we've got to meet over the weekend over a really tough personnel issue.' Because I had personnel at the time in HR, and I thought, 'Oh boy, they're never fun. I thought this will be a nice weekend.' So I was gone, he was gone. We couldn't match up. He wanted to do it face to face. So 6:00 a.m. Saturday morning, the phone rings and I was up. I typically get up and was reading the paper and I thought, 'Boy, that's strange.' And I picked up the phone and it's Jim. I said, 'Hey, Jim, how you doing?' He said, 'Well, it's a little urgent. I got to talk to you.' And then he said, 'We'd like you to be chairman and CEO of the company.' It's a moment I will never forget in my life. It was really outstanding, but certainly I didn't start like all of you at 22 years old going to work thinking this is where I was going to end up. But I'm very lucky in my career.

So, I guess I get to ask you a couple questions. You can. And which is always fun because I don't usually get to do this with the moderator. You know, he always pins me down. I can't do it back. But Kent's had several I guess legacy through here at University of Georgia. I'm looking for the Adams School of Something shortly and I'll see that the next time I come, Dean. So, there you go. I'll tee you up on that.

But you know, I've known Kent since the day he walked into Caterpillar in 1979. And we've been around each other's career for all these 30 years. And similarly in finance at the same time, and Kent's risen to be in charge of our finance company, which is a $35 billion asset finance company, leading all other finance company in industrial goods. Hugely successful in managing risk. A big job. It's a banking job. It's a finance job. A classic banking and finance job. And through the downturn in '08, '09, '10, Kent was the leader of that. And he will say that it's a great team and it is, but he was the leader through a very tough time. And we didn't lose money. We didn't have any extreme blowups in our finance company like so many banks did and other financial institutions like at GM that you've all probably read about or know about. How'd you do that? I know it was around the team you had there.

Yeah. For those of you that were some of you seniors, maybe juniors and seniors remember probably studying some of this. It'll be a case study for many, many years to come. But literally the credit world stopped for two days in late '08. It stopped. Kent couldn't borrow at CAT Financial. We couldn't borrow at Caterpillar Incorporated. We had a rock-solid balance sheet. We could not come up with cash if we wanted to. And we watched our business shrink from 52 billion in sales topline in 2008 to 32 billion in sales the next year. And most of that happened in the first half of the year of 2009. And that reminded me of one of my experiences when I lived in South America in Uruguay in 1981. I was moved down there to clean up a mess after the great Latin American debt bomb of the late 70s of petrodollar recycling when oil went to $35 the first time a lot of free money washed around cheap money washed around the world ended up in places it shouldn't have. Does it sound familiar? This was 1980 and I literally watched businesses and friends and cities and governments and countries lose everything in Latin America. And this was shades of that coming to our country here in the United States. It was really a pretty tough time but we got through it and the finance company for us was kind of the lightning rod and the target of so much of things that were gone bad. You know, GM went bankrupt. So, spun off their credit company. GE couldn't borrow. They got downgraded and blah blah. You all know the story of all the finance companies and banks. We came through that and it was Kent and that team that got it done. We're pretty proud of that and I'm very really proud of that, Kent. But go back to kind of your career and how you guys do. Kent came as a smart person. See, I came with an undergrad degree. Kent came with about four degrees and masters and all this stuff and well I always say he taught me everything I know but he knows that's not true.

And then yeah, that's maybe that's something we should talk about a little bit in that I'm asked this often by young people or new people to CAT, not necessarily young, but what would you recommend to me to get ahead to get to your job? What should I do? And I have a pretty simple answer to that and I thought about this a lot in the early days as I got to this answer, but it really comes down to ambition. And if you look at a starting group that comes to our company in any discipline, marketing, finance, engineering, manufacturing, you name it, everybody in that group is relatively of the same intelligence because we have a minimum grade point. We've got all the things you have to have to get through the process. So virtually everybody is of the same mind and very talented, very good, lots of potential. But what separates those that really go a long way in life and business or whatever endeavor and those that don't? And I sometimes liken it to the high school class where there's always one person in high school raising their hand answering questions and everybody else gets so fed up with them. But chances are that kid's probably the valedictorian and later on you'll see him as an Eagle Scout or was an Eagle Scout and on and on. He or she does well down the road. And it's no different in our company, volunteering for extra projects, extra work, being very careful in taking the jobs that are offered to you. Because if you don't take a key job, somebody else will and they'll just go around you. You can be the best person for the future, but if somebody else has the experience and I have to choose, chances are the experience is going to win out. So I really think it comes down to ambition in the end. Not raw political hard-elbowed ambition in our company. There's some of that always everywhere, but it's just who really wants to help us get things done and go where we want to go.

Yeah. It's amazing to me, and I'm sure Dean, you teach this these days how many new people we get in our company that can't make a presentation or are intimidated or afraid or just have never done it. And in this day and age, a presentation, whether it's on an iPad or one-on-one or to a group, is bottom line. It's the 3.25 or 3.5 grade point. You got to do it. And I'm kind of amazed about that. And of course, the other thing we're losing as a society are our writing skills, which I think when you receive a written letter from somebody, and in school, you don't do that often or write to someone, but you will. I guarantee it in your future. And you receive a well-written letter or you read a well-written piece, you'll be impressed because it's so rare these days. And that is a differentiator in my opinion in your own brand and in what you can do in the future. And when you recognize it, you'll know it because we're losing it to these fingertip things.

That's a good way to ask that actually. Mondays are my favorite day without question for a lot of reasons, but we meet as an executive office. That is the five group. Start in the morning. What time do you get up in the morning? Okay. I get up every day at 5:30. And I do religiously two miles every morning. Either right now I can be outside because the weather's nice or on the treadmill religiously when I have time. And that's four to five days a week I can get that in. I need to do that. And then I'll have breakfast with my wife who's my absolute soulmate of all time anyway. And we'll read two papers at that time that generally the local paper and scan the Wall Street and then I leave at about 7 o'clock. This sounds like a routine. It is. Sorry about that. But and I try to get in by about 7:15. But Monday mornings at 8:00 for an hour and a half, we have our executive office round table. We call it unstructured the six of us, five group presidents and myself. And we update each of us on the previous week's events. And right now it's all of course economic situation, worldwide sales situation for us. What's happening in China is a big thing right now for us. So, next Monday at and then once a month, off the track a little bit, once a month we have an all-day meeting, which is next Monday, and we'll cover lots of things during a full day to make decisions, but normally it's just an hour and a half as an update. Maybe where I was, I'll probably talk about this on Monday. I'm going out to do some touring and I'll talk about that or I met with customers earlier in the week and this and that. A lot of information right now about Europe and overall worldwide. We're looking for any upturn or downturn or anything that we ought to be monitoring right now to adjust either production levels or up or down or whatever else we may do. So that's really fun and it's unstructured and everybody has their little bullet points and we talk through that.

No, I never have open time on a Monday.

I never have open time during the whole Monday through Friday. And that's one thing about a CEO job and probably a lot of jobs for that matter, but is the calendar what we call calendar hell. And it's amazing. And I was warned about it by other CEOs I knew. I was warned about it by my predecessors. But it is true. And I could literally work 48 hours a day. And I get requests for 48 hours a day. And 48 hours a day because the 12 you're not at work is travel and I could go every single day but I enjoy that and it's fun and everything is different so different. I've had a big push in my time here on customer contact and customer visits and trying to change our company to be more customer receptive and that's been fun and I was with Paul Ryan's family last week in Janesville, Wisconsin for example the night he gave the acceptance speech and there everybody in the room was just excited about Congressman Ryan giving his speech that night. So, I really love that. But anyway, Saturdays, I'm not a workaholic and I'll spend at some point Saturday enough time on my iPad to get to be current, figure out everything that's going on, catch up, get that out of the way. And I'll do a little bit on that Sunday morning. But tomorrow, Saturday, is the opening day of teal season in Illinois, which is a duck season. So, I'm a big duck hunter. I'm doing that. I have my two Georgia dogs. They're not bulldogs, but they are black labs that lived in Thomasville for two years for training. One's named Diesel and one named Dozer. And they're the two of them and I are going hunting tomorrow morning and I can't wait. And so that's in the fall we try to do a lot of that. But I try not to do office time on the weekends. I have to, but I try not to. I'm just not a workaholic on the weekends. I feel by Monday morning I'm recharged. I better be ready to go. And I let it all happen during the week. And the trips of course are always 7:00 a.m. until 10 at night. Usually a foreign trip will be 10 or 12 days. I try to limit it to 12 days because after that with jet lags your productivity really drops. I've got a trip to China next week. We'll have our board meeting over there and then in November I've got a trip to Peru and Brazil both customer visits which I'm really extremely looking forward to.

And in my case, this is my second time and I got it really perfect the second time and it's helped me immensely with my day job and I had to kind of learn it the hard way I guess.

Yeah. I think for me the absolute answer for me is around personal accountability. And one of the things that I've tried to bring to Caterpillar is no matter what level you are, no matter what job you are on, you own the results and it's your company. And big companies get lost on that. Big companies get lost and want other people to do the job and think another department's going to do it. But when it comes right down to it, it's no different than the corner hardware store. If you own the corner hardware store and you had Walmart coming in six months time and you knew it, you'd treat every customer that walks through that door like a golden ring. You'd answer every phone call on the first ring. You'd answer every email. You'd make sure you have everything perfectly lined up in that store. You'd make sure you have the sidewalk swept out front. Wouldn't you? It's no different in a big company and it requires in our case 155,000 people with that kind of accountability and commitment to get it done because today we have competition everywhere on this planet and most of our competition are not in this country. We basically have one competitor in the United States and everybody else is offshore and they all want our jobs just like we wanted their jobs years ago as America developed. All these developing countries around the world today want our jobs. That's the Walmart coming to Caterpillar and coming to America. So to me it's around accountability and one thing that really struck me I had the great fun of working on an assembly line earlier this year assembling the big D11 bulldozer the largest bulldozer made in the world up in Illinois and I never worked in assembly line in my life. I'm not a manufacturing person. I'm not an engineer. I've been in plants everywhere in the world. I never worked there. So I showed up that morning. I got up there and they showed me what to do and told me what to do. And these are big huge fabrication and weldsmans and heavy stuff. And so I was assembling a rubber exhaust tube from the engine turbo from the engine exhaust to the smoke stack on the D11. There's a clamp. Of course, I'm not used to this. And I dropped the clamp. I thought, well, no problem. Except I looked right down and it just missed going inside the turbo, which if it would have gone in the turbo would have been a massive deconstruction of that turbocharger. Hours and hours of delay. And if I would have had a bad day, I said to myself, I probably just would have let that go. Wouldn't have told anybody. Nobody would have known it. So machine starts up in test, throws that clamp right through the turbocharger, and guess what happens? $10,000 repair more. And I said right then to myself, my god, these are important jobs in this factory. And I've been talking about that internally ever since. The second thing was safety. I was scared to death I was going to hurt somebody because I was walking around things and huge heavy things with overhead cranes and I was afraid. It really dawned upon me accountability in a factory worker job how important those are to a company like Caterpillar. I've kind of been on that almost that rant since I did that earlier this year. It really helped me. But it's all about accountability at any level in any job whether it's insurance or tractor assembly or you name it. I really think that's a critical one and I've been working on that one. What do you think?

A little bit off the question, but another one I It's similar. One question I get all the time from people is what keeps you up at night? The big CEO question, I guess. What keeps you awake at night? Well, not much fortunately. And I'll tell you why that is. The thing, the heaviest obligation I feel on my shoulders is to make sure that this company is here a hundred years from now because over the last hundred years there have been however many CEOs at Caterpillar that have given me this wonderful absolutely fantastic company to manage. And so I'm looking out for 10 and 20 and 30-year decisions much more than I am every quarter earnings or the day-to-day stock price. Now I watch all that and we have to worry about all that. But the heaviest weight I feel is when we put that plant in Athens, is that the right thing for 20 years from now? Will it be there? And was that the right move? Because we just destructed a plant in Japan that we're going to do something else with. And was that the right move for that one? None of that has anything to do with a one or two or three-year decision. And that to me is the biggest obligation on a CEO is to make sure the right pieces and bets and chess moves are made for two or three generations and I really take that one seriously and I do wake up at night about that on some of the big things we talk about is that really the right thing to do. Anyway, those probably more than you want. I'm sorry.

Doug, yeah, exactly. That's good. And I would say what we will apply to Athens is exactly the same process. We are just applying to Nanjing, China where we're opening a plant. Chengdu where we're opening a plant, Sao Paulo where we're opening a plant, Victoria, Texas where we just opened a plant and on and on and on. It's the same set of rigorous way in which we bring people in and then provide constant training because the one thing that I found going around the world and I think I've been in something like close to 80 countries and for our people they our people anybody for that matter but people really want to know what the playing field is it level or is it tilted one way or another and which way do I have to play the game and we have found in new plants whether it's Athens or China or Bangalore, India that when we lay out our four values and we provide a lot of training and we hire like Kent has talked about we have a lot better buy-in from our employees and it works great but we really try to work on that level playing field and whether the new plant if you go to Athens you'd see our values up there we just had them in Victoria, Texas two weeks ago when we cut the ribbon you see them there and wherever you walk in one of our facilities they're everywhere as you kind of mentioned and that's critical because of the level playing field and people like that and Americans really like it. But guess what we found and I've seen with my own eyes everybody else likes it too. Nobody likes a corrupt world where in many other places there's other ways you get ahead. Maybe family history for example if your name isn't such and such in Europe sometimes or else we're not to pick on Europe but the playing field is different and we really work hard on that.

You're going to get a building for your daughter.