Tuesday, January 31, 2017

Caterpillar to move headquarters from Peoria to Chicago


Posted at 8:44 AM Updated at 8:57 AM

By Matt BudelGateHouse Media

PEORIA - Caterpillar Inc. has scrapped plans to build a new office complex in downtown Peoria and will move its global headquarters to the Chicago area by the end of the year.

The upper echelon of executives, including newly installed CEO Jim Umpleby, will begin relocating later this year, with up to 100 employees total moving by year's end. About 300 employees will work in the new office at an as yet undecided location once the transition is complete.

"I think our commitment and our ties to Peoria will still be very, very strong," Umpleby said in an exclusive interview with the (Peoria) Journal Star. "We'll have more employees in this area than any other place in the world. We intend to continue our deep philanthropic and civil involvement."

Umpleby continued: "So (Peoria) really will still be, in my view, the center of the universe for Caterpillar. That's not going to change."

The action about to be undertaken by Caterpillar, however, represents a stark reversal of official company words from years and decades past.

Studies for modernization of the company's global headquarters that began in 2012 focused almost exclusively on downtown Peoria and the surrounding region, according to accounts given by Caterpillar at the time.

Then, in February 2015, the company affirmed its intention to remain local and global when it unveiled plans for a sprawling campus to be built on the Chase Bank building block, across the street from the current headquarters.

Doug Oberhelman, who retired as CEO at the beginning of the year but remains the chairman of Caterpillar's Board of Directors through the end of March, said simply at the time: "Caterpillar will stay in Peoria. I repeat, we will stay in Peoria."

Much has changed since those plans first were set into motion - to Caterpillar's plans and bottom line.

The company indefinitely suspended planning for the new Peoria headquarters in the fall of 2015 after announcing a restructuring effort that called for up to 10,000 jobs to be cut and about 20 facilities around the world to be closed or consolidated.

The projection was low, and the plan evolved. Since the original announcement, 30 facilities have been affected and 16,000 Caterpillar employees have lost jobs.

The changes contributed to $2.3 billion in savings in 2016, but sales and revenue for last year still were more than 40 percent below peak levels of 2012. Umpleby said that decline is a fundamental reason the company's Board of Directors opted to move global headquarters to an area where the global marketplace is in easier reach.

"What we're really after here in terms of the location is access to flights and the ability to get to markets more quickly," Umpleby said. "One of the reasons we chose Chicago is it allows us that easier global access but it also is close to where we're going to still have the majority of our people. We have more people here than any other location in the world."

Umpleby stressed that Caterpillar intends to lease existing office space in the Chicago area, rather than build. And that space will not be a place where the company plans to move thousands of employees from Peoria.

Instead, those who will work in the Chicago area office will include the CEO, group presidents, a few vice presidents and some staff from the financial, legal and human resources departments, as well as support staff.

"The reason we're doing this is the management team has a singular focus, and the board, on helping Caterpillar grow again. That is what we're focused on," Umpleby said. "And that means making priority decisions with our resources. And we believe that it's a better use of our resources to invest in new products, services and solutions than to build an office building. That will allow us to compete, increase sales and grow the business."

Umpleby also acknowledged the civic magnitude of moving the global headquarters from the city where Caterpillar was founded in 1925 and eventually grew to be the world's largest manufacturer of earth moving equipment.

"I understand it is a big deal, and it is not a decision that we made lightly. As we step back and looked at what is most important, what's most important for us is to get Caterpillar growing again and for us to make the company successful," Umpleby said. "And I clearly recognize it will be disappointing, it will be tough. This is not easy. I clearly recognize that. But again I think it's the right thing for Caterpillar to do in the long term."

The company planned to call in city leaders to inform them of the move this morning before informing employees and notifying the public.

Matt Buedel: 309-686-3154; mbuedel@pjstar.com; @JournoBuedel

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