Caterpillar CEO sees U.S. soft landing

By James B. Kelleher and Nick Zieminski

NEW YORK (Reuters) - The top executive at Caterpillar Inc. (CAT.N: Quote, Profile, Research, Stock Buzz), the U.S. construction and mining equipment giant, said on Tuesday any U.S. slowdown will be confined to specific sectors and that the wider economy is headed for a soft landing.

Speaking in New York at the Reuters Manufacturing Summit, Jim Owens, Caterpillar's chair and chief executive, said that global economic growth could continue at "fairly high levels," driven by productivity gains, the ongoing worldwide commodity boom and increasing globalization.

His comments came as U.S. stocks plummeted, sending the benchmark S&P 500 index .SPX to its biggest one-day slide in more than 3-1/2 years, as a sell-off in China's equity market fanned worries that stock valuations there are too high. Data suggesting U.S. economic growth may be slowing also weighed on the market.

While Owens said Caterpillar was girding for "substantial growth this year in every geographic region except the United States," where a slowdown in real estate has hit equipment sales and new clean-air rules have hit truck engine sales, he said he wasn't worried the United States was headed toward a recession.

"Our best expectation is we're going to have a 1995-like soft landing," Owens said.

He said he expected the U.S. central bank would begin cutting interest rates toward the end of 2007 and that he foresaw a "pretty strong" U.S. economy in 2008.

Owens, whose company generated about $1 billion in annual sales in China out of total 2006 sales of $41.5 billion, said Caterpillar was more focused on gaining market share in China than on sheer size.

Asked how slower Chinese growth would affect the company, Owens cited the impact of China's growth on demand for machines used in mining, construction and energy sectors, given its sheer size as a marketplace.

"It affects us profoundly," Owens said. However, he added that investors shouldn't "get transfixed on that" because of the relatively small contribution China makes to the company's total sales.

He added there was "absolutely no" change in Caterpillar's China strategy given expectations for slightly weaker economic growth.

Owens said as China's economy matures, he expects to see annual economic growth in the 7 percent range, down from more than 10 percent in recent years.

In a subsequent interview with Reuters TV, Owens said Caterpillar's revenue growth this year may come in at the top end of the company's forecast, which calls for 2007 sales to be flat to up 5 percent.

"It could well be at the higher end of that range, but in that range," Owens said. He added: "We expect to continue to improve our margins this year as we get more efficiency in our manufacturing operations worldwide. We are continuing to run at full capacity for all of the larger end of our product line."

Asked about the U.S. stock market's decline on Tuesday, Owens said the fall does not alter his expectation for slowing U.S. growth and generally strong global markets.

"A day's fluctuations on the stock market doesn't change my view," Owens said.

(Additional reporting by Megan Davies and Nicole Volpe)