Business Segments and Subsidiaries of Caterpillar Inc.

Abhijeet Pratap
17 min readMar 25, 2021


You might be knowing Caterpillar (NASDAQ: CAT) as the maker of monster-sized construction and mining machines. The company is based in the United States and sells its products across 192 countries worldwide through its network of 161 independent dealers. 46 of these dealers were based in the United States (as of 2020) and the rest overseas. The company has managed an extensive distribution and supply chain network. It is best known for its high-performance and high-productivity machines that cater to customers’ needs in various industries apart from construction, mining, and transportation. The revenue of the company took a hit in 2020. The decline was caused by the pandemic, which hit several industries hard and led to a fall in end-user demand, causing Caterpillar sales and revenue to fall.

Caterpillar’s l eadership position in the industry results from its focus on innovation, product quality, and differentiation. It offers an extensive range of machines and related parts discussed in detail in another post. The company has classified these products into different segments based on the industries they are made for. Caterpillar generates a significant portion of its revenue from the North American market, followed by the Asia Pacific and Europe. As a result, the pandemic raging in the United States was bound to drive its profits down. The giant machine builder is also facing heavy competition from other players like Komatsu, Hitachi, and John Deere. However, it has established itself as a leading player offering superior technology, products with advanced capabilities, and better returns for customers on the premium prices it charges for its products.

In this post, we will take a look at how the company has segmented its business and how this operating model helps the company in terms of operational efficiency and profitability.

Business Segments of Caterpillar Inc:

Caterpillar has divided its business into two main operating segments — physical products and financial products. The physical products segment is also known as the machinery, energy, and transportation segment. Caterpillar’s main source of revenue is the physical products segment. The financial segment includes the finance and insurance subsidiaries of Caterpillar.

However, for ease of business operations, the company has divided the first larger segment into three segments. This segmentation is based on the industries that Caterpillar serves -

  • Construction,
  • Resources and
  • Energy and transportation.

Construction Industries segment of Caterpillar Inc:

This segment mainly caters to the needs of large and medium-sized buyers in the infrastructure, forestry, and construction industries. The company makes most of the machinery sales in this category to heavy and general construction, rental, quarry, and aggregates markets and mining industries.

The level of customer demand for construction machinery varies by market region. Customer priorities also vary by market region. It implies the customers in different markets have different priorities in terms of large purchase decisions. For example, prices come first for the customers in developing economies. In the developed world, however, the customers’ priority is the productivity and performance of the machinery and other factors that affect the cost of machine ownership over its lifetime. Caterpillar mainly sells premium products, but it has grown its focus on the developing economies and, accordingly, its range of products that attract the buyers in these regions with their prices and performance.

Caterpillar’s offerings for the developing economies are differentiated from those made for the developed economies. To grow and maintain its market share in Asia and other regions’ developing economies, the company has developed customer-driven product innovations. These differentiated product offerings have enabled the company to target its customers in the developing economies more effectively and grow its competitive edge against the rivals in these markets. In 2020, Caterpillar focussed most of its research and development expenditure in this segment on the development of next-generation construction machines.

Who are the leading competitors of Caterpillar in the Construction Industries segment?

Apart from the leading global competitors of caterpillar, there are several regional and specialized local competitors in this segment. In this segment, Caterpillar’s leading global competitors include

  • CASE (part of CNH Industrial N.V.),
  • Deere Construction & Forestry (part of Deere & Company),
  • Doosan Infracore Co., Ltd.,
  • Hitachi Construction Machinery Co., Ltd.,
  • Hyundai Construction Equipment Co., Ltd.,
  • J.C. Bamford Excavators Ltd.,
  • Kobelco Construction Machinery (part of Kobe Steel, Ltd),
  • Komatsu Ltd.,
  • Kubota Farm & Industrial Machinery (part of Kubota Corporation),
  • and Volvo Construction Equipment (part of the Volvo Group).

Caterpillar’s competitors in China also include

  • Guangxi LiuGong Machinery Co., Ltd.,
  • Longking Holdings Ltd.,
  • Sany Heavy Industry Co., Ltd.,
  • XCMG Construction Machinery Co., Ltd.,
  • Shandong Lingong Construction Machinery Co., Ltd. (SDLG, part of the Volvo Group) and
  • Shantui Construction Machinery Co., Ltd., (part of Shandong Heavy Industry Group Co.).

These companies operate with varying levels of regional focus and offer varying lines of products that compete with Caterpillar products.

What does the construction industries product portfolio of the company look like?

The construction industries product portfolio of Caterpillar includes the following machinery and related parts:

. Asphalt pavers

· forestry excavators

· small and medium track-type tractors

· backhoe loaders

· motor graders

· compactors

· pipelayers

· track-type loaders

· cold planers

· road reclaimers

· wheel excavators

· compact track and multi-terrain loaders

· site prep tractors

· compact, small and medium wheel loaders

· skid steer loaders

· mini, small, medium and large excavators

· telehandlers

· utility vehicles.

How much did the construction industries segment of the company generate in 2020 in revenues and profits?

The revenues and operating profits of the construction industries segment of the company in 2020 fell below 2019. In 2019, Caterpillar generated $22.65 billion in revenues from the construction industries segment which fell to $16.9 billion in 2019. The company’s sales in this segment declined across all geographical regions. The company’s net sales declined by 25% in 2020 compared to 2019 or by $5.7 billion. Lower end-user demand and changes in dealer inventories during 2020 drove the decline in net sales and profits of this segment. Caterpillar dealers decreased inventories in 2020 compared with an increase in 2019.

The operating profit of the construction industries segment also declined heavily in 2020 compared to the previous year. The company experienced a net decline of 40% or $1.56 billion in 2020 compared to the previous year. The operating profit of Caterpillar Inc from the construction industries segment reached $2.4 billion in 2020 compared to $3.9 billion in 2019.

Resources Industries segment of Caterpillar Inc.

The resources industries segment of Caterpillar caters to the needs of the customers using heavy equipment in mining, heavy construction, and quarry and aggregates. The company offers a broad range of products and services to deliver comprehensive solutions for its customers engaged in such businesses. Caterpillar manufactures high productivity equipment for surface and underground mining operations both. Apart from that, it offers drivetrains, hydraulic systems, electronics and software for Cat machines and engines. Companies use Caterpillar equipment to extract and haul copper, iron ore, coal, oil sands, aggregates, gold and other minerals and ores. The resources industries segment of Caterpillar Inc also sells complementary technologies and services to provide customers with fleet management systems, equipment management analytics and autonomous machine capabilities.

Across most markets, the customers choose equipment based on its reliability, productivity and total cost of ownership. However, in some of the developing markets, the customers’ main priority are the prices of the equipment instead of productivity. On the contrary, the customers from the developed economies base their investment decisions when buying large equipment on factors like productivity, reliability and other factors that affect the cost of ownership of the machine over its lifetime. Caterpillar’s ability to design and integrate key machine components offers it a substantial competitive advantage. The company focuses its research and development activities in this segment on offering its customers the lowest total cost of ownership of equipment while also offering the highest productivity and quality of products and services.

Apart from a few large and global brands that compete with Caterpillar, there are a large number of smaller brands that compete with Caterpillar in a limited range of products, applications and regional markets. The global brands that compete with Caterpillar in surface mining equipment include Deere Construction & Forestry (part of Deere & Company), Epiroc AB, Hitachi Construction Machinery Co., Ltd., Komatsu Ltd., Liebherr-International AG, Sandvik AB, and Volvo Construction Equipment. Apart from it, the global brands that compete with Caterpillar in underground mining include Epiroc AB, Komatsu Ltd., and Sandvik AB.

What does the resources industries portfolio of the company look like?

The following machines and related parts are included in the resources industries product portfolio of Caterpillar Inc.:

· electric rope shovels · large mining trucks · wheel dozers · draglines · longwall miners · landfill compactors · hydraulic shovels · large wheel loaders · soil compactors · rotary drills · off-highway trucks · machinery components · hard rock vehicles · articulated trucks · autonomous ready vehicles and solutions · large track-type tractors · wheel tractor scrapers · select work tools.

How much did the resources industries segment of the company generate in 2020 in revenues and profits?

The resources industries segment of the company also experienced a net decline of 23% or $2.4 billion in 2020 compared to the previous year. The net operating revenue of the company from the resources industries segment in 2020 was $7.9 billion compared to $10.3 billion in 2019. The factors that drove lower sales in 2020 included lower end-user demand for equipment and aftermarket parts and the impact from changes in dealer inventories. Dealers decreased inventories during 2020, compared with an increase during 2019. Lower end-user demand was mainly driven by equipment supporting heavy construction and quarry and aggregates. Mining equipment end-user demand and aftermarket parts demand remained lower in 2020, though to a lesser extent. Mining equipment sales were impacted by mining company delays in capital expenditures due to pricing in certain commodities and the overall economic uncertainty.

The profit for this segment was down 45% in 2020 compared to the previous year. The resource industries segment of Caterpillar generated $896 million or $733 million less than the previous year when it generated $1.629 billion in profits. The decline was mainly due to lower sales volume. However, favorable manufacturing costs offset the decline to some extent.

Energy and transportation Industries Segment of Caterpillar:

The energy and transportation industries segment of Caterpillar Inc caters to the needs of customers in oil and gas, power generation, marine, rail and industrial applications. The CAT machines subsidiary of Caterpillar is also a part of the energy and transportation industries segment. This segment’s products and services portfolio includes reciprocating engines, generator sets, gas turbines and turbine-related services, the remanufacturing of Caterpillar engines and components and remanufacturing services for other companies, diesel-electric locomotives and other rail-related products and services and product support of on-highway vocational trucks for North America.

Due to new product-related regulations being introduced the company has to maintain a heavy focus on product research and development in this segment. The regulatory emissions-related standards are particularly a major concern for the company and require it to make regular investments to stay compliant. In developing markets, the situation can be especially very complex. Emissions standards in these markets are evolving rapidly and there are unique requirements of each market. Apart from that, the enforcement processes can also vary from market to market. To comply with the emissions-related regulations in the developing and developed markets, Caterpillar has employed robust product development and manufacturing processes.

In this segment too, apart from a few leading global rivals that compete with the equipment maker across several markets, Caterpillar competes against many smaller companies that deal in a limited range of products, across specific and smaller geographic regions and/or a limited group of applications.

Who are the main competitors of Caterpillar Inc in the energy and transportation sector?

The main global competitors of the company in the energy and transportation business segment include Cummins Inc., Deutz

AG, INNIO, Rolls-Royce Power Systems and Wärtsilä Corp. Other competitors, such as Fiat Industrial SpA (CNHI), GE Power, Kawasaki Heavy Industries Energy System & Plant Engineering, MAN Energy Solutions (VW), Mitsubishi Heavy Industries Ltd., Siemens Power and Gas,Volvo Penta AB, and Weichai Power Co., Ltd..

The global competitors of Caterpillar Inc in the railroad-related businesses include Alstom SA, CRRC Corp., LTD., The Greenbrier Companies, Siemens Mobility, Voestalpine AG, Vossloh AG and Wabtec Freight.

What does the energy and transportation industries portfolio of Caterpillar look like?

Here is a list of the products and related parts that are included in the energy and transportation product portfolio of Caterpillar Inc.:

  • Reciprocating engine powered generator sets
  • Reciprocating engines supplied to the industrial industry as well as Caterpillar machinery
  • Integrated systems used in the electric power generation industry
  • Turbines, centrifugal gas compressors and related services
  • Reciprocating engines and integrated systems and solutions for the marine and oil and gas industries,
  • Remanufactured reciprocating engines and components, and
  • Diesel-electric locomotives and components and other rail-related products and services.

How much did the energy and transportation industries segment of the company generate in 2020 in revenues and profits?

The energy and transportation segment of Caterpillar Inc generated a net revenue of $17.470 billion in 2020, a decrease of $4.627 billion, or 21 percent, compared with $22.097 billion in 2019. Sales in this segment declined across all applications and inter-segment engine sales.

Oil and gas sales decline 29% in 2020 compared to 2019 falling to $3.7 billion from $5.2 billion a year ago, a net decline of $1.5 billion.

Power generation sales also fell 11%. Net revenue from power generation sales declined to $3.96 billion in 2020 from $4.5 billion in 2019, caused by lower sales volume of reciprocating engines and after marketing parts as well as lower sales of turbines and related services.

Net revenue from industrial and transportation products fell by 21% and 20% respectively.

The company’s net revenue from industrial products was $3.96 billion compared to $4.5 billion in 2019. Net revenue of the company from transportation products was down to $4 billion in 2020 down from $5.06 billion in 2019.

The Energy & Transportation segment’s net operating profit was $2.405 billion in 2020, a decline of $1.505 billion, or 38 percent, compared with $3.910 billion in 2019. The decrease was caused mainly by lower sales volume, partially offset by lower SG&A/R&D expenses and manufacturing costs.

Financial Products Segment of Caterpillar Inc.

Based on the revenue it generates, the financial products segment of Caterpillar Inc is the smallest of all the business segments of the company.

Cat Financial, Insurance Services and their respective subsidiaries and affiliates mainly conduct the financial products business of Caterpillar Inc. CAT finance is a wholly owned subsidiary of Caterpillar Inc, offering retail and wholesale financing to customers and dealers globally for Caterpillar products, as well as financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products.

Retail financing offered by CAT finance mainly includes installment sale contracts and other equipment-related loans, working capital loans, finance leases and operating leases. Wholesale financing CAT finance offers to Caterpillar dealers mainly includes inventory and rental fleet financing. Apart from that, CAT finance also purchases wholesale trade receivables from Caterpillar. CAT financial has designed the financial plans it offers to support sales of Caterpillar products and generate financing income. A significant part of its business activities are carried out in North America. However, the company has additional offices and subsidiaries in Latin America, Asia/Pacific, Europe, Africa and the Middle East. CAT financial has been offering financial services in areas where it operates for almost 40 years.

What does the services portfolio of CAT finance look like?

CAT financial retail loans (49% of total portfolio at end 2020) including:

  • Loans that allow customers and dealers to use their Caterpillar equipment or other assets as collateral to obtain financing.
  • Installment sale contracts, which are equipment loans that enable customers to purchase equipment with a down payment or trade-in and structure payments over time.

Cat Financial’s retail leases ( representing 37% of the total portfolio at end 2020) including:

  • Finance (non-tax) leases, where the lessee for tax purposes is considered to be the owner of the equipment during the term of the lease, that either require or allow the customer to purchase the equipment for a fixed price at the end of the term.
  • Tax leases that are classified as either operating or finance leases for financial accounting purposes, depending on the characteristics of the lease. For tax purposes, Cat Financial is considered the owner of the equipment.
  • Governmental lease-purchase plans in the U.S. that offer low interest rates and flexible terms to qualified non-federal government agencies.

Cat Financial also purchases short-term receivables from Caterpillar (representing 12% of CAT financial’s total portfolio at end 2020).

Cat Financial’s wholesale loans and leases (2 percent of total portfolio) include inventory/rental programs, which provide assistance to dealers by financing their new Caterpillar inventory and rental fleets.

CAT Financial also operates in a highly competitive environment and faces a lot of competition from several sources that also offer loans and leases for purchasing Caterpillar equipment. Uts leading competitors include Australia and New Zealand Banking Group Limited, Banc of America Leasing & Capital LLC, BNP Paribas Leasing Solutions Limited, Wells Fargo Equipment Finance Inc., Societe General and various other banks and finance companies. Many of the leading competitors of Caterpillar also own financial subsidiaries like John Deere Capital Corporation, Komatsu Financial L.P., Kubota Credit Corporation and Volvo Financial Service. They utilize below market interest rate programs to assist machine sales.

Which are the wholly owned insurance subsidiaries of Caterpillar Inc?

The wholly owned insurance subsidiaries of Caterpillar include:

  • Caterpillar Insurance Company — a wholly owned subsidiary of Caterpillar Insurance Holdings Inc.. It is a U.S. insurance company domiciled in Missouri and regulated mainly by the Missouri Department of Insurance.
  • Caterpillar Life Insurance Company — also a wholly owned subsidiary of Caterpillar. It is a U.S. insurance company domiciled in Missouri and primarily regulated by the Missouri Department of Insurance.
  • Caterpillar Insurance Co. Ltd. — a wholly owned subsidiary of Caterpillar Insurance Holdings Inc. It is a captive insurance company domiciled in Bermuda and regulated by the Bermuda Monetary Authority.
  • Caterpillar Product Services Corporation (CPSC) — a wholly owned subsidiary of Caterpillar. It is a warranty company domiciled in Missouri.
  • Caterpillar Insurance Services Corporation, a wholly owned subsidiary of Caterpillar Insurance Holdings Inc., is a Tennessee insurance agency licensed in all 50 states, the District of Columbia and Guam.

Performance of the Caterpillar Financial Products segment in 2020:

Financial Products’ segment generated revenues of $3.044 billion in 2020, a decline of $390 million, or 11 percent, from 2019. The decline was caused mainly by lower average financing rates across all regions and lower average earning assets in North America.

Financial Products’ segment profit for 2020 remained $590 million, against $832 million in 2019. The decrease was caused mainly by higher provision for credit losses at Cat Financial, lower average earning assets, an unfavorable impact from equity securities in Insurance Services, lower net yield on average earning assets and an unfavorable impact from returned or repossessed equipment. A reduction in SG&A expenses primarily due to lower incentive compensation partially offset the unfavorable impacts from the above listed factors.

A List of Brands/Subsidiaries in the Caterpillar Family:

  • CAT Lift Trucks: cat Lift Trucks is a subsidiary of Caterpillar Inc that was formed in 1965 when Caterpillar acquired a company called Towmotor. In 1992, again the company entered into a joint venture with Mitsubishi called Mitsubishi Caterpillar Forklift America Inc. (MCFA), for the production and marketing of Lift trucks. Since then the company has vastly expanded its forklift line up to include electric counterbalanced lift trucks to internal combustion (IC) cushion and pneumatic tire lift trucks.
  • CAT REMAN: Production at Caterpillar’s first remanufacturing plant began in Bettendorf, Iowa, in 1973. The brand offers a broad portfolio of replacement parts, available at CAT dealers. These parts offer the same performance and durability as new parts but at lower prices compared to new ones.
  • CAT financial: Caterpillar formed a subsidiary called Caterpillar Leasing company in 1981 and renamed it CAT financial in 1983. Cat Financial provides retail and wholesale financing solutions and extended protection products to Cat customers and dealers for the complete line of Cat machinery and engines, Solar gas turbines, other related equipment and marine vessels.
  • Solar Turbines: Caterpillar founded its Solar Turbine brand as the Prudden-San Diego Airplane Company in 1927. The company believed that gas turbines were going to become the prime movers in future and therefore it heavily invested in the development of small turbines. The International Harvester Company purchased the company in early 1960. Again, Caterpillar acquired Solar Turbines International in 1981. Today, Solar Turbines brand designs and manufactures industrial gas turbines for onshore and offshore electrical power generation, marine propulsion, and the production, processing, and transportation of natural gas and oil.
  • Hindustan: Caterpillar announced in 1984 that Hindustan Motors Ltd. of Calcutta, India, would start licensing the manufacture of specific Caterpillar construction equipment models, including track-type tractors, wheel loaders, and off-highway trucks. For more than 30 years, Hindustan has been offering sales, marketing and after sales support for the sale of a limited range of Caterpillar products in the Indian market. Hindustan offers affordable, high-quality, ready-to-run small wheel loader products and components that are reliable, as well as easy to use and maintain.
  • Olympian: Caterpillar’s Olympian brand offers prime power or standby gas and diesel-fueled generator set and aftermarket parts.
  • Anchor: Anchor’s history dates back to 1938. It provides high-quality hydraulic hose, steel couplings and complete assemblies for the OEM and general market business sectors. These hoses and couplings are essential parts for operating every Caterpillar product.
  • FG Wilson: FG Wilson has been around for more than 50 years. Its product line ranges from small ready-to-run generator sets suitable for domestic use to large power systems with remote monitoring capabilities to feed into the national grid. Caterpillar acquired a 49% stake in the company in 1996 and then the remaining 51% stake in 1999.
  • MAK: MAK, one of the top engine brands in the medium-speed propulsion market, has a history dating back over 150 years. Its product line includes marine diesel, gas and dual-fuel engines used in various marine applications.
  • Turner PowerTrain System: Turner Powertrain System has been developing transmissions since 1859. The brand is a world leader in the development and manufacturing transmissions for backhoes, wheel loaders and telehandlers.
  • ASIA TRAK: Asia Track produces high-quality undercarriage components for hydraulic excavators and track-type tractors for Caterpillar and outside OEMs.
  • CAT Rental Store: CAT Rental store started its services in 1998. It started offering equipment for short term use, providing rentals for a day or even an hour. Today, the Cat Rental Store network offers the largest construction equipment rental fleet in the world. From the well-known Cat earthmoving machines, excavators, skid steer loaders, backhoes, pavers and compactors, work tools and power generators to equipment from more than 70 other top-tier brands, CAT Rental store offers a vast range of machines and equipment for short term use.
  • Perkins: Caterpillar acquired Perkins in 1998 and renamed it Perkins Engines Company Limited of Peterborough, England. The history of Perkins dates back to 1932. It is a world-leading provider of diesel and gas engines, offering the most comprehensive range of innovative and reliable power solutions tailored to meet its customers’ precise requirements.
  • SEM: The SEM brand offers wheel loaders, soil compactors, motor graders and track-type tractors targeted to meet customers’ needs in China and other markets. It has been around for more than 60 years.
  • Progress Rail: progress rail has been serving the rail industry since 1983. It is among the largest integrated and diversified providers of rolling stock and infrastructure solutions and technologies for global rail customers.
  • HYPAC: The Hypac brand in the portfolio of Caterpillar offers large mining customers and Cat dealers with hard-to-find parts for legacy brands as well as expanded service opportunities through competitive parts offerings.
  • MWM: The history of MWM dates back to 1871. It developed and produced sustainable gas engines and gensets in Mannheim, Germany. Now, the MWM products are developed by Caterpillar Energy Solutions. These products include gas engines and gensets, distributed power plants, cogeneration plants and CHP plants, gas applications, and cogeneration and trigeneration.
  • M2M: M2M data corporation was founded in 1999. It has developed a wide range of hardware and services to provide remote status of equipment data with real-time notifications upon equipment status changes, including equipment shutdown events.
  • KEMPER: Kemper Valve & Fittings Corp was founded in 1965. The company is a market leader in the production of hammer unions for Oil & Gas services in the North American market.
  • SPM: SPM Oil & Gas brand provides superior products and service solutions to Oil & Gas customers in upstream, production, transportation, refining and related industries.

Originally published at on March 25, 2021.