Witnessing the Transformation of Caterpillar under Umpleby's Leadership
Current Financial Performance
While revenue has stabilized this year, operating margins continue to climb, now exceeding 20 percent. This is a far cry from the $38.5 billion revenue Umpleby inherited in 2017. The stock price has also soared, rising from $192.64 a share to $381.37 a share (at the time of writing) since the company's relocation. Umpleby's leadership earned him the unanimous choice as the 2024 CEO of the Year by D CEO editors.
The 2022 relocation was preceded by a warning a decade earlier. In 2012, Umpleby's predecessor, Doug Oberhelman, highlighted issues such as improperly balanced budgets, high workers' compensation costs, and high taxes in the state. The total cost of living in the Chicago metro was 12 percent higher than in North Texas. At the time of the decision, Illinoisans faced the nation's highest combined state and local tax rates, which have not improved since. Workers' comp costs in Illinois were nearly double those in Texas.
Texas Operations and Talent Pool
Caterpillar has had operations in Texas since the 1960s, with manufacturing plants in Seguin, Houston, and Victoria. Its first corporate play in DFW was relocating the Electric Power Division to Irving-Las Colinas in 2021. The business behind Caterpillar's data center operation shifted hundreds of jobs from California, Arizona, and Illinois to DFW. A year later, Irving won the headquarters prize.
"Obviously, this place is booming," Umpleby says. "People want to be here. Employees want to be here. We wanted to be here. The diverse talent pool is just so wide and deep; that really was the driving factor." With 113,200 global employees, including 7,070 in Texas, Caterpillar is known for its commercial construction and mining equipment. It has over 2 million construction machines in action worldwide and hundreds of thousands of children's construction toys. The company also manufactures off-highway diesel and natural gas engines, diesel-electric locomotives, and industrial gas turbines. To date, it has built 30 million engines.
Caterpillar is exploring opportunities in automated vehicles and data centers. With large manufacturing operations in Mexico, China, Japan, Brazil, the U.K., Germany, and India, the largest concentration of jobs is still in America, a characteristic Umpleby wants to maintain.
Safety Strategy Refresh
The CEO shoulders a great responsibility as the world's infrastructure depends on his decisions. "We're in business to make our customers successful," Reed-Klages says. "Our customers build the infrastructure the world needs."
Performance and competition are always on Umpleby's mind, but safety is what keeps him awake at night. According to the U.S. Bureau of Labor Statistics, 1,069 construction professionals died in 2022. At Caterpillar's Mapleton, Illinois, foundry, six deaths have occurred since December 2021. Since 2017, OSHA has fined Caterpillar or a subsidiary 20 times for workplace safety violations.
"We're going through a refresh of our safety strategy right now to ensure we do everything we can to prevent serious injuries," Umpleby says. "We're working on new technologies to aid with safety, such as detecting people with our equipment and using AI to tell the difference between a human and a post."
Winding Career and Leadership
Umpleby's career did not start in an office. Growing up in northwest Indiana near Chicago and Lake Michigan, his mother was a homemaker and his father was a foreman in a steel mill. Umpleby was good at math and science and pursued a degree in mechanical engineering. He worked at Inland Steel Co. during summers and took on various leadership roles at Caterpillar over the years.
After graduating, he took on different positions at Solar Turbines and moved around the world, negotiating large deals. In 1990, he earned his first real leadership role and held various positions in different departments.
In 2010, he was named president of Solar Turbines and later promoted to group president of Caterpillar's energy and transportation division. However, the company faced financial challenges, and Umpleby was named CEO in 2017. Under his leadership, the company has undergone a remarkable turnaround.
Strategic Focus and Future Opportunities
Much of Umpleby's strategy focuses on growing Caterpillar's digital capabilities and services business. He wants to double the services revenue from $14 billion in 2016 to $28 billion in 2026. Currently, the company has reached $23 billion in services revenue.
The biggest opportunity Umpleby sees is in the data center boom. Many companies use Caterpillar's generator sets as backups for their data centers. The company is expanding its manufacturing capabilities to meet the demand.
"At the same time, there has been an under-investment in traditional power generation sources to supply data centers in the U.S.," Umpleby says. "We're very excited about distributed generation and selling our gas turbines and reciprocating engines."
Umpleby is also pushing into autonomous trucking and electric vehicles. Caterpillar has deployed over 600 fully automated mining trucks. Electric vehicles require a lot of commodities, and Caterpillar's mining business benefits from this.
Reed-Klages believes Caterpillar is well-positioned to benefit from the future of the energy landscape. "Caterpillar produces all the necessary equipment to support electric reliability, which gives us a real competitive advantage."
Market Outlook and Retirement
According to FMI Corp.'s 2024 North American Engineering and Construction Outlook, the U.S. construction industry is projected to slow by around 3 to 5 percent annually over the next five years. However, Umpleby has diversified Caterpillar's business, and Reed-Klages is confident the company will withstand market volatility.
In 2022, the board waived its age limit policy to ensure Umpleby could stay on as CEO. No successor has been named, and when he will retire is uncertain. But Umpleby is looking forward to skiing once he retires. "I've been very fortunate to have a career that has been an adventure in and of itself."
The Collaborative Leadership for Safety and Health in Construction (CL-SHC) Project
The CL-SHC project is a collaborative endeavor between CHWE and the Center for Promotion of Health in the New England Workplace (CPH-NEW). Supported by the Center for Construction Research and Training (CPWR) through a Cooperative Agreement with the Centers for Disease Control and the National Institute for Occupational Safety and Health (NIOSH), it integrates elements from the successful Foundations for Safety Leadership training and the Healthy Worker Participatory Program. This integration aims to implement sustainable health and safety practices specifically tailored to construction sites.“As this partnership between our two NIOSH Centers of Excellence for Total Worker Health® is truly exciting,” said Schwatka. “By combining our expertise and resources, we can make a far more substantial impact on worker safety and health in the construction industry than we could achieve individually.”Developing the Toolkit with Industry HelpThe team is dedicated to developing a toolkit that will empower construction managers, supervisors, and workers with collaborative problem-solving tools. This toolkit enables them to identify and address both safety and psychosocial health challenges within their companies. By emphasizing collaboration among different levels of the workforce, it fosters a comprehensive and sustainable culture of safety and health.“The construction industry confronts a multitude of challenges that affect individual well-being,” added Schwatka. “Although there are numerous strategies that construction companies can employ to address these challenges, they often fail to be adopted or implemented successfully because they are not developed by the participants who possess the knowledge and experience of how things work best.”Researchers are working closely with a diverse advisory board consisting of industry leaders, including representatives from academia, industry, labor unions, and safety professions. This collaborative approach ensures that the toolkit reflects a wide range of perspectives, enhancing its potential effectiveness and adaptability across different work environments.“The key aspect of our approach is the emphasis on both leadership commitment and workforce engagement,” said Schwatka. “This project is about creating a framework that gives both managers/supervisors and workers a more active role in the safety and well-being initiatives at their workplace.”“Our project aims to address this challenge by providing a toolkit that assists contractors in planning, designing, and implementing changes specific to their work and workforce. The advantage for workers is that this project gives them a voice throughout the process,” said Schwatka.Implementation, Evaluation and Next StepsThe team will evaluate the effectiveness and implementation of the toolkit with eight contractors. After the evaluation, the goal is to disseminate the toolkit, mainly through intermediary organizations such as unions, contractor associations, professional safety and health associations, workers’ compensation insurers, and most importantly, OSHA.“We are creating a resource that enables everyone on a construction site to actively participate in safety and health matters,” said Liliana Tenney, DrPH, MPH, a co-investigator on the project. “This toolkit is not only about resolving immediate issues; it is about building a culture where workers and management unite to jointly create long-lasting, positive change. By focusing on sustainability, we are equipping construction teams to support well-being even after the project ends.”By adopting this evidence-based and collaborative model, the researchers hope to bring about lasting changes in the construction industry’s approach to worker health, safety, and well-being, ultimately leading to a reduction in injury rates and an improvement in overall workforce health.About the Centers for Health, Work & EnvironmentThe Centers for Health, Work & Environment (CHWE) play a crucial role in educating and training future leaders. They conduct research and design and implement practical solutions to occupational safety and health challenges in collaboration with their partners. The Centers collaborate with faculty, students, and community partners to advance worker health, safety, and well-being. As part of the Colorado School of Public Health, it is home to one of 10 nationwide Centers of Excellence for Total Worker Health®, the Mountain & Plains Education and Research Center (MAP ERC) and the Climate Impacts on Worker Health & Safety (CIWHS) Center.The Centers’ main offices are situated at the University of Colorado Anschutz Medical Campus in Aurora, Colorado.