February 2011

Caterpillar extends its reach

Bucyrus purchase accelerates industry plans

By Eavan Moore

Bucyrus-purchase 

Caterpillar's purchase of Bucyrus will not only increase its range of mining shovels but will expand its access to mining markets | Photo courtesy of Caterpillar Inc.


With its US$7.6 billion purchase of Bucyrus International, Caterpillar Inc., the Peoria, Illinois-based manufacturer, has not only managed to increase its foothold in mining equipment but also its footprint, becoming the largest supplier of mining equipment in the world.

According to Caterpillar, the company’s expansion into mining equipment is a response to its customers’ needs and the demand for commodities in emerging economies. “For several years, mining customers have been asking us to expand our range of products and services to better serve their increasingly complex requirements, said Doug Oberhelman, Caterpillar president and CEO, in a statement. “This announcement says to those customers, we heard you loud and clear. It is a strong statement about our belief in the bright future of the mining industry.”

It is also a major step toward consolidation among mining equipment suppliers. Bucyrus acquired the mining division of Terex Corporation last February and offers a large product line, including hydraulic shovels, drills and draglines. This complements Caterpillar’s trucks, dozers, engines and components. Caterpillar’s own planned line of mining shovels, announced last summer, is now shelved as the company assesses the Bucyrus shovel program.

Paul Johnson, general manager for technical services at Osisko Mining Corp., said he sees a direct benefit from the merger. “When Bucyrus purchased Terex, we were not sure if they would continue using the Cat dealer for servicing our shovels, and we were worried about that,” he explained. “Bucyrus has no suppliers in the northwest area of Québec. This announcement makes our life easier because now we know that Caterpillar will support and supply all the parts for our shovels and such. So for us, it’s very good news.”

But Caterpillar’s move could have downsides for mining operators, said Tim Skinner. A member of the Surface Mining Association for Research & Technology (SMART), he predicts that further consolidation among original equipment manufacturers (OEMs) will stifle technological innovation, integration and automation.

“One can speculate that there will be two large manufacturers, with a few smaller ones,” said Skinner. “Innovation is most active in a diverse and open environment. We have started to see some very capable, advanced and well-architected solutions, especially from the ‘smaller’ OEMs, but these will likely be lost as the creative OEMs disappear with the consolidations.”

“The large manufacturers will attempt to build their own highly protected proprietary systems, providing limited integration and interoperability with other technologies,” Skinner explained. “The mine operator will not be allowed access for their own innovative operational developments. Automation technology will be less innovative, harder to work with, and more expensive.”

Dan Bozung, corporate public affairs representative at Caterpillar, responded that Caterpillar has a “strong history of open architecture for mining information systems that extends nearly 20 years to its first mining technology product-VIMS (Vital Information Management System).” He pointed out that, at the time, the protocol itself was made available to third-party software providers.

“Caterpillar’s mining information systems interact with all commercial mine planning systems available on the market through standard industry accepted interfaces,” Bozung said. “Caterpillar has a long history with drill and shovel OEMs to provide interfaces, he added. “This will continue as customers have a broad range of equipment from a large number of suppliers and seek integrated solutions.”

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