Caterpillar Inc. (CAT) Chief Executive James Owens said Wednesday additional spending on U.S. infrastructure projects is needed because the current economic stimulus program isn't sufficient to jump-start the slumping construction industry.
Owens, a member of the Obama administration's Economic Recovery Advisory Board, said the $70 billion allocated for construction projects in the $787 billion stimulus legislation isn't enough to offset the steep reduction in private sector spending on construction.
"We need a bigger and sustained stimulus," Owens said to reporters after participating in a panel discussion on the global economy organized by the Chicago Council on Global Affairs. "There's a lot of the excess [construction] capacity that could be put to work."
The collapse of the U.S. housing market, plunging prices for mined commodities and tightening credit conditions have choked off demand for Caterpillar's bulldozers, excavators and other machinery.
The Illinois company expects 2009 sales to fall at least 30% from 2008. In recent months, Caterpillar has shed about 25,000 employees, closed assembly plants and cut executive compensation to align expenses and production to reduced sales.
Owens said he has asked Caterpillar managers to assemble a list of large infrastructure projects in the U.S. that are planned but not funded. He intends to present the projects to the economic recovery panel to illustrate the shortcomings of the stimulus bill as it relates to highways, bridges, railroads, energy transmission and other infrastructure.
"Now would be a meritorious time to pull those projects forward," said Owens, who predicted high levels of unemployment will persist even after U.S. economic growth resumes at a tepid 2% rate in 2010. "I think unemployment grows next year."
Owens also warned against protectionist trade legislation as a reaction to the recession. He said the "buy American" provisions in the stimulus bill undermines the economic recovery by triggering similar restrictions in other countries.
Caterpillar is a major exporter of U.S.-built machinery and has lobbied in recent years for U.S. free trade agreements with other countries that eliminate tariffs.
"Protectionism will dramatically worsen this recession and continue it," he said.