Caterpillar to spend $1 billion on a compact equipment plant; $85.5 million in local incentives hinge on keeping 1,950 jobs

Caterpillar said on Wednesday it will invest about $1 billion in a new factory in Sanford, North Carolina, to expand production of compact track loaders and telehandlers, according to the company's press release. "As demand for compact equipment continues to increase, we're investing to better serve this growing segment," said Rod Shurman, president of Caterpillar's construction industries group. The company gave no construction schedule, production start date or capacity figure. Reuters also reported the plan.

Caterpillar shares closed at $810.67, down 1.9%, according to Nasdaq, a move too small to pin on a $1 billion project for a company worth about $373 billion.

The number behind the number: jobs kept, not jobs added

Local governments put up the incentives. The Lee County commissioners approved tax rebates worth up to $46 million and the Sanford City Council approved a separate $39.5 million package, for up to $85.5 million over 12 years, WRAL reported. The county payments equal about 80% of the property taxes Caterpillar pays, and depend on the company meeting its targets.

Those targets are to invest the $1 billion and keep at least 1,950 full-time jobs, with average pay of about $65,500. According to WRAL, Caterpillar's existing Sanford plant already employs about 2,000 people, including 600 hired this year. So the headcount commitment is roughly the workforce Caterpillar has now. The incentives buy a new plant and the retention of those jobs in Lee County, rather than a promised wave of new hiring. Spread across the 1,950 required jobs, the full package is worth about $43,800 per job over 12 years.

Caterpillar's release speaks of creating "opportunities for advanced manufacturing careers" but gives no hiring number, and says the plant will lean on automation and digital production systems. Readers should not take the $1 billion headline as a jobs figure.

Who buys these machines

Compact track loaders and telehandlers are the workhorses of small contractors, site-prep crews, landscapers, farms and material yards. Caterpillar's decision to add capacity signals it expects that demand to hold, though with no production date, the plant will not change what a contractor pays or waits for a machine anytime soon.

141,913 independent construction and contractors are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 12,896 in TX, 12,642 in CA, 11,414 in FL. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

North Carolina alone has 5,133 independent contractors in the CheckThisBiz count, the home market for a plant in Sanford. For most of them, a compact loader is financed rather than bought outright, which puts equipment costs next to interest rates as the number to watch; our small-business section tracks both.

Sources: Caterpillar press release; WRAL; Nasdaq; CheckThisBiz business counts. The per-job incentive figure is our calculation. This is market information, not investment advice.