Komatsu Ltd., the giant Japanese construction equipment maker that is challenging Caterpillar Tractor Co. around the world, plans to carry the battle to the American company's home turf.
Komatsu announced today it is buying an abandoned factory here for $3.5 million and by next March expects to begin assembling heavy construction equipment, such as bulldozers and dump trucks, to increase its share of the U.S. market, largely at Caterpillar's expense.
Komatsu President Shoji Nogawa said there is "no question" that his company's share of the U.S. market will go up even though production facilities in this country will cut into the benefits it receives from the widening differential between the high dollar and the lower Japanese yen.
Nogawa cited "world customer satisfaction" as the reason for his company's growing success rather than the dollar-yen differential.
"Good for them," commented a spokesman for Caterpillar, which has blamed an overvalued dollar and undervalued yen for much of the sharp fall in its overseas sales. Caterpillar, the world's largest construction equipment maker, lost $773 million in the last two years, much of it attributable to the loss of sales in other countries. Export sales fell from $3.5 billion in 1981, when the dollar began its climb, to $1.6 billion in 1983.
A high dollar increases the cost of American-made products in overseas markets, while Japanese products cost less because of the lower value of the yen.
"Obviously if they are going to compete for a manufacturing base in the United States, it is going to put their U.S. costs on an equal footing with Caterpillar, which is to our advantage," the Caterpillar spokesman said from the firm's Peoria, Ill., headquarters.
Komatsu, ranked second in world construction equipment, has cut into Caterpillar's sales all over the world. Komatsu's export sales grew steadily until 1983, but dropped last year because of a cutback in construction in the Middle East and among the debt-burdened Third World nations.
Those developments make the U.S. market, now dominated by Caterpillar, of increased importance for Komatsu. It is unclear, however, just how much production Komatsu will actually do in its new 320,000-square-foot Chattanooga plant.
Nogawa, who flew here from Tokyo for the announcement, said he doesn't expect Komatsu to make any engines here, and the amount of American-made components "depends on the quality and cost of what we can produce here.
"It will probably change gradually," Nogawa said, indicating the company plans to begin by assembling Japanese-made components at first and phase in made-in-America parts later.
With the new American plant, however, Kamatsu hopes to take away more of the construction equipment market from Caterpillar. The Japanese company's American sales more than doubled last year, from $140 million to $300 million, while its market share inched up from 5 percent to around 7 to 8 percent.
With a U.S. plant for easier supply of spare parts, Komatsu officials believe they can strengthen their network of dealers in this country, which has grown to 70 this year from 50 less than a year ago.
The U.S. plant, moreover, serves as a hedge against possible protectionist import restrictions by the United States against a flood of Japanese products. Nogawa acknowledged that fear of protectionism played "a pretty big" role in his company's decision to locate a plant in the United States.