Global Supply Chain

MAKING PROGRESS POSSIBLE

Jim Waters Vice President Caterpillar Production System Division Caterpillar, Inc.

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Yellow Iron and Clean Power

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Products and Services

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Strong Growth, Promising Opportunities

$0B

$10B

$20B

$30B

$40B

$50B

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07*

*Based on the midpoint outlook contained in the July 20, 2007, earnings release.

1990 – 2006 Sales & Revenues CAGR = 8.4% 1990 – 2006 Profit per Share CAGR = 20.5%

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Global Leadership

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Team Caterpillar

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Caterpillar Production System

Chase Waste: Drive for the continuous and relentless elimination of waste in all processes, with priority on safety and quality­related wastes Pull: Use Pull replenishment to only build what is needed, when it is needed, in the amount it is needed Make Value Flow: Simplify processes to quickly identify problems and increase process efficiency Drive Standard Work: Standardize tasks and utilize common processes as the foundation for Continuous Improvement Even the Load: Balance the workload to level production and reduce process variability Validate Our Processes: Prove the process and technology work before introducing them into production

Operating System

Put Safety First: Build a Safety First culture by placing the highest priority on eliminating safety­related waste Take the Customer’s View: Make decisions based on the customer’s view and the long­term Caterpillar strategy, even at the expense of near­term goals Go, See, Act: See it first­hand to ensure thorough understanding Stop to Fix: Cease production when a problem occurs to correct it in process; this means we build in­station as planned Develop People: Identify, attract and develop people and teams to build Caterpillar’s long­term capability

Cultural System

Actively Listen: Conduct process improvement dialogues at all levels, demonstrating the value people’s ideas by quickly implementing them Make it Visual: Build the visual workplace so no problems are hidden and opportunities can be realized Align the Targets: Deploy cascaded metrics and targets across the value chain aligned to the enterprise strategy supporting People, Quality, Velocity and Trough Act Decisively: Make decisions by consensus, thoroughly considering all options, and implement with a sense of urgency

Management System

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§ Fears of global competition

§ Shifts toward protectionism and isolationism

§ Mischaracterizations of trade and globalization

§ Energy and sustainability

Dangers on the Horizon

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Energy and Sustainability – Inextricably Linked § Demand outstripping supply – prices impacting

competitiveness § Economic growth, security and competitiveness at risk § Robust, comprehensive energy policy essential:

– Stimulate TECHNOLOGY development to increase efficiency

– Expand DOMESTIC production and supply – clean coal – Encourage economic and environment SUSTAINABILITY

§ Sustainability at Caterpillar – compliance / business opportunity

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§ $10.5B in exports from the United States

§ Global production supporting 48,000 domestic jobs

§ Exports to China up 40%

§ More than 5,000 new U.S. jobs created

Competing – and Winning

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§ 1 in 5 American jobs is related to trade

§ 31 million Americans depend on imports and exports for their jobs

§ One quarter of U.S. GDP is directly linked to trade

§ Unemployment has dropped significantly as we’ve liberalized trade

Trade and American Jobs

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By the Numbers

§ 40% higher global prosperity

§ Global economic welfare up $613B

§ Average family income up $10,000

§ 300 million people lifted out of poverty

§ 95 percent of the world’s population outside the U.S.

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§ Creativity and resiliency – culture of entrepreneurship

§ Vibrant, market­based economy

§ Technical expertise – research, engineering, innovation

§ Tradition of openness, flexibility, government restraint

Strengths of American Business

The Business Community Must…

Build bridges, not walls

Educate policymakers

Spread the good word

Encourage bipartisanship