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The buzz at Conexpo may not be about Cat technology

By Ken Korane | March 3, 2017

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Cat-wheel-loaderIn a case of extremely poor timing, FBI and IRS agents raided Caterpillar’s headquarters five days before Conexpo opens. For the engineers who work there, it will be a shame if the actions distract visitors from the company’s technology message and new products—particularly if the blame lies with company executives.

Caterpillar is not only the world’s largest construction-equipment manufacturer. It has long been highly regarded as an engineering leader and a strong proponent of fluid-power R&D. Cat’s hydraulic-hybrid excavator (which we featured in Fluid Power World’s September issue at www.fluidpowerworld.com/engineering-groundbreaking-hydraulic-hybrid) and driverless, autonomous mining trucks are but two examples of the company forward-looking innovations.

We were expecting more of the same coming out of Conexpo/IFPE. With 40 machines on display in two different exhibit areas totaling 60,000 sq.-ft, Caterpillar’s presence is expected to be among the largest at the show. But in all likelihood that will be overshadowed by news of federal agents serving search warrants at the company’s Peoria offices and other Illinois facilities.

While the reason for the raid was uncertain, speculation centers on a dispute over $2 billion in unpaid taxes linked to a Swiss subsidiary. According to Associated Press, filings with the Securities and Exchange Commission and a 2014 U.S. Senate report said Cat paid PricewaterhouseCoopers $55 million to devise a tax-avoidance strategy. In it, Caterpillar transferred the rights to profits from its lucrative parts business to a wholly controlled unit in Switzerland, even though no employees or businesses were moved to Switzerland. And income was taxed at a rate of 4 to 6%, rather than at 35% in the U.S. The AP noted that in an SEC filing last month, Caterpillar was “vigorously contesting” an IRS notice that it owed back taxes due to the Swiss affiliate.

In the worst case, Cat officials could face criminal convictions and the company could lose the ability to bid on federal contracts. That would be disastrous if the Trump administration moves ahead with $1 trillion in proposed infrastructure spending. According to news reports, a Caterpillar spokeswoman said the company was cooperating fully with law enforcement officials.

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Tagged With: Conexpo/IFPE
 

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