The caterpillar will soon move out of the Land of Lincoln.
In this article, I will help you understand Caterpillar's decision to leave Illinois for Texas.
Caterpillar Inc., in a June 14, 2022 press release, announced that it will move its global headquarters from Deerfield, Illinois to Irving, Texas starting this year.
Caterpillar has had a presence in Texas since the 1960s across several areas of the company.
Amidst this move, Illinois remains the largest concentration of Caterpillar employees anywhere in the world.
So let’s get down to business. Let’s first explore Caterpillar Inc and its significant role in Illinois.
What is Caterpillar Inc (CAT.N)?
Caterpillar Inc. is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives.
It is a manufacturing bellwether and one of the 30 companies whose stock price influences the Dow Jones Industrial Average.
Caterpillar does business on every continent, principally operating through three primary segments – Construction Industries, Resource Industries, and Energy & Transportation – and providing financing and related services through their Financial Products segment.
In 2021, they earned sales and revenues of $51 billion.
As Caterpillar grew strength to strength year by year, it also became a pride of the Illinois manufacturing industry.
The historical significance of Caterpillar to Illinois
Caterpillar Inc has called Illinois its home state for nearly a century.
The company was based in Peoria for many decades before moving its headquarters to Deerfield, a Chicago suburb, in 2018.
This manufacturer is an icon in Illinois, with not only the Deerfield headquarters but also a massive facility in Peoria that hosts a museum of the company’s 97-year history.
Caterpillar Inc said that they value their deep roots in Central Illinois, and Peoria will continue to be our hometown.
The vast majority of their people will remain in this important region where they have many essential facilities and functions.
In particular, 17,400 Illinoisans work for the company in East Peoria, Mapleton, Mossville, Pontiac, and Decatur.
The signs were already there in the past, that Caterpillar may leave the Land of Lincoln.
Former Caterpillar CEO Doug Oberhelman warned Illinois leaders in 2012.
“Despite the fact that we have announced plans for dozens of new factories in the last few years and that our workforce in the United States has increased by more than 14,500 people in the last 10 years, we haven’t opened a new factory in Illinois in decades. Our workforce in Illinois today is at the same level it was 10 years ago,” Oberhelman said. “In short, when Caterpillar and most other companies look to locate a new factory in the United States, Illinois is not in the running for such projects. It doesn’t have to be that way.”
His main complaints were the budget deficits, high workers’ comp costs, and severe tax burdens.
And since 2012, Illinois has suffered from higher taxes and inflated spending, including the nation’s highest pension debt at $313 billion.
So you may be wondering: Why is Caterpillar moving its headquarters to Irving, Texas?
Why is Caterpillar moving its headquarters to Irving, Texas?
Caterpillar CEO Jim Umpleby said that they are moving to Irving, Texas, in the best strategic interest of the company. They want to have profitable growth as they help their customers build a better, more sustainable world.
Business analysts and real estate experts concur that Caterpillar’s move is part of a greater shift of employment out of Illinois to more business-friendly states such as Texas.
Matt Arnold, an equity analyst at Edward Jones, says: "Illinois has been losing employers based on taxation and regulations that aren't necessarily the most friendly to businesses.”
The total cost of living in suburban Deerfield, Illinois is 26% higher than in Irving, Texas. For example, Illinois commuters are paying the fifth-highest gas prices in the nation. Illinois residents also pay the nation’s highest combined state and local tax burden.
Meanwhile, Texas is becoming a global headquarters state of several, different industries, notably 54 Fortune 500 companies. Recently, Tesla, Exxon Mobil, McKesson, AT&T, and Energy Transfer moved here.
And Irving bills itself as the “headquarters of headquarters” city.
Companies are attracted to Texas’ lower crime, lower real-estate prices, lower labor costs, less stringent regulations, wider talent pool, and lack of personal and corporate income taxes.
Beth Bowman, president, and CEO of Irving-Las Colinas Chamber of Commerce and Irving Economic Development Partnership said that they make sure Caterpillar, their entire team within their global headquarters, knows that they are coming into a community that wants them and looks forward to integrating them.
Gov. Greg Abbott applauds the move to Irving as a testament to the boundless opportunity Texas has to offer. He says, “We champion a world-class economic environment fueled by the lowest business operating costs in the nation, a reasonable regulatory environment, and a lower cost of living coupled with an exceptional quality of life.”
But Caterpillar moving its headquarters to Irving, Texas, doesn't mean it will leave Illinois entirely.
It will still bolster the Illinois economy.
Here's how.
How Caterpillar will still support the Illinois economy
Caterpillar is still a bastion of the manufacturing industry in Illinois.
It has offices and manufacturing locations throughout Illinois, including an office here in Chicago.
Caterpillar’s commitment to this Midwest state is still strong, especially since Peoria is the largest employment center for Caterpillar in the world.
The company maintains a research and development campus near Peoria, as well as a foundry and a logistics center, among many other facilities.
Conclusion
Caterpillar leaving its Deerfield HQ for Irving, Texas is unfortunate. But it’s not the end of the line. The global manufacturing conglomerate reiterates its commitment to supporting Illinois people and the economy in the communities here. And it’s also an opportunity for Illinois lawmakers to start creating a more business-friendly environment to compete with states like Texas.
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