CHAMPAIGN, Illinois (AP) -- Caterpillar executives talk a lot these days about how 2007 had the makings of a disaster. Its truck engine and construction equipment sales in North America plunged and the sluggish U.S. economy offered no hope of a quick turnaround.
Yet the Peoria, Illinois-based company had its best year ever, with profits of $12.3 billion (euro7.79 billion) and almost $45 billion (euro28.49 billion) in revenue, thanks largely to overseas sales.
''I cannot think of a time in my 27 years with this company that I could rattle off a list of negatives like that about business in the United States, and follow it with the statement 'We're pleased to report record sales and revenues and record profit for the year,''' Caterpillar investor relations manager Mike Dewalt told analysts.
U.S. heavy-equipment makers have taken refuge in growing economies overseas to ride out the downturn in the American economy. Growing economies abroad have kept American-made industrial and agricultural heavy equipment moving in China, India, the Middle East and elsewhere -- even as U.S. sales have slowed.
Companies such as Deere & Co. have added factories abroad, or taken other steps to increase their international profiles on the promise that a development boom will continue for years.
Deere opened a new tractor plant in Brazil last year to serve expanding farm economies there and in Argentina. Just this week, Caterpillar announced plans to spend $500 million (euro316.54 million) to increase its 50 percent ownership of a Japanese joint-venture with Mitsubishi Heavy Industries Ltd. to 67 percent. And the deal gives Cat the option to buy the rest of the company, Shin Caterpillar Mitsubishi Ltd., which makes loaders and hydraulic excavators.
During past economic slowdowns, few if any of these American heavy-equipment manufacturers would have been diversified enough to do much besides try to ride it out, Morningstar analyst John Kearney said.
Companies that make construction equipment have been especially hurt by the stagnant American housing market. Caterpillar blamed its 11 percent drop in 2007 North American machinery sales in large part on the slowdown in new-home construction. But a lot of overseas economies, most in developing countries, are riding a wave of new construction that is increasing profits at American industrial firms.
''Very large equipment-intensive projects in the Middle East and Russia appear likely to continue strong growth in those regions while China and India remain strong,'' Citibank analyst David Raso wrote in a January report.
Also, Brazil, Argentina and several other developing countries are becoming agricultural powerhouses. Brazil and Argentina together produce almost half of the world's soybeans, and just over a fifth of the planet's wheat grows in China.
That budding prosperity requires expensive bulldozers, backhoes, tractors and mining equipment.
Moline, Ill.-based Deere, whose biggest business is agricultural equipment, is a major seller in South America. In its most recent quarter, Deere's profit was up 55 percent to $369.1 million (euro233.67 million). The biggest reason? A 37 percent increase in sales outside the U.S. and Canada.
And mining-equipment manufacturer Joy Global Inc., based in Milwaukee, this month said its profit rose 19 percent in its most recent quarter to $71.1 million (euro45 million). Just over half of its sales were outside the U.S.
Similarly, crane maker Manitowoc Co. earned $99.2 million (euro62.8 million) in its most recent quarter, nearly double the year-ago numbers. The company didn't break out its results by region, but credited the increase to construction overseas -- particularly the building of new power plants, mines and other energy-production infrastructure. The Manitowoc, Wisconsin-based company has a heavy presence in China and other fast-developing countries.
''Over 45 percent of our business is in energy-related markets,'' Manitowoc President Glen Tellock told analysts in February. ''And that is I think what gets lost a lot of times in the noise when you look at the residential and the commercial construction.''
And Caterpillar in January reported its record 2007. Its profits were up 4 percent and sales were up 8 percent for the year. In the fourth quarter, when bad economic news was weighing on many American companies, Caterpillar chalked up a $975 million (euro617.24 million) profit, 13.6 percent better than a year earlier.
The company credited double-digit sales increases for truck engines and construction equipment in Asia, the Middle East and Africa.
Caterpillar also noted that almost 60 percent of its fourth-quarter sales were outside North America, a 10 percent increase from the year before. And the company expects that figure will increase this year.
Caterpillar has a significant and growing manufacturing presence overseas, but a lot of those exported products are made in U.S. factories running near capacity, according to Caterpillar Group President Edward J. Rapp.
''I take can take you to Lafayette, Indiana,'' he said in an interview, referring to a Caterpillar heavy-engine plant. ''It sure doesn't feel like recession.''
The manufacturers all say they expect overseas growth to continue, insulating them from American economic weakness.
And analysts think it's a solid strategy.
Dozens of countries are on the cusp of economic prosperity, experts say, and the energy business is in need of billions of dollars of investment to support that demand.
Stock prices across the industry seem to back up that judgment. Since beginning of 2007, Deere's share price has increased almost 80 percent, Joy Global is up just shy of 50 percent and Caterpillar's about 30 percent.
Morningstar's Kearney said it would take a worldwide recession to derail Caterpillar's strategy, and even then, ''it's probably not the end of the world for them.''
Last month when Deere executives told Wall Street analysts that they expect 2008 to be a year of ''exceptional financial performance'' and 17 percent sales gains -- outward optimism that doesn't always come easy to staid Deere -- Bear Stearns analyst Ann Duignan couldn't help but laugh.
''It's probably the first time I've ever heard Deere say on a conference call that their outlook was very encouraging,'' she said. ''Things must be pretty good.''
