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Seth Perlman  /  AP
In July, Caterpillar reported a 91 percent surge in second-quarter earnings driven by strong sales.
updated 8/12/2010 5:35:16 PM ET 2010-08-12T21:35:16

Caterpillar Inc.., the world's largest maker of construction and other heavy machinery, said Thursday it will build a hydraulic excavator manufacturing facility in Victoria, Texas, that will employ more than 500 workers.

The facility will triple Caterpillar's hydraulic excavator production capacity in the U.S., and double the number of Caterpillar's U.S. employees making excavators.

Construction on the 600,000-square-foot structure will begin next month, with production expected to start in mid-2012.

"Based on our comprehensive review of possible locations, Victoria's proximity to our supply base, access to ports and other transportation, as well as the positive business climate in Texas made this the ideal site for this project," said Gary Stampanato, Caterpillar vice president with responsibility for excavators.

Caterpillar received a $1.18 million grant from the Texas Enterprise Fund as part of its commitment to build in the state, Governor Rick Perry said Thursday. Since its creation in 2003, the TEF has invested more than $397 million in securing job-creating projects in the state.

Currently in the U.S., Caterpillar produces two excavator models at a facility in Aurora, Ill., where it also makes wheel loaders, soil and landfill compactors, wheel dozers and components. Caterpillar also makes excavators in Belgium, Brazil, China, France, Indonesia, Japan and Russia. The new facility will manufacture the two models now made in Aurora, as well as several other models now produced in Akashi, Japan, and exported to the United States.

The expansion of excavator production in the U.S. will allow the Japan plant to shift to better serve growing demand in Asia. The Peoria, Ill.-based company recently announced plans to quadruple excavator capacity at its plant in Xuzhou, China, to serve Chinese market demand.

Caterpillar last week said it will expand a North Carolina plant that makes tight-turning skid loaders widely used in landscaping and construction, adding 325 jobs over four years. It also plans to build a new factory in Winston-Salem, N.C., producing axle units for large mining equipment that would employ about 500 full-time and contract workers. The region offered a combined $44 million in tax incentives to lure the company's investment.

In July, Caterpillar reported a 91 percent surge in second-quarter earnings driven by strong sales. From construction sites to mines, Caterpillar's black and yellow machines are a ubiquitous presence around the world. Caterpillar has said emerging markets like China are driving its better results. Developed markets like North America and Europe also saw gains last quarter, but Caterpillar expects growth to be slower there.

Shares of Caterpillar fell 86 cents to $67.85 in afternoon trading.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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