When Jim Owens, the CEO of Caterpillar Inc , retires next month, it will mark the end of a long career bookended by corporate crises and displays of a tough-love approach to leadership and the company's workforce.
In a company that has had only 12 leaders in its 85-year history, Owens, 64, will be remembered as one of the best, analysts say.
He is seen as second only to Don Fites, the legendary top executive who vanquished the construction and mining equipment company's once-mighty unions, reorganized the company's sclerotic corporate structure and revamped its hopelessly dated production system in the 1990s.
But he will also be seen as an executive who was quite prepared to make the hard decisions to close plants and fire workers if it meant the company could survive and thrive in the longer run.
He finished the job Fites began, said Alex Blanton, an analyst at Ingalls & Snyder who has followed Caterpillar since the early 1970s, before Owens even joined the company.
He's also probably the smartest guy who's ever been in the job, with a broad view of the world. And he's a great leader. He doesn't dictate. He gets people to follow him because they want to.
Yet Caterpillar very nearly lost Owens early on in what turned out to be his 38 years with the company, when he was asked to audit Caterpillar's operations and came away discouraged by the inefficiency, infighting and utter lack of focus he found.
The company was bloated, Owens told the Reuters Manufacturing and Transportation Summit this week.
We had a lot of functionality, not much business savvy and flexibility. We had a very rigid cost structure and a very strong union stranglehold on our ability to maneuver.
A thoughtful, soft-spoken North Carolina native who never lost his Southern drawl, Owens joined Caterpillar in 1972, a year before he was awarded his PhD in economics.
He intended to stay with the Peoria, Illinois-based company for just a few years and then move on. That exit strategy seemed to be only temporarily delayed when Caterpillar transferred him in 1975 to Geneva, Switzerland, a stimulating place he remembers today as the closest thing to an adult Disneyland a person can find.
Brought back to the United States in 1980, he was asked to lead a small team charged with looking at everything Caterpillar did and recommending what should be kept in-house and what should be outsourced.
At the time, Caterpillar was in deep trouble. Fast-rising Japanese rivals like Komatsu Ltd <6301.T> were producing track-type tractors -- a flagship company product -- 30 percent more inexpensively than Caterpillar. The result: Caterpillar was losing $1 million a day.
Owens discovered the company could buy many of the things it made from outside suppliers at dramatic savings and urged that a half-dozen plants be closed. His recommendations were heeded. His reward? He was ostracized by half the company, including many in the higher ranks.
We didn't work well together, he said. I frequently got called the Benedict Arnold of the company for doing this kind of analysis that closed down plants.
It was a rough patch. The only reason he did not bolt, Owens says, is that he was simultaneously undergoing a domestic restructuring. Being out of work while he was getting divorced seemed a bad idea. He decided to tough it out.
During the next decade, Owens spent much of his time overseas, in China and Indonesia, where those who resented his earlier efforts were not so thick on the ground. These were the wilderness years, but also a time when Owens made contacts with up-and-coming bureaucrats in fast-growing places like China who would later prove crucial as Caterpillar grew there in later years.
His next big stateside assignment came in 1990, when he was sent to San Diego to figure out a way to make Solar Turbines, an underperforming business Caterpillar had acquired in 1981, look attractive enough to sell.
Owens decided the gas turbine maker could be turned around -- and he convinced Fites to let him try. Last year, the unit accounted for nearly 10 percent of Caterpillar's revenue and boasted 20 percent operating margins thanks to operating improvements initiated by Owens during his time there.
But Owens' biggest test came fairly late in his career, during the last 18 months as CEO.
During his first four-and-a-half years at the helm, Caterpillar's sales more than doubled from $23 billion in 2003 to $51 billion in 2008 and earnings more than tripled from $1.56 a share to $5.66 a share in 2008.
Then the financial crisis and the global recession sent Caterpillar's global sales skidding nearly 40 percent in the fall of 2008. Owens responded quickly, cutting more than 30,000 full-time and contract jobs worldwide, cutting his own pay by 50 percent and freezing wages across the company.
The result: With the exception of the first quarter of 2009, when Caterpillar booked a massive charge to pay for the job cuts, the company maintained its profitability throughout the downturn. Just as importantly, it maintained both its dividend and credit rating.
Caterpillar used to be a company that made a lot of money in good times and lost money in bad times, said Eli Lustgarten, an analyst at Longbow Securities.
Under Owens, they were able to become far better downside managers than they have ever been in their history.
WORK TO DO
To be sure, Owens' successor, Doug Oberhelman, another lifelong Caterpillar employee, has work to do, proof that Owens was not able to tackle all the company's problems during his six years in the top spot.
Its supply base is still too sprawling and flat-footed. During Owens' first four years at the helm, the company could not keep up with demand for some products because of bottlenecks -- leaving orders on the table for its rivals to enjoy.
If your suppliers can't keep up, then you can't keep up, said Blanton. You have got to make sure that your supply chain can feed you on time with what you need.
But Owens seems confident he is leaving the company in better shape -- and in higher regard on Wall Street than when he took over.
Back in 2006, Owens told Reuters that he was frustrated with the way investors were valuing the company, which he believed had become far more adept at handling economic cycles than in the past.
As a result of its performance in the recent downturn, Owens thinks he has changed minds on Wall Street and that Caterpillar is more fairly valued than before the downturn.
They're getting better, he said this week, referring to analysts who set price targets. But he quickly added, No CEO is ever happy with his valuation. You wouldn't be a good CEO. You aspire to be better.
(Reporting by James B. Kelleher, editing by Matthew Lewis)