UPDATED: Caterpillar to Put Plant at Deluxe Video Site in North Little Rock, Employ 600

Gov. Mike Beebe announced Monday that Caterpillar Inc. of Peoria, Ill., will put a new motor grader production facility at the former Deluxe Video Service Inc. site in North Little Rock, bringing with it 600 jobs.

The company said it will invest $140 million in the new plant. Production of commercial motor graders is expected to begin in early 2010. Renovation will begin immediately, and management offices are already operational.

The state of Arkansas gave Caterpillar $3 million from its Quick Action Closing Fund as incentive for the plant. North Little Rock is providing a package worth more than $13 million, Mayor Patrick Hays said, though the city council must first pass the package.

The city's incentives are largely for infrastructure, including an $8 million new power substation, an $800,000 wastewater treatment facility and the waiver of building permits worth more than $30,000. Hays emphasized that the city planned to build the power substation in 2010, but has moved plans forward to accommodate the manufacturer.

The city is also providing carbon offsets worth $2.5 million, Hays said. The city receives the offsets because of its use of hydroelectric power, he said. The company will also pay reduced electrical bills over the next five years. The electricity deal is worth more than $2 million.

Company officials said that a full line of motor graders, with the exception of its 24M motor grader, will be made at the North Little Rock facility. The graders are used to build and maintain roads, highways, airports and other construction projects. Caterpillar has produced graders since 1931.

Hiring at the plant is expected to begin in mid-2009, officials said. People can apply here. The "vast majority" of hires will hail from the local area, said Jon Harrison, who will oversee the North Little Rock operation. The company previously produced graders for North America at an Illinois plant, which also produced mining trucks. The plant will now solely build mining trucks. The graders cost between about $200,000 and $400,000, Harrison said.

The company will raise the city's profile, Hays hopes.

"For North Little Rock, central Arkansas, and the state, the benefits of being the home of an internationally known Caterpillar product are many and huge," Hays said in prepared statement. "This decision is an announcement to the world that we are a major factor in the vehicle manufacturing industry."

The North Little Rock City Council last month approved a zoning change to allow the former Deluxe site, off Interstate 440 on Faulkner Lake Road, to be used as a vehicle plant. At the time, officials wouldn't name the prospective business.

A Fortune 500 firm, Caterpillar (NYSE: CAT) makes construction and mining equipment, diesel and natural gas engines and industrial gas turbines. It had reported revenue of $44.9 billion for 2007. But it has not been immune to the economic slowdown, reporting a 6 percent drop in third-quarter profit in October.

Caterpillar's plans come as it continues to cut costs in a tight credit market. In December, the company said it would lay off 814 employees in February at an engine plant in Mossville, Ill. The company also announced compensation reductions for executives, management and support staff. And it suspended merit pay increases and instituted a hiring freeze.

But Caterpillar's consolidation has been good for some areas of the country. Caterpillar announced Dec. 18 that it would consolidate its assembly, paint and testing operations from Illinois and South Carolina to Seguin, Texas, which is just outside of Austin. The move will create 1,400 jobs there.

According to the Austin American-Statesman, the Texas Enterprise Fund, created by the governor and legislature there, gave Caterpillar $10 million as incentive for putting the plant there.

The 712,000-SF Deluxe plant opened in 1995, producing videotapes before converting to DVD production and updating its name to Deluxe Media Services. It employed about 500 people. In 2006, The Rank Group, a European gaming operation based in London, sold Deluxe Media Services to ODS Optical Disc Service Inc., a subsidiary of ODS Business Services Group, based in Hamburg, Germany.