CAT®® REPAIR OPTIONS

Dealer
Dealer Webinar|
Webinar| December
December 2015
2015

CAT REPAIR OPTIONS // 1

AGENDA

• Repair Option Overview

• Tools & Resources Available
– Getting Started
• Empire Machinery
• AED (America’s North only) Repair Option 10%
Promotion Overview
• Next Steps

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REPAIR OPTION OVERVIEW

CAT REPAIR OPTIONS // 3

BURNING PLATFORM for Repair Options

Want flexibility and

competitive options;
match repair
66%
GCI customers want
to the wear engine options priced
at (or less than)
50% of new

70%
Caterpillar and dealers
have only limited offerings
in this range.

of all customers will CUSTOMERS

rebuild components in
next 3 years Repair After Failure
cost is on average

Level 1 rebearing/
reseal costs are
2.5x
higher
~ 25% than Repair Before
Failure
of new
CAT REPAIR OPTIONS // 4
Our Advantage for Aftermarket Parts Leadership

CAT REPAIR OPTIONS // 5

 980/988 Research Snapshot
Customer Powertrain Repair Timeline (Engine & Drivetrain)

• Users are pushing their powertrain rebuild past the recommended hour mark (e.g. 12,000 hrs for engine) due to up-
front costs and workload. This might lead dealers to feel that they have lost opportunities whereas users are, in actuality,
still turning to the dealers for their rebuilds, just at a later date.

Done with Cat dealer

Done with 3rd party

or in-house
Common repairs here are primarily for the Later life repairs include turbos, and various pumps and shafts for engine
engine and include turbos and water & torque convertor, valves, and electronic components of the
pumps. transmission.

There is a large (mostly missed) opportunity for lower-level repair

packages which are done in-house or through a 3rd party shop to minimize
downtime and operate at a lower hourly rate.

CAT REPAIR OPTIONS // 6

Best Demonstrated Practice – Repair Options
• 71 POPS- Top Quartile (vs. 35) ENG, DT, HYD
$70,000 • Service PAD- Top quartile
• 50% - 70% of all work sold at true flat rates (v <25)
$60,000 • 34% Techs & Floor CRC/Specialization (vs. 15%)
• Reman 32% (vs. 23%)
$50,000 • Experts in reuse & salvage

$40,000

$30,000

$20,000
Do you sell fixed price repair options
$10,000 priced at 25% to 50% of new component
on high opportunity models?
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CAT REPAIR OPTIONS // 7

 Where Does Your Dealer Want to Focus
Engines/Transmission/Torque Converter/Final Drive/Cylinders
Uncertain OWNERSHIP Longer

Primary Lower UTILIZATION Higher

Purchase
Sensitive PRICE Prefers Guaranteed
Driver(s)
Flexible TURN/AROUND Fast

• Extends life
• Before Failure
Attributes • Moderate to High usage
• 100% New Parts
Replacement
• Extends life • Core exchange • Core exchange • Core not available
• Before Failure • Before Failure • Before or After Failure • After Failure
• Moderate to High usage • Moderate to high usage • High usage • High Usage
• Rebuild/Exchg/Certified • New / Reman / Exchange • Factory new

25 – 50% 55 – 65%
Target
Price Point < 25% 60 – 80% 100%
Relative to Enhanced reuse & salvage results in lower price
Factory New point.
Level 1 Reseal & Level 2 Reseal &
Dealer Rebuild Cat Reman New
Rebearing Rebearing Plus
• 100% new parts • 100% new parts PLUS • Dealer Rebuild, Dealer • Immed availability • Immed availability
• Inspect Level 2 parts • Inspect Level 2 parts and Exchange or Certified • Full life rebuild • Long life
Rebuild
• Lower O&O Costs salvage or replace only • Before or After Failure
those not meeting reuse • Immed availability
• OTC Kits (based on • High usage
guidelines • Full life rebuild
market analysis)
Product • Lower O&O costs • Before or After Failure
• Like new warranty
• Moderate to high usage
• New, Reman or salvaged
parts
• Dealer Warranty
Extend component hours Reset component hours to zero CAT REPAIR OPTIONS // 8
Dealer Spec Sheets and Associated BUILDER Files

L1/2 RO (Job/Builder File, Spec Sheet)

Dealer inserts own

fixed pricing and
can replicate
content into own
quoting system

Available for target

models on
dealer.cat.com/repairo
ptions

Dealer customizes
with their content
and logo

CAT REPAIR OPTIONS // 9

Machine Model Status
L1/2 RO (Job/Builder File, Spec Sheet)

Phase 1 (done) Phase 2 (done) Phase 3 (in process)

980G AWH 3406 950G AYL 3126 777D FKR 3508B
980H JMS C15 950H N1A C7 777F JRP C32
988G BNH 3456 966G AXJ 3176 785C APX 3512B
988H BXY C18 966H A6G C11 789C 2BW 3516
320C PAB 3066 140H CCA 3176C 793C ATY 3516
320D FAL C6.4 140M B9D C7 793D FDB 3516B
330C DKY C-9 416E MFG 3054C 793F SSP C175-16
330/336D JBT C9 740A B1P C15 D10T RJG C27
D6N ALY 3126B 740B T4R C15 D11R 7PZ 3508B
D6R S6X C9 D11T GEB C32
D6T GCT C9
D8R 9EM 3406
D8T KPZ C-15 • Spec sheets for eng, trans, TC, FD, hyd cyl.
• Currently 80+ spec sheets w/Builder file (GBOM)
• 32 models represent 44% opportunity of 1,302 models
• Phase 4 - BCP, Phase 5 - T&E
• Dealer.cat.com/repairoptions

CAT REPAIR OPTIONS // 10

Discussion Point

• Do you have concerns with going after Level 1 and Level 2 component
repair options?
• If you have concerns with aggressively pursuing these options, in which
areas do they fall: don't believe there is opportunity, don't have the
capability to meet price point (what are the root causes), don't have the
service capacity, difficult to position/sell these levels of options, or other
concerns?

CAT REPAIR OPTIONS // 11

TOOLS & RESOURCES

CAT REPAIR OPTIONS // 12

 Tools & Resources- dealer.cat.com/repairoptions

DEALER ASSESSMENT
TRAINING
• Builder Software
• Reuse & Salvage

DEALER GUIDEBOOK

ASSURANCE
PROGRAM

SPEC SHEETS AND

MAJOR
BUILDER FILES
COMPONENT ID
TOOL

CAT REPAIR OPTIONS // 13

Salvage & Reuse Assurance Program

• New Caterpillar Salvage & Reuse “Assurance” program*

– 12 month coverage for qualified “Salvage and Reused” parts
• Parts covered at D/N, dealer responsible for all labor expense
– Sub-component or component overhaul that utilizes all applicable Caterpillar
published Salvage and Reuse procedures
• Intention is to encourage Dealers to progress in their Repair Option
programs while providing consistent risk mitigation for rebuilds
• Dealer requirements to qualify
– Complete Repair Option Assessment, with action plan for key gaps
– Provide list of published “Fixed price” component repair options
– Demonstrate Salvage & Reuse capabilities
– Dealers must “Re-Qualify” ever two years to maintain eligibility
• Additional reference material/documentation available at:
– Dealer.cat.com/repairoptions
– Program Introduction, Qualification & Claim Process, and FAQ

CAT REPAIR OPTIONS // 14

Training Opportunities
• Reuse & Salvage
Peoria – LC Course Availability:
Component Reuse Training – DPC # 41658
START DATE CLASS NUMBER
Jan. 11, 2016 120456
Mar. 14, 2016 118124
Jun. 13, 2016 118125
Jul. 11, 2016 118126

• Builder G3 Software
DPC Courses Available:

Builder G3
Module 1 DPC # 40977
Module 2 DPC # 40998
Module 3 DPC # 40999
Module 4 DPC # 41005
Module 5 DPC # 41006
CAT REPAIR OPTIONS // 15
Discussion Point

• Do you plan to leverage the Reuse & Salvage Assurance Program to help
you price more competitively?

CAT REPAIR OPTIONS // 16

GETTING STARTED

CAT REPAIR OPTIONS // 17

Repair Options Effectiveness Assessment

• Poses a variety of questions covering

many important topics regarding
readiness
• Evaluates dealer’s current repair
options parts and service capabilities
• Allows the dealer to access RO
Guidebook content based on their
capabilities

CAT REPAIR OPTIONS // 18

Repair Options Guidebook

• Developed by Caterpillar with dealer input

• Packed with valuable “how to” guidance

Documents
Documentsthe
the
implementation
implementation
process
process

CAT REPAIR OPTIONS // 19

 Getting Started

1. Identify Market Position

– Assess what areas you are losing the
business
– Understand what options competitors
are offering
– Discuss with dealer PSSRs

2. Choose Target Models

– Largest populations
– Target T200 population
– Reasonable age (hours)

CAT REPAIR OPTIONS // 20

 Getting Started

3. Establish your baseline

– Utilize Major Component ID Tool
– Current offering gap analysis

4. Fill gaps
– Work with service department
– Create dealer fixed price options
– Publish offerings

5. Sell Repair Options

– Train salesforce
– Create marketing material
– Give PSSRs target customer list

CAT REPAIR OPTIONS // 21

Major Component ID Tool

• Developed to help both dealers and Caterpillar identify the component part numbers
for the product population
• Replaces time-consuming analysis for each serial number
• Merges data from EDS, SIMS and the SIS parts manual
• Located on SISWeb->Additional Service Information-> Component Identification

Available today

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 Marketing Communications Support

www.catrepairoptions.com -Customer Landing Page

Banner Ads

ZIFT Templates

CAT REPAIR OPTIONS // 23

980H C15 Engine Repair Options

EMPIRE SOUTHWEST
 EMPIRE MACHINERY PRODUCT SUPPORT PRICING STRATEGY

• Move from Cost Plus Pricing to Value Based Pricing

• Pricing of rebuilds is assigned to a Pricing Team (removed from the

Service Department)

• Pricing Team works with Product Support Sales Reps & Parts/Service
areas to understand the cost/competitor/price/Client
 Need for Repair Options
Need too:
• Separate our capabilities from the competition
• Provide the client options to meet their requirements
• Provide the clients a better story of what’s included in our rebuilds
• Move the discussion from lowest price to best value match
• Provide the PSSRs a sales tool to assist them during and after the
discussion with the client
• Provide the rebuild shop a guide as to what was sold- scope of works-
build rules that includes parts & labor
 Voice of the Client

Voice of the Client was collected by:

• CAT Survey conducted April 2015 with clients that typically do not rebuild
engines with Empire and have 980/988 machines

• Reviewed competitive activity in our territory- more aggressive & more

competitors

• Across the counter engine parts purchases are 67.2% of total non-mining
parts purchased in 2015 (clients doing their own rebuilds/repairs)

• PSSRs need additional tools to assist in the selling process with their clients
 CLIENT FEEDBACK
• Hanson Aggregates
• “Meets their needs and provides a great comparison for competitor’s
offerings”
• Salt River Materials - *Level 3 waiting on approval
• “Prices are very competitive”
• “Additional items menu allows us to build our own option to fit our
needs”
• “Guaranteed no risk level 3 option is excellent, and would like to see this
same option for lower powertrain, and other machine models”
• “Pictures are key for understanding what's included and comparing to
competition”
• Superstition Crushing
• “Brochure offers a wide range of repair options which differentiates
Empire from the competition”
• “Would like to see exchange and certified options in this same format”
 CLIENT FEEDBACK
• S&S Concrete
•“Firm prices are very attractive”
•“Would like to see component packaged options”
•“Would like to see Field R&I option pricing”
•“Would like to see additional warranty options”
•“Wants options like this for all their machines”
• Granite Construction - *Presenting to corporate for proposal and feedback
• “Extremely pleased with the level 3 firm price for budgeting purposes…
likes that there are no surprises with the level 3 option”
• “Reason we buy Cat is due to parts availability and product support, and
this is another step in the right direction”
• BLT
• “Images are great, firm prices are great”
• “Would like to see more warranty options”
• DPE
• “Firm prices differentiate Empire from the competition and would be very
helpful in budgeting”
 Major Successes Identified
• Options provided to clients- they choose

• Client better understands what is included and great communication tool

within their organization

• Sales tool for the PSSR/ISR during and after the sales call

• Requires the competitor to define/defend their work scope

• Will improve the shop productivity by providing parts list and build rules for
the technicians (less non wrench time & reduce parts returns)

• One engine rebuild scheduled and a second pending funding (client contact
began in September)
 CAT SUPPORT
• Salvage & Reuse Assurance Program (Dealer qualification review
completed)- Very helpful

• Reviewed Repair Option Suggestions- Great idea sharing

• Ghost Images- Critical to move forward- Need additional assistance from CAT

• Rebuild Option Selector Tool- Needs some fine tuning by CAT

• 980-988 VOC Service Options Survey April 2015- Very helpful

• Lisa Peiffer and Rudy Tigani, and several others, have been very helpful
in the support of building this program- THANK YOU!
 Next Step & Additional Considerations

• Expand to complete power train for 980H and other high opportunity
models

• Need additional support from CAT for ease of obtaining ghost

images. Currently restricted and cumbersome process

• Add Value Adds to the promotional piece (dyno testing, machining

capabilities)
AED- (US & CANADA) REPAIR OPTIONS
10% OFF CAMPAIGN OVERVIEW

CAT REPAIR OPTIONS // 33

Repair Options Campaign Overview

• Awareness campaign targeting Repair Options

– Promote what repair options we have
– Value of the Dealer
– Value of Caterpillar

• New!! Customer offer

– 10% off Cat parts purchase
• Credit capped at $1,000
• Over the counter or service work applicable
• Eligible machine models include: 950, 966, 980, 988, 320, 336, D6, D8, 416, 140, 740, 777
• OTO-MLP-3385
• Only 1 coupon per customer
• Available November 1, 2015- February 29, 2016

• What is different?
– No toolbox giveaway with this quarter’s offer
– ADSD North dealers only eligible
– Utilizing www.catrepairoptions.com vs. previous landing page
• Aligns with Repair Options initiative/messaging
– Modified dates of November 1, 2015-February 29, 2016

CAT REPAIR OPTIONS // 34

10% Special Offer Redemption Process

• Customer
– Offer is emailed to a customer after they have completed a lead form on the landing page
– Customer must present special offer coupon to dealer
– All customers who complete the form will be sent to dealers as a lead through normal lead
generation process
• *Please do not simply print off this coupon or apply it to work orders as they come through your
shop ; there are a full suite of national programs available to support those efforts
• Dealer
– Submit required claim form to program owner for reimbursement monthly
– Reimbursement of 10% credit will be calculated at list, capped at $1,000
– OTO-MLP-3385
– Combinable with all programs
• Suggest promoting this with a machine inspection
– Ensure marketing department is aware of campaign and forwarding leads

• Submit claims to: Campaign questions:

– Rhonda Frederking -- Sarah McDonnell
– (309) 675-4088 -- (309) 578-7852
– Frederking_Rhonda_M@cat.com -- McDonnell_Sarah_S@cat.com

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 Repair Options Campaign Marketing Materials

• Corporate website to direct customers

– www.catrepairoptions.com
• Direct mail template
• Email / ZIFT templates
• Web banners
• D6 Repair Options brochure
– Media Number: PEDJ0216
– Dealer customizable D6 brochure also available
– Dealer.cat.com->Cat Product Support Marketing
Campaigns->Parts Promo 4th Quarter- Repair Options

CAT REPAIR OPTIONS // 36

NEXT STEPS

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Next Steps

• Determine where repair options fits within you dealer

growth plan

• Get Started:
– Utilize tools available (RO assessment, guidebook, training) to:
• Identify priority models
• Create baseline/conduct gap analysis
• Determine operational readiness
• Complete Assurance program qualification
• Fill gaps on high opportunity components / repair levels
• Price and market offerings
• Train salesforce
• Develop marcom strategy/utilize available campaign tools

CAT REPAIR OPTIONS // 38