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CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S MICHELLE CARUSO-CABRERA INTERVIEWS JAMES OWENS, CHAIRMAN & CEO, CATERPILLAR, ON CNBC'S "CLOSING BELL" TODAY

CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S MICHELLE CARUSO-CABRERA INTERVIEWS JAMES OWENS, CHAIRMAN & CEO, CATERPILLAR, ON CNBC'S "CLOSING BELL" TODAY

WHEN: Today, Tuesday, October 21st at 4:13 PM ET

WHERE: CNBC's "Closing Bell"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Caterpillar Chairman & CEO James Owens, on CNBC'S "Closing Bell" Today.

All references must be sourced to CNBC.

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MICHELLE CARUSO-CABRERA: MR. OWENS THANKS FOR JOINING US.

JAMES OWENS: THANK YOU MICHELLE. WELCOME TO PEORIA.

CARUSO-CABRERA: THE GLOBAL ECONOMY, HOW DOES IT LOOK FROM WHERE YOU STAND?

OWENS: WELL OF COURSE WE ARE IN CHOPPY WATERS RIGHT NOW, BUT AS YOU JUST NOTED, WE HAD A PRETTY GOOD QUARTER IN TERMS OF TOP LINE SALES AND REVENUE GROWTH, ALL TIME RECORD LEVELS, BUT OUR EARNINGS WERE OFF BY 6%. BUT OVERALL WE ARE SEEING RECESSIONARY CONDITIONS CRETAINLY IN THE KEY MARKETS WE SERVE, ACROSS ALMOST ALL OF THE OECD COUNTRIES. THE UNITED STATES, WESTERN EUROPE, JAPAN. AND DESPITE THAT, WE ARE SEEING PRETTY GOOD GROWTH CONTINUING, CERTAINLY THROUGH THE THIRD QUARTER OF THIS YEAR IN ALL OF THE EMERGING MARKETS. OUR SALES WERE UP MORE THAN 30% IN ASIA PACIFIC, UP 38% IN FACT. UP 32% IN LATIN AMERICA AND 11 IN THE EUROPE AFRICA MIDEAST REGION. SO THE EMERGING MARKETS IN THAT THEATER OFFSET THE DOWNTURN IN WESTERN EUROPE. SO IT'S A VERY MIXED BAG OUT THERE.

CARUSO-CABRERA: DO YOU EXPECT THAT TO CONTINUE THOUGH? BECAUSE THERE'S A LOT OF CONCERNS THAT CHINA FOR EXAMPLE -- I HAVE SEEN ONE ESTIMATE THAT CHINA SLOWS DOWN TO 6% GDP. DO YOU THINK THAT'S POSSIBLE AND WHAT WOULD THAT DO TO YOUR COMPANY?

OWENS: I THINK IT'S POSSIBLE, BUT OUR EXPECTATION IS THAT THE EMERGING MARKETS OF THE WORLD WILL CONTINUE TO HAVE GROWTH THAT'S 2.5 TO 3 TIMES GREATER THAN THE OECD WORLD NEXT YEAR. BUT, WE THINK IT'S GOING TO BE AROUND 6% THIS YEAR AND DROP TO AROUND 5.5 NEXT YEAR. THAT WOULD BE COLLECTIVELY FOR ALL OF THE DEVELOPING COUNTRIES OF THE WORLD. CHINA ITSELF WE THINK THEIR GROWTH RATES WILL HOLD IN THE 7.5 TO 9% RANGE.

CARUSO-CABRERA: TELL US WHAT ARE THE ISSUES YOU ARE FACING, WHEN YOU SELL THESE VERY EXPENSIVE PIECES OF EQUIPMENT THAT PEOPLE USE, OR COUNTRIES USE, TO BUILD THE INFRASTRUCTURE. IS IT THAT THERE IS LESS DEMAND OR YOU CAN'T EXTEND CREDIT TO THEM BECAUSE OF THE CRUNCH IN THE CREDIT MARKETS? WHAT'S THE ISSUE?

OWENS: WELL I DON'T KNOW THAT THERE IS AN ISSUE ON SALES. IN FACT, THIS YEAR, 2008, DESPITE ALL THESE RECESSIONS ACROSS THE INDUSTRIAL WORLD, WE WILL TOP $50 BILLION IN SALES SO WE'LL BE THERE TWO YEARS AHEAD OF OUR SCHEDULE. WE WILL HAVE ALL TIME RECORD LEVEL OF SALES THIS YEAR. AND OUR ORDER BACKLOG, PARTICULARLY FOR THE GLOBAL MINING INDUSTRY, GLOBAL OIL AND GAS INDUSTRY IS STILL VERY STRONG AND WE FULLY EXPECT THAT STRENGTH TO CARRY INTO 2009. NOW, THIS SLOW DOWN IN THE DEVELOPED COUNTRIES WILL ADVERSELY AFFECT THE EXPORTS FROM KEY DEVELOPING COUNTRIES, NAMELY CHINA, INDIA AND MANY OTHERS. AND THAT WILL AFFECT THEIR ECONOMIC GROWTH AND COMMODITY MARKETS IN GENERAL, MOST OF THE COMMODITIES ARE PRODUCED TODAY IN EMERGING MARKETS WITH LOWER COMMODITY PRICES THAT WILL ADVERSELY AFFECT THEIR CASH FLOWS IF YOU WILL. BUT THE BIG DIFFERENCE IN THIS CYCLE FROM LAST CYCLE, FROM PREVIOUS CYCLES THAT WE HAVE BEEN THROUGH, IS THAT THESE DEVELOPING COUNTRIES COLLECTIVELY HAVE A NET CASH POSITION OF AROUND $1.5 TRILLION. SO THEY CAN AFFORD TO CARRY ON WITH MAJOR INFRASTRUCTURE PROGRAMS AND DEVELOPMENT INITIATIVES IN THEIR COUNTRIES THIS TIME AROUND, NOT BEING DEPENDENT ON A LOAN FROM NEW YORK OR LONDON.

CARUSO-CABRERA: STILL, FOR THE FIRST TIME SINCE DECEMBER OF 2005, THE PRICE OF COPPER FELL BELOW $2 A POUND. A LOT OF FOLKS WOULD ARGUE THAT THAT'S SENDING A BIG SIGNAL ABOUT WHAT'S GOING TO HAPPEN TO COMMODITY PRICES. WHAT KIND OF REVENUES THAT THOSE COUNTRIES ARE GOING TO BRING IN. LIKE, FOR EXAMPLE, IN BRAZIL WHERE THEY BRING IN A LOT OF MINERAL PRICING. DOES IT WORRY YOU TO SEE THE DROP IN COMMODITY PRICES?

OWENS: WELL OF COURSE IT DOES. AND WE WATCH THAT VERY CLOSELY. KEEP IN MIND IN THIS CYCLE THAT STARTED BACK IN 2003, COPPER STARTED AT ABOUT 61 CENTS A POUND. IT'S GONE AS HIGH AS $4. WE THOUGHT IT WENT WAY ABOVE SUSTAINABLE LEVELS AT THAT PRICE AND WE FULLY EXPECTED IT TO PULL BACK. WE THINK. INVESTMENT, YOU KNOW IF IT DROPS BELOW $1.30 PER POUND, I THINK A LOT OF NEW INVESTMENT IN THE MINING INDUTRY COMES OFF THE TABLE AND WILL BE DELAYED. BUT AS LONG AS IT STAYS NORTH OF $1.30, WE THINK THE ESTABLISHED COPPER PRODUCERS OF THE WORLD, THOSE THAT HAVE GOOD ORE BODIES, WILL CONTINUE TO PRODUCE AND BE PROFITABLE IN FACT, AT THAT LEVEL. WHAT WE FIND INTERESTING, I MEAN WE'VE BEEN CRANKING OUT TRUCKS AS FAST AS WE COULD BUILD THEM. AND THE FLEET OF TRUCKS OPERATING IN THE MINING INDUSTRY TODAY, ALMOST 60% OF THEM ARE MORE THAN 10 YEARS OLD. SO THERE'S THE BIG BACKLOG OF DEMAND THAT NEEDS TO BE REPLACED AND WE THINK THAT INDUSTRY LONG-TERM HAS GOOD LEGS. I THINK PEOPLE --

CARUSO-CABRERA: I'M SORRY, THERE IS A LITTLE BIT OF A DELAY. I DON'T MEAN TO INTERRUPT. YOUR CFO ON "THE CALL' TODAY SAID HE SAW A HUGE DIFFERENCE THIS WEEK FROM LAST WEEK WHEN IT COMES TO CREDIT CONDITIONS. CAN YOU ELABORATE AND ARE YOU SATISFIED WITH WHAT THE U.S. GOVERNMENT IS DOING IN TERMS OF FREEING UP THE CREDIT MARKETS?

OWENS: I'M VERY PLEASED WITH WHAT THE U.S. TREASURY AND FEDERAL RESERVE HAS DONE. AND THAT COMBINED WITH THE COOPERATIVE EFFORTS OF EUROPEAN AND OTHER CENTRAL BANKERS AROUND THE WORLD, A CONCERTED EFFORT TO REDUCE INTEREST RATES AND TO PUT LIQUIDITY INTO THE SYSTEM I THINK WILL WORK. YOU KNOW YOU HAVE TO PUT THE FIRE OUT WHEN THERE IS A PROBLEM. A LIQUIDITY CRISIS AS WE HAVE HAD AND BEFORE YOU CAN MOVE ON WITH STABLE MONITARY POLICY, FISCAL POLICY FOR THE FUTURE. SO I THINK IT IS BEGINNING TO WORK. LIBOR RATES ARE BEGINNING TO COME DOWN. ONLY THE VERY BEST CREDITS WERE ABLE TO FUNCTION IN THIS MARKET AND I'M VERY PLEASED WITH WHAT CATERPILLAR HAS BEEN ABLE TO DO. OUR FINANCE COMPANY WITH AN A-1, P-1 RATING, WITH A LOT OF TRANSPARENCY, WITH GOOD UNDERWRITING STANDARDS, HAS BEEN ABLE TO BORROW AND ACCESS COMMERCIAL PAPER MARKETS AND TO ISSUE FIVE AND TEN YEAR MEDIUM-TERM NOTES EVEN DURING THIS CRISIS PERIOD. SO I HAVE A LOT OF CONFIDENCE.

CARUSO-CABRERA: HE MENTIONED ON "THE CALL" TODAY, LAYOFFS. ARE THERE MORE TO COME IN 2009?

OWENS: WELL, LAYOFFS. WE ADJUST EMPLOYMENT. WE'VE GROWN VERY RAPIDLY. WE'VE ADDED EMPLOYMENT TO TAKE CARE OF OUR EXPANDING CAPACITY AND GROWING SHIPMENT LEVELS. WE'VE ALWAYS TRIED TO BUILD IN A FLEX CAPABILITY WITH CONTRACT AND TEMPORARY LABOR THAT WILL GIVE US AN OPPORTUNITY TO HIT BUSINESS CYCLE PEAKS AND THEN SCALE BACK. OBVIOUSLY WE DO EVERYTHING WE CAN TO AVOID LAYOFFS BUT WHAT I WAS TRYING TO EMPHASIZE THIS MORNING IS, WE HAVE THE FLEXIBILITY TO ADJUST OUR COST WITH VOLUME, UNLIKE A DECADE OR SO AGO. CATEPILLAR IS VERY VOLUME FLEXIBLE. WE KNOW WE OPERATE IN CYCLICAL MARKETS AND WE'RE VERY FOCUSED ON SUSTAINING OUR PROFITABILITY THROUGH THESE CYCLICAL TIMES.

CARUSO-CABRERA: MR. OWENS THANKS SO MUCH FOR YOUR TIME.





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