Caterpillar may cut 10,000 job to reduce costs
Caterpillar is planning another round of job cuts that could exceed 10,000 through 2018, as the construction and mining equipment maker adjusts to downturns in key markets.
That could amount to more than 8 percent of the 126,800 employees it had globally as of June. About 350 work at Caterpillar Global Mining in Houston, one of the region’s largest manufacturers.
A company spokeswoman did not return a request for more specific information about where the cuts would be made.
The Peoria, Ill.-based firm said Thursday it will cut as many as 5,000 people mostly by the end of this year from its salaried and management workforce. It then could cut thousands more, raising the total above 10,000, as it figures out which factories and manufacturing sites to close through 2018.
Caterpillar also said Thursday it was dropping its 2015 revenue outlook by $1 billion, and its profit forecast will take a hit as well.
Caterpillar makes diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives in addition to construction and mining equipment. Several sectors it serves have been hit by problems beyond the company’s control.
Low oil prices hurt Caterpillar’s Energy & Transportation business, which makes products used in oil and gas production. The company said its construction equipment sales fell far below peak levels in North America, Latin America, Europe and the Middle East. Mining equipment sales stayed well below a level considered normal for customers replacing or upgrading their equipment.
The company has been hurt, in particular, by a slowdown in China’s construction boom. That contributed to a 21 percent drop in Caterpillar’s Asia-Pacific region sales during the second quarter.
Caterpillar has been cutting costs to counter those problems.
But the firm also kept a more positive outlook than its competitors about its end markets for much of this year, said Kwame Webb, an analyst who covers Caterpillar for Morningstar.
“I’m sort of surprised it took them so long to come to this point,” he said after the cuts were announced.
Caterpillar executives said Thursday in a statement industries like mining, oil and gas and construction are the right businesses to be in for the long term, even with a history that includes prolonged downturns.
Caterpillar expects 2015 revenue of about $48 billion, and it said 2016 sales should be about 5 percent lower.
Analysts expect, on average, revenue of $48.93 billion this year, according to FactSet.
The company didn’t update its 2015 profit forecast, but it noted the lower sales outlook and higher restructuring costs will hurt its bottom line. It said it would provide an update when it releases third-quarter results in late October.
Caterpillar brought in $55.18 billion in revenue last year. If sales drop again in 2016, that would mark the first time in Caterpillar’s 90-year history the company’s top-line figure decreased four years in a row.
The company said the job cuts announced Thursday and other expense reductions are expected to help lower operating costs by around $1.5 billion.
Caterpillar Inc. trimmed its total workforce by more than 31,000 since the middle of 2012, and closed or laid out plans to close more than 20 manufacturing locations since 2013.
Peoria Mayor Jim Ardis said Thursday he expects the city and region to absorb a sizable hit from the latest round of job cuts, though he said the company has not shared specifics.
Caterpillar said in February it decided to keep its global headquarters in Peoria, about 160 miles southwest of Chicago, after considering other locations. It said then that it would expand and modernize the complex.
Chairman and CEO Doug Oberhelman wrote Thursday in a guest column for the Peoria Journal-Star that plans for the new headquarters “still stand, although given current conditions, we can’t say when the project will begin.”
Shares of Caterpillar Inc. sank more than 6 percent, or $4.49, to $65.71 Thursday afternoon, while broader indexes dropped nearly 1 percent. Caterpillar’s stock price fell more than 28 percent this year.