Caterpillar, Feeling Global Slump, to Cut Up to 10000 Jobs

25 Sep 2015 | Author: | No comments yet »

Caterpillar lowers 2015 revenue outlook, announces deep job cuts.

Construction and mining equipment maker Caterpillar plans to lay off 10,000 workers — or more — in a bid to save $1.5 billion a year in operating costs, it announced Thursday.Caterpillar slashed its 2015 revenue forecast and said it could cut up to 10,000 jobs through 2018, joining a list of big US industrial companies grappling with the shock waves from the mining and energy downturn.Jim Cramer answered viewers’ Twitter questions from the floor of the New York Stock Exchange and addressed Caterpillar’s (CAT) announcement that it has lowered its revenue outlook and plans to cut 10,000 jobs. ‘These numbers were chilling,’ he said. And nearly half of those job losses — 4,000 to 5,000 salaried and management employees — will come before the end of 2016, with most completed this year and a “significant” proportion in Illinois, the company said.

Caterpillar also warned that total layoffs could climb to more than 10,000 through 2018 and that sales and revenue could drop in 2016 for a record fourth straight year. Caterpillar expects revenue to fall in 2015, for the third straight year, to $48 billion (€42.74bn), below the average analyst estimate of $48.82 billion. The big loss in Caterpillar, which is viewed as a proxy for global economic health and a component of the 30-stock Dow Jones industrial average, dragged down the Dow.

Most will take place this year at more than 20 international plants across its three key businesses – construction, resources, and energy and transportation. As British mining giant Anglo-American prepared to shave as many as 53,000 jobs, chief executive Mark Cutifani told the Wall Street Journal, “We’re looking at every dollar and pulling everything back.” In the United States, Bureau of Labor statistics indicate that employment in mining has fallen by as much as 90,000 since its peak in December. It now plans a “restructuring” at 20 more of its 103 plants worldwide that will involve some closings, a move that will cut its total manufacturing space by about 10 percent, it said. But the company also had 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. But the majority of Caterpillar’s plants are overseas, in Asia, Europe and South America. “We recognize today’s news and actions taken in recent years are difficult for our employees, their families and the communities where we’re located.

Caterpillar executives said Thursday in a statement that 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. The company didn’t update its 2015 profit forecast, but it noted that the lower sales outlook and higher restructuring costs will hurt its bottom line. Last month, stocks hit a particularly bad slump as the price of oil dropped to its lowest in more than four months, reported The Los Angeles Times. “The energy sector is down 15 percent this year, making it easily the worst performing industry group in the S&P 500 index.

We don’t make these decisions lightly, but I’m confident these additional steps will better position Caterpillar to deliver solid results when demand improves.” The company had warned of headwinds in its second-quarter earnings report issued back in mid-July. Those include low oil prices, which have reduced demand for Caterpillar engines and equipment used on oil rigs, and to pump and transport oil, as well as a “hangover” in the mining industry, which has excess capacity after years of heavy investment, according to Mircea Dobre, an analyst with Robert W. If sales drop again in 2016, that would mark the first time in Caterpillar’s 90-year history that the company’s topline figure has decreased four years in a row. In February, Caterpillar said that it would stay in Peoria and develop a 31-acre campus over the coming decade, a development hailed at the time by Gov. Ardis placed the coming layoffs in the context of recent major manufacturing job losses across Illinois. “Our state is hemorrhaging manufacturing jobs, and it has been for some time,” he said. “We’ve lost 300,000 manufacturing jobs since 2000.” Still, he said, he believes Caterpillar has “a good handle” on the steps it needs to take, adding that he was “very confident” that Caterpillar will rebound.

Peoria Mayor Jim Ardis said Thursday that 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 that it had decided to keep its global headquarters in Peoria, about 160 miles southwest of Chicago, after considering other locations.

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