Caterpillar slashes revenue forecast, may cut up to 10000 jobs

24 Sep 2015 | Author: | No comments yet »

Caterpillar plans up to 5,000 job cuts, possibly more, lowers revenue expectation.

(Reuters) – Caterpillar Inc slashed its 2015 revenue forecast and said it could cut up to 10,000 jobs through 2018, on Thursday joining a list of big U.S. industrial companies grappling with the shock waves from the mining and energy downturn.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. The stock fell as much as 8 percent to a five-year low and also pulled down shares of other industrial companies and knocked about 30 points off the Dow Jones industrial average.

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. Over the past year, miners and oil companies have slashed budgets and put expansion projects on hold as prices of raw materials – from crude oil, copper, coal and iron ore – have plunged to six-year lows amid lingering worries about oversupplies and China’s slowing economic growth. The company’s stock fell to US$64.65 in intraday trade at the New York Stock Exchange, its lowest level in more than a year, before regaining some strength. Deere & Co, the world’s largest maker of farm equipment, announced layoffs of more than 900 plant employees in January as declining grain prices have hurt demand for agricultural machinery. “That they had hung in with their guidance for so long was probably the most surprising, given the … accumulating evidence around them that things were slowing,” said Morningstar analyst Kwame Webb. Caterpillar expects revenue to fall in 2015, for the third straight year, to $48 billion (£31.5 billion), below the average analyst estimate of $48.82 billion, as compiled by Thomson Reuters I/B/E/S.

Most will take place this year at more than 20 international plants across its three key businesses – construction, resources, and energy and transportation. Analysts had expected $47.36 billion. “2016 would mark the first time in Caterpillar’s 90-year history that sales and revenues have decreased four years in a row,” the Peoria, Illinois-based company said in a statement.

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 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. He added, “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.” Analysts agreed that Caterpillar had to act in the face of tough market conditions. 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. 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.

In an op-ed published in the Peoria Journal Star on Thursday, Oberhelman wrote: “Our vision and plans for a new headquarters in downtown Peoria still stand, although given current conditions we can’t say when the project will begin.” He 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. Rauner spokeswoman Catherine Kelly described Caterpillar as “an important economic engine in Illinois” and said the planned job losses underscore “the need to help improve the state’s economic climate.”

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