Strategy

Caterpillar to Close 5 Plants, Cut More Jobs

The downsizing is part of Caterpillar's plan to reduce its workforce by roughly around 10,000 employees and close about 20 production facilities.
Katie Kuehner-HebertApril 29, 2016

Caterpillar Inc. is planning to close five U.S. plants and cut about 820 jobs as it continues to restructure in the face of declining demand.

The downsizing announced Thursday is part of the construction-equipment maker’s plan to reduce its workforce by roughly around 10,000 employees and close about 20 production facilities by 2018. It currently has about 105,000 employees.

“Caterpillar recognizes that these restructuring actions are painful for its dedicated workforce, their families and the impacted communities,” Caterpillar said in a news release. “The decisions are difficult. However, it is necessary to have the right capacity in place for the tough market conditions the company is facing.”

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The five plants in North Carolina, South Carolina, Florida and Mississippi designated for closure mostly produce components for Caterpillar machinery and engines. A company spokeswoman would not predict where and when any further job cuts would be made during the three-year restructuring period.

As Bidness Etc reports, demand for construction and mining equipment has decreased significantly amid the commodity glut. Caterpillar’s first-quarter revenue declined to $9.5 billion, from $12.7 billion a year earlier, while earnings dropped to 46 cents a share from $2.03.

“Things may get worse before they begin to improve for Caterpillar,” Bidness Etc said. “We expect the company to make many more announcements of shutting down facilities and reducing its workforce as the company ramps up its cost-cutting plans.”

Caterpillar stock closed virtually unchanged Friday at $77.72.  It has gained more than 14% so far this year, reflecting a modest rally in commodity prices.

But Seeking Alpha noted that commodity prices “are only increasing due to declining investments and falling supplies, a negative sign for companies like Caterpillar, whose revenue base is clearly dependent on investments from mining, energy and construction industries.”

In its outlook for the year, Caterpillar said it sees some improvement in sales of construction equipment in China but  lowered its revenue guidance to $40 billion to $42 billion from a prior range of $40 billion to $44 billion.