Caterpillar's cuts will include dozens of facilities around the world and 10,000 workers or more.
Caterpillar's cuts will include dozens of facilities around the world and 10,000 workers or more.
Caterpillar's cuts will include dozens of facilities around the world and 10,000 workers or more.
Caterpillar's cuts will include dozens of facilities around the world and 10,000 workers or more.
Caterpillar's cuts will include dozens of facilities around the world and 10,000 workers or more.

Caterpillar to Cut Costs, Lay Off 10,000 Workers

Sept. 27, 2015
Caterpillar announced restructuring and cost-reduction actions to lower operating costs by about $1.5 billion annually that will include staff reduction of 4,000 to 5,000 people between now and the end of 2016.

Caterpillar announced restructuring and cost-reduction actions to lower operating costs by about $1.5 billion annually that will include staff reduction of 4,000 to 5,000 people between now and the end of 2016. The workforce reduction could be more than 10,000 people, including the contemplated consolidation and closures of manufacturing facilities occurring through 2018.

The cost reduction steps will begin in late 2015 and reflect recent, current and expected market conditions, the company said. For 2015 sales and revenues outlook has weakened, with 2015 sales and revenues now expected to be about $48 billion, or $1 billion lower than the previous outlook of about $49 billion.

Caterpillar expects 2016 sales and revenues to decline about 5 percent from 2015.

The company will offer a voluntary retirement enhancement program for qualifying employees, which will be completed by the end of 2015.

Slightly less than half of the $1.5 billion of cost reduction is expected to be from lower selling, general and administrative costs. The cuts will occur across the company.

The remaining cost reductions are expected to come from lower period manufacturing costs, including savings from additional contemplated facility consolidations and closures, which could impact more than 20 facilities and more than 10 percent of manufacturing square footage.

“We are facing a convergence of challenging marketplace conditions in key regions and industry sectors, namely in mining and energy,” said Doug Oberhelman, Caterpillar chairman and CEO. “While we’ve already made substantial adjustments as these market conditions have emerged, we are taking even more decisive actions now. 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.”

This year is Caterpillar’s third consecutive year of declines in sales and revenues, and 2016 would mark the first time in Caterpillar’s 90-year history that sales and revenues have decreased four years in a row.

Oberhelman added the several of the company’s key industries – mining, oil and gas, construction and rail – have a long history of substantial cyclicality.

“While they are the right businesses to be in for the long term, we have to manage through what can be considerable and sometimes prolonged downturns,” he said.

Caterpillar’s restructuring has, in fact, been going on for some time. Since 2013, Caterpillar has closed or announced plans to close or consolidate more than 20 facilities, impacting 8 million square feet of manufacturing space. The company has reduced its total workforce by more than 31,000 since mid-2012.