Citing the continued deterioration of conditions in many of the markets its customers serve and on-going uncertainty in credit and financial markets, Caterpillar Inc. last week announced cost-cutting steps including significant compensation reductions for executives in 2009 as well as other compensation reductions for management and support staff. The company will also suspend merit pay increases for management and support employees and has instituted a hiring freeze.
For 2009, executive compensation will decrease up to 50 percent, compensation for senior managers will be reduced 5 to 35 percent and other management and support staff will see a reduction of zero to 15 percent, reflecting planned reductions in the company's incentive compensation program and equity-based compensation. Caterpillar is also offering management and support employees based in the United States an incentive-based voluntary separation program. Eligible employees have until Jan. 12, 2009 to elect to take part in the program.
"We understand these decisions will disrupt the lives of many of our employees and their families, and we regret the need to take these steps," said Caterpillar chairman and CEO Jim Owens. "We considered waiting until January to make this announcement, but decided it was better to communicate these plans with our employees as we approach the completion of our 2009 planning process," said Owens. "We also wanted to give employees interested in the voluntary separation plan time to consider this decision and discuss it with family over the holiday break."
Caterpillar and its individual business units will continue to implement cost reduction measures such as temporary factory shut downs and involuntary employee separations, on an as-needed basis in response to economic conditions that impact the markets for its products. Already, certain Caterpillar business units, through a combination of temporary and permanent layoffs of contract and agency personnel and company employees, have made work force reductions.
"Good companies become great companies when facing and addressing adversity, and over the decades that has been the case for Caterpillar," said Owens. "When we announced our new enterprise strategy in 2005, one of our critical success factors was planning for and managing through a major economic downturn. We are now intensifying our focus on cost reduction as we implement this part of our strategic plan. During these uncertain times we will position the company for long-term growth, continued industry leadership and global competitiveness," Owens said
Headquartered in Peoria, Ill., Caterpillar is a leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services.