Caterpillar plans layoffs in South Milwaukee

Peoria, Ill.-based Caterpillar Inc. is planning to lay off 250 to 300 employees in South Milwaukee by June.

“Short-term layoffs and other actions will be taking place,” Caterpillar spokesman Rusty Dunn told BizTimes. “We are not getting into specific numbers, as we continue to evaluate the situation given the fluctuating economic and business environment. Various Caterpillar facilities and business units are taking action to bring our production in line with demand, including our operations in South Milwaukee. This includes some short-term temporary layoffs and other actions. These actions vary from location to location and impact both production and support and management employees. We know this is difficult for our employees, but we are taking steps to better align with the current economic circumstances, while at the same time remain focused on positioning the company for long-term success.”

Ross Winklbauer, United Steelworkers union sub-district director of District 4, received word of the layoffs from union president Kevin Jaskie, who was present for the company announcement.

The union is unsure if layoffs will affect only union staff or both union members and management staff.

The union also remains uncertain about whether the layoffs will be temporary cuts or permanent dismissals, Winklbauer said.

Any company that lays off a significant number of employees in Wisconsin is required to notify the state Department of Workforce Development at least 60 days in advance. The DWD has not received any notification from Caterpillar at this time, said DWD spokesman Dick Jones.
City of South Milwaukee officials have heard nothing about the company’s layoff plans, said city administrator Tami Mayzik.

“We have not been notified,” she said.

According to information Winklbauer received from Jaskie, Caterpillar cited low sales as the reasoning for the layoffs.

Winklbauer, however, said he has not had any conversations with the company about low sales.

“Maybe there (are) some low sales, but the timing of it just makes it suspicious,” Winklbauer said.

Caterpillar is preparing for its first labor negotiations with the United Steelworkers Local 1343 since the South Milwaukee facility became part of the company. It was acquired as part of Caterpillar’s acquisition of Bucyrus International Inc. in 2011. The company currently has 800 production employees at the plant.

“Formal negotiations (are) scheduled to get underway early next week,” Dunn said.

Recently Caterpillar has been getting contingency workforce planning training for salaried and management personnel in case of a labor strike at the South Milwaukee plant. The training, which readies managerial and support staff for production jobs, is a normal part of Caterpillar’s planning cycle prior to any union negotiations, Dunn said.

The United Steelworkers asked Milwaukee Area Technical College to stop training Caterpillar’s salaried and management personnel for production jobs. MATC officials rejected that request.

“If (Caterpillar is) really this slow as what they’re saying, why would they spend money to have MATC train replacement welders?” Winklbauer said.

The MATC training was intended to intimidate union workers, according to Winklbauer.
The tactic has not worked, he said.

“Is this the next thing they’re using to try to intimidate the workers by trying to scare them by saying, ‘You’ll be out of a job?’” Winklbauer said.

Caterpillar is facing some difficulties because of a slowdown in demand in China.

China’s manufacturing industry, which has slowed amid slack external demand, is being challenged by poor innovation, excessive competition for low-end products and insufficient core components and key technologies, Chen Qihua, vice president of Caterpillar told ChinaDaily USA.

The overcapacity of low-end products has been a problem for China’s construction equipment industry, Chen said.

China’s economic growth fell under 8 percent for the first time since 1999 last year, mainly due to cooled manufacturing production and property investment.

In January, Caterpillar chief executive officer Doug Oberhelman admitted the company had overpaid for the acquisition of Chinese company Zhengzhou Siwei Mechanical & Electrical Manufacturing Co. last year. Siewei makes equipment to support the roof in coal mines.

Caterpillar paid about $700 million for Siwei parent ERA Mining Machinery Ltd., but later learned of the company’s deliberate accounting misconduct, which was designed to inflate profits ahead of the sale. As a result, it wrote the value down by $580 million.

After the write down, which halved Caterpillar’s fourth quarter 2012 earnings expectations, the company said it was exploring all avenues to recover the losses from the bad deal.

Meanwhile, Bloomberg Business News analysts are forecasting a global bear market for iron ore, which has led to some iron ore mines to be closed and workers to be laid off in North America in recent months.

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