Peoria, Ill.-based Caterpillar Inc. announced today that it is expecting to cut 4,000 to 5,000 jobs between now and the end of 2016, with most occurring this year. In total, the company plans to reduce its workforce by more than 10,000 through 2018 as part of a move to reduce annual costs by about $1.5 billion.
It did not specify how many Milwaukee-area employees may be impacted.
Caterpillar, which has a large Wisconsin presence following its 2010 acquisition of South Milwaukee-based Bucyrus International Inc., is undergoing restructuring and cost reduction actions due to weakened sales and revenue outlooks.
2015 sales and revenues are slated to be about $48 billion, or $1 billion lower than the previous outlook of about $49 billion. For 2016, sales and revenues are expected to be about 5 percent below 2015.
This year is the company’s third consecutive down year for 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.
Other cost reduction actions include lower Selling, General and Administrative (SG&A) costs. The reduction in SG&A, which will account for slightly less than half of the $1.5 billion in cost reductions, will largely be in place and effective in 2016 and 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 slightly more than 10 percent of its manufacturing square footage.
A portion of these cost reductions are expected to be effective in 2016, with more savings anticipated in 2017 and 2018.
Twenty unspecified facilities around the world could be impacted by the consolidations and closures, and they would be across the company’s three large segments: construction industries, resource industries, and energy and transportation.
“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 chief executive officer. “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.”
Today’s announcement is in addition to significant actions Caterpillar has already taken.
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 also reduced its total workforce by more than 31,000 since mid-2012.
“Our strategy is to deliver superior total shareholder returns through the business cycle, and growth is a key element of that strategy. However, several of the key industries we serve – including 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,” Oberhelman said.
