Caterpillar is planning another round of job cuts that
could exceed 10,000 people through 2018, as the
construction and mining equipment maker adjusts to
downturns in key markets.
That could amount to more than 8 percent of the 126,800
employees it had globally as of June.
The Peoria, Illinois, company said Thursday that it will
cut as many as 5,000 people mostly by the end of this
year from its salaried and management workforce. It then
could cut thousands more, raising the total above
10,000, as it figures out which factories and
manufacturing sites to close through 2018.
Caterpillar also said Thursday that it was dropping its
2015 revenue outlook by $1 billion, and its profit
forecast will take a hit as well.
Caterpillar makes diesel and natural gas engines,
industrial gas turbines and diesel-electric locomotives,
aside from construction and mining equipment. Several
sectors that it serves have been hit by problems beyond
the company's control.
Low oil prices have hurt the company's Energy &
Transportation business, which makes products used in
oil and gas production. Caterpillar said its
construction equipment sales have fallen far below peak
levels in North America, Latin America, Europe and the
Middle East. Mining equipment sales have stayed well
below a level considered normal for customers replacing
or upgrading their equipment.
The company has been hurt, in particular, by a slowdown
in China's construction boom. That contributed to a 21
percent drop in Caterpillar's Asia-Pacific region sales
during the second quarter.
Caterpillar has been cutting costs to counter those
But the company also had kept a more positive outlook
than its competitors about its end markets for much of
this year, said Kwame Webb, an analyst who covers
Caterpillar for Morningstar.
"I'm sort of surprised it took them so long to come to
this point," he said after the cuts were announced.
Caterpillar executives said Thursday in a statement that
industries like mining, oil and gas and construction are
the right businesses to be in for the long term, even
with a history that includes prolonged downturns.
Caterpillar now expects 2015 revenue of about $48
billion, and it said 2016 sales should be about 5
Analysts expect, on average, revenue of $48.93 billion
this year, according to FactSet.
The company didn't update its 2015 profit forecast, but
it noted that the lower sales outlook and higher
restructuring costs will hurt its bottom line. It said
it would provide an update when it releases
third-quarter results in late October.
Caterpillar brought in brought in $55.18 billion in
revenue last year. If sales drop again in 2016, that
would mark the first time in Caterpillar's 90-year
history that the company's topline figure has decreased
four years in a row.
The company said the job cuts announced Thursday and
other expense reductions are expected to help lower
operating costs by around $1.5 billion.
Caterpillar has trimmed its total workforce by more than
31,000 since the middle of 2012. Caterpillar Inc. It
also has closed or laid out plans to close more than 20
manufacturing locations since 2013.
Peoria Mayor Jim Ardis said Thursday that he expects the
city and region to absorb a sizable hit from the latest
round of job cuts, though he said the company has not
Caterpillar said in February that it had decided to keep
its global headquarters in Peoria, about 160 miles
southwest of Chicago, after considering other locations.
It said then that it would expand and modernize the
complex. Chairman and CEO Doug Oberhelman wrote Thursday
in a guest column for the Peoria Journal-Star that plans
for the new headquarters "still stand, although given
current conditions we can't say when the project will
Shares of Caterpillar Inc. sank more than 6 percent, or
$4.49, to $65.71 Thursday afternoon, while broader
indexes dropped nearly 1 percent. Caterpillar's stock
price had fallen more than 28 percent so far this year.