CNNFN writes article about Caterpillar to cut more than 10,000 jobs:
By Matt Egan @mattmegan5
Caterpillar CEO: U.S. is ‘falling behind’
Caterpillar CEO: U.S. is ‘falling behind’
China’s economic slowdown and cheap oil are killing more American jobs.
This time at a giant in U.S. business. Caterpillar (CAT) announced
that job cuts could exceed 10,000 through 2018.
Up to 5,000 employees will lose jobs between now and the end of 2016.
The moves are aimed at cutting $1.5 billion in annual costs as the
global growth outlook continues to darken.
Caterpillar is heavily exposed to the turbulence ripping through the
world’s economy. Nearly 10% of the company’s revenue is generated in
China, where the country’s economy is shifting from infrastructure-led
growth to being more consumer driven.
The shift has led to a dramatic economic slowdown and many anticipate
China will continue to stumble as its economy goes through a difficult
transition.
China’s growing pains have rippled through many countries with which it
has deep trade ties.
As demand for raw materials dropped, it’s sent prices careening for
everything from crude oil and copper to iron ore. That’s led mining
and oil exploration companies to cut back on spending on the heavy
equipment that Caterpillar produces.
“We are facing a convergence of challenging marketplace conditions in
key regions and industry sectors — namely in mining and energy,”
Caterpillar CEO Doug Oberhelman said in a statement.
Unprecedented sales slump for Caterpillar
Given those challenges, Caterpillar dimmed its 2015 sales targets and
warned next year’s revenue could decline by 5%. That would mark the
first time in Caterpillar’s 90-year history that sales have declined
for four straight years.
Caterpillar said the 10,000 job cut estimate includes the potential
closing of more than 20 unspecified manufacturing facilities.
Caterpillar also said it will offer a voluntary retirement enhancement
program for qualifying employees that will be completed by the end of
2015.
Caterpillar expects pre-tax costs of about $2 billion tied to the
layoffs and consolidating manufacturing facilities.
It’s been a particularly rough stretch for Caterpillar. Earlier this
week the company said retail sales of its machinery slumped 11% between
June and August. The company felt the greatest pressure in China and
Latin America.
Job cuts mount
All of this represents the latest employment fallout related to falling
commodity prices. U.S. companies announced more than 86,000 job
cuts directly attributed to falling oil prices since June 2014,
according to Challenger, Gray & Christmas.
One Caterpillar employee CNNMoney reached out to was worried for his
job.
Jake, who declined to give his last name when CNNMoney reached out to
him, works as an engineer at a subsidiary owned by Progress Rail
Services, a builder of diesel-electric trains that Caterpillar acquired
in 2006.
Many of the employees at this division are contractors, all of whom
were immediately concerned about their jobs.
“No one really knows the outcome of how things are going to play out,”
said Jake, who is 30 years old and has a wife and two children.
Mining stocks crumble
Caterpillar stock tumbled 7% on the news. It’s lost more than one-third
of its value over the past year.
The gloomy Caterpillar news sparked selling in other mining,
construction and farm equipment stocks, including Joy Global (JOY),
Deere (DE), AGCO (AGCO) and CNH Industrial (CNHI).
CNNMoney (New York) September 24, 2015: 12:06 PM ET
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