Caterpillar to slash 10,000 jobs: signal of broader industry downturn?
The world's largest construction and mining equipment maker has also reduced revenue projections for the year by $1 billion.
Caterpillar Inc. said it may cut up to 10,000 jobs by the end of 2018, unveiling a vast restructuring plan in response to America’s declining energy and mining sectors.
Caterpillar, the world’s largest construction and mining equipment maker, has already reduced its workforce by more than 31,000 since mid-2012.
The company on Thursday also slashed its revenue forecast for the year by $1 billion.
Caterpillar’s shares afterward fell to a five-year low of $64.65, bringing with it shares of other industrial companies.
The company, which employs more than 126,000 worldwide, is facing "challenging marketplace conditions in key regions and industry sectors – namely in mining and energy," Chief Executive Doug Oberhelman said in a statement.
This is the third consecutive year Caterpillar has cut its revenue forecast. Next year, executives expect it will drop another 5 percent. Its expected revenue for 2015 now is $48 billion.
Of the potential 10,000 layoffs, up to half will happen through 2016, the company said. Most will take place this year at more than 20 international plants across its three key businesses – construction, resources, and energy and transportation.
The company expects to save up to $1.5 billion annually from the restructuring. It will also incur about $2 billion in pretax costs.
This year has seen the world’s largest mining companies scramble to recover from China’s industrial slowdown and a drop in commodity prices.
As British mining giant Anglo-American prepared to shave as many as 53,000 jobs, chief executive Mark Cutifani told the Wall Street Journal, “We’re looking at every dollar and pulling everything back.”
In the United States, Bureau of Labor statistics indicate that employment in mining has fallen by as much as 90,000 since its peak in December. And of the 9,000 jobs cut this August, most of them – 7,000 – were concentrated in support activities for mining.
Mines are closing almost every month, reported The New York Times. The situation has become so dire that signs have gone up in local diners of these towns asking customers to send prayers for the miners.
The energy sector has fared no better. Last month, stocks hit a particularly bad slump as the price of oil dropped to its lowest in more than four months, reported The Los Angeles Times. “The energy sector is down 15 percent this year, making it easily the worst performing industry group in the S&P 500 index. Earnings at energy companies have dropped almost 60 percent in the second quarter.”
This report contains material from Reuters and the Associated Press.