Peoria-based Caterpillar Inc. has announced big layoffs:
Jan. 26 (Bloomberg) — Caterpillar Inc., the world’s largest maker of bulldozers and excavators, said it’s cutting 20,000 jobs and this year’s profit and sales will trail analysts’ estimates as the deepest recession in a quarter century saps demand.
The jobs include 12,000 employees, or 11 percent of the Peoria, Illinois-based company’s workforce, and 8,000 contractors, spokesman Jim Dugan said today. Caterpillar’s full- year forecast trailed the average estimate by 41 percent, and its shares fell in early New York trading.
Demand evaporated in the fourth quarter after nine months of record sales to mining and energy companies, Caterpillar said. U.S. builders broke ground last month on the fewest houses since record-keeping began 50 years ago, and the company said government stimulus plans like those from President Barack Obama may not be enough to offset the drop in private
Profit excluding some items may fall this year to $2.50 a share, less than the average estimate of $4.22 in a Bloomberg survey of 21 analysts. Sales may decline 22 percent to $40 billion, below the $46 billion average estimate.
The announced layoffs of Caterpillar employees amount to about 10% of the company’s work force.
Tom Mangan, who blogs primarily about Caterpillar, had this to say today:
Further good news: Overtime is being slashed and hours are being cut, so even those who keep their jobs may end up pinching pennies this year.
Sadly, the report does not say where the cuts will happen. I’ve heard of layoffs in Aurora, Illinois, and Lafayette, Indiana, in the past couple days.
Here were his comments yesterday:
As for Monday, I cannot help but agree that Cat seems to be in for a body blow, and that the rest of earnings season may pound it lower over the next few weeks. Yahoo Finance’s message board traffic is dominated by a guy who posts under the handle Benwaw58, who thinks Cat will most likely get down around 30, give or take a point or two, before a sustained rally kicks in. That’s down another 14 percent from last Friday, so it won’t be pretty. He’s watched the stock since the 1970s so he has a good grasp of its ups and downs, including those dark days of the early Reagan administration.
Caterpillar’s problems aren’t credit-related—they’re strictly a product of business slowing. And Cat had a good year in 2008. I’ll say what I’ve said here several times before: I think that companies that aren’t in survival mode should be very, very careful about big layoffs in the current climate solely for the purpose of keeping their dividends up. They’re setting the stage either for additional taxes on dividends to pay the unemployment benefits of all those layoffs or European-style regulations on workforce that would cripple American business’s ability to react to change.
This will be hard on Peoria, hard on Illinois.