Caterpillar Layoffs

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.

7 comments… add one
  • PD Shaw Link

    I wonder if the layoffs are going to hit Peoria in particular. CAT has a worldwide work force, 50% of production IIRC is in foreign countries, and if the dollar is strong or is projected strong, foreign countries might take the hit.

    It also seems odd to count the elimination of “8,000 temporary, contract and agency workers” as job cuts. I get the sense that CAT is exaggerating job cuts to appease Wall Street. I note also that while CAT was able to sell bonds in December, it had to pay a premium to do so.

    BTW/ CAT is still building a $140 million road grader plant in Arkansas, which will employ 600 workers beginning in 2010. This production is being removed from the Decatur, Illinois plant, which will focus on large off-highway trucks. CAT says the project is still going forward, I would be concerned about Decatur jobs right now.

  • Rob Chandler Link

    As a Caterpillar worker here in Peoria, I find these layoffs troubling to say the least. During the last economic slowdown, Cat did not react soon enough and this caused them some difficulties, but now it appears that too much is being done too fast.

    I have to wonder how much of this is to keep the dividend up. Its bad enough that good union jobs are being moved to “right to work (for less money)” states where Caterpillar will be able to pay a wage too low to raise a family on, but now those of us who helped Cat set records for profits and production are now being told “thank you, here’s the door”.

    For all the talk about how much labor gets paid, why is it that we never see how much management gets paid? College management interns are paid a wage close to what skilled Manufacturing Systems Operators make, and Floor Supervisors make more than the highest paid laborer does, yet labor gets the shaft?

    Cat is top-heavy. Too many managers are doing jobs that add no value to the company, that produce no product, but they still have their jobs. Jim Owens has said before that he wants the Union purged, that it isn’t necessary, but actions like this prove otherwise. Major corporations like Cat do not care about their employees, they only care about keeping those record profits and continuing dividends. They can say otherwise, but the proof is in their actions.

  • PD Shaw Link

    It doesn’t look to me like full-time labor is taking the hit here. My math shows:

    20,000 total jobs cut, of which 2,500 are salaried and management employees in the U.S. that have already been bought out, and 8,000 are temporary, contract and agency workers. That leaves 9,500 still to be cut.

    And the Journal Star is reporting this morning that “5,000 additional salaried employees worldwide” could be cut. That suggests to me that the focus is not on labor.

  • PD Shaw Link

    “That leaves 9,500 still to be cut.”

    According to today’s earnngs release, the 9,500 jobs to be cut are:

    4,000 full-time production employees
    5,000 support and management employees.

    So of the 20,000 jobs, 4,000 are full-time labor (20%). I’m very surprised given that the main problem appears to be excess inventory. CAT is going to be shutting down a lot of plants lines I expect this year.

  • Hi, I am a reporter with The Northern Miner in Toronto and am writing about the downturn in mining and how it is affecting companies like Caterpillar. If anyone who works at Caterpillar or has been laid off could speak to me about what’s going on there and how it is impacting you, that would be much appreciated. my email is:

    thanks and best regards,

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