Caterpillar announced that in order to cut cost, it will be closing a number of plants and downsizing a number of people.
Caterpillar Inc. will be eliminating over 670 jobs as it has announced that it will be shutting down five of its plants all across the United States. Previous year, the manufacturer of construction and mining equipment had stated that would be working on cost cutting.
The estimations by the manufacturing company in the fourth quarter fiscal year 2015 for the current year included restructuring charges that, at the time, had amounted to $400 million for the year. In the upcoming three years, the manufacturer has announced to cut as many as 10,000 jobs; presently it is standing at over 105,700 employees. As per the news, most of these job cuts are to be carried out in the current year.
Initially the company had announced in September that from the fourth quarter of fiscal year 2015 till the end of fiscal year 2016, it will downsize as many as 4000 to 5000 employees. Additionally, after this announcement, it also stated that it would shut down a number of plants all across the country in all the states.
According to the information, in Thomasville, Georgia, it plans to cut 250 jobs. In Wisconsin, it plans to shut down a forest products factory and cut 220 employees. Furthermore, other plants and industries that will be affected due to these cost cutting strategies are Indiana, Texas, and Mississippi along with China.
Caterpillar itself is predicting that there are further tough times ahead as the stock is already down 8% year to date – all because of decreasing commodity prices, slow Chinese economy along with the political unrest in the Middle East.
For the fourth quarter, it had reported revenue of $11 billion, which indicated a drop over 23% in comparison to the same quarter during the previous year. Additionally during the same quarter, it lost as much as $87 million profit from $757 million indicating a decline of 111%. The sales for the year fell by 15% to $47 billion. According to the forecasts of analysts, the sales were expected to be $48 billion. Year 2015 was the third consecutive year in which it reported a decline in sales.
The chief executive officer, Doug Oberhelman, said that these missed forecasts can be blamed on the unexpected decline in the oil prices, the strength of the U.S. dollar and lower than expected mining related sales in the Resource Industries.
With the help of the new cost reduction strategy, it is expected to save as much as $1.5 billion for the company in the next few years. Till November 2015, a number of employees had accepted early retirement packages while the company laid off as much as 1000 employees. Furthermore, it also plans to shut down over 20 facilities.
The heavy equipment building organization is hoping for improvement in the economic conditions, growth and betterment in oil prices – at this point all these factors are majorly affecting the company.