Category Archives: Caterpillar

Caterpillar plans to cut up to 10,000 jobs worldwide over the next three years, the company reported today, as it also announced reorganization of its mining division.

Check out coverage from the Wall Street Journal, Reuters, USA Today and CNBC. Here is the press release.

From the Wall Street Journal piece …

The Peoria, Ill.-based company said the job cuts would occur through a reduction in its salaried and management staff and, longer term, through contemplated plant consolidations and closures. Caterpillar is aiming to reduce annual costs by roughly $1.5 billion a year. …

The planned job cuts include reductions of between 4,000 and 5,000 salaried and management staff through 2016 but mostly this year. The potential plant consolidations and closings could affect more than 20 of its operations and slightly more than 10% of its factory floor space.

Caterpillar said that since 2013, it has closed or announced plans to close or consolidate more than 20 facilities, impacting 8 million square feet of manufacturing space. In addition, the company already has reduced its total workforce by more than 31,000 since mid-2012. …

Caterpillar also said it would revamp its mining business, as well as the company’s dealer and customer-facing divisions as part of the efforts to lower costs.

Details of the mining reorganization are contained in a company press release. From it …

As previously announced, Chris Curfman, vice president with responsibility for Caterpillar’s Mining Sales & Support Division is retiring, effective December 31, 2015. His division will be integrated into the existing Global Mining machine business divisions. Bringing product, operations, sales and marketing organizations together in both the surface and underground mining applications aligns well with our customers and will also enable a more effective cost structure in a challenging mining environment. The surface mining sales and support teams will join the Hauling & Extraction Division, which will be renamed the Surface Mining & Technology Division, led by Caterpillar Vice President Tom Bluth. The underground mining sales and support teams will join the Material Handling and Underground Division, led by Caterpillar Vice President Denise Johnson.   

So, what does it all mean for South Milwaukee? It remains to be seen.

I’ll keep you posted, especially if I hear more about potential impacts to our city.

Cat is significantly reducing its manufacturing footprint in South Milwaukee — but investing significantly in what remains.

In that regard, this afternoon’s announcement about the retooling and redesign of the South Milwaukee plant — including the consolidation of nearly 260,000 square feet of it, or about half of its current manufacturing space — is not all bad news.

And it certainly could have been much worse.

From the Daily Herald in suburban Chicago …

In South Milwaukee, where the company makes electric rope shovels, hydraulic mining shovels and draglines, Caterpillar plans to redesign and retool the facility, removing the need for more than 260,000 square feet of production space in its manufacturing footprint.

“We continue to evaluate our operations for efficiency, to lower cost and to improve competitiveness. This decision allows us to more competitively position the products produced on these campuses, and it provides employees in these facilities clarity around our long-term plans for maintaining production,” said Ed Rapp, Caterpillar group president with responsibility for resource industries.

I am told the buildings Cat will vacate (by not renewing leases) are primarily located in the inner portion of the campus, with those along Rawson Avenue getting the increased (likely multi-million dollar) investment. The technical center and offices are not affected.

The announcement Monday will not affect current employment, which is obviously much less than it used to be. South Milwaukee has more than 700 employees.

I spoke with a local Caterpillar official this afternoon about the decision, and he positioned it as a significant investment in the facility to make it more competitive.

“The ultimate goal in this is to make South Milwaukee a world-class provider,” he said. “As you get more globally competitive, that is good for the employees, our customers, and the city.”

I agree. While it would be great to see the local plant humming along at full capacity in its current footprint, that seemed more and more unlikely with each passing day. Instead, we are getting a smaller, more efficient plant better positioned for the long term, in a changing mining industry that might be headed for an upswing.

Indeed, there are plenty worse alternatives.

Check out coverage from the Milwaukee Journal Sentinel,

Some good news in Caterpillar’s first-quarter earnings report, which came out Thursday … but mining continues to struggle.

From the Reuters story …

Caterpillar said it expected its sales to the global construction industry to increase 10 percent from 2013, up from a previously anticipated rise of about 5 percent.

But it cautioned that 2014 would be “another very tough year” for mining, another key market, and that its outlook reflected an anticipated drop of about 80 percent in sales of large mining trucks from the company’s peak year in 2012.

Adam Fleck, an analyst at Morningstar, said he was pleasantly surprised by the company’s “very solid cost control in construction in particular,” where operating margins continued to grow and “were at their highest quarterly level in several quarters”, even though they were typically more compressed than in the mining equipment category.

Fleck said the weakness in mining “wasn’t terribly surprising” and added that because that once-critical business accounted for just 17 percent of sales and 12 percent of operating profit in the first quarter, any continued weakness in the sector was “more of a headline risk than a true economic one.”

The better-than-expected report was tinged with caution. Chief Executive Officer Doug Oberhelman said the Peoria, Illinois-based company was watching several regions closely. Having visited China recently, he said the construction industry there was facing challenges.

Caterpillar was also concerned about the situation in Ukraine and Russia, he added.

The news followed stories this week of mixed dealer data and of reduced 2013 compensation for the CEO.

Of course, we’ll continue to watch the Caterpillar news closely, especially that from the mining front, given our (and Oak Creek’s) position as the center of Cat’s global mining operations.

With that in mind, I had a really positive meeting with several local Caterpillar officials on Friday, as part of my ongoing efforts to introduce myself to local elected official and business owners.

I look forward to keeping lines of communication open … and I have Caterpillar’s commitment to do the same. Having a strong partnership with our largest employer is a priority for me as mayor.

Profits were up significantly for Caterpillar in the fourth quarter of 2013, and the company on Monday issued a positive earnings forecast for the new year … but there wasn’t a lot of positivity in the sector South Milwaukeeans watch closest.

Here is MarketWatch coverage. From it:

Oberhelman said the company sees some signs of improvement in the global economy, which should bode well for sales in its construction and power systems businesses. However, despite expectations that mining production will continue to rise, the company sees mining companies further reducing capital spending this year.

“As a result, we’re expecting sales in resource industries to decline modestly,” he said. “ We’ve already taken a number of restructuring actions to help improve our financial results and expect to take additional actions in 2014.”

Reduced spending by mining companies has taken a toll on sales of mining equipment, while Caterpillar’s sales of construction equipment have benefited from a recovery of home building in the U.S. The heavy-equipment maker has been closing plants that make mining equipment and laying off workers to reflect a sharp drop in demand in the sector.

Of course, I always worry about the “additional actions in 2014.” The Reuters story included this …

He characterized the moves as “tough decisions necessary to better position us down the road when economic conditions improve and our sales rebound.”

I guess we’ll have to wait and see what “tough decisions” are to come. Let’s pray the worst is over.

Also, check out coverage from the Chicago Tribune and Wall Street Journal.