Caterpillar Inc. will reduce its workforce by approximately 20,000 employees, the company said, as it announced a 32% decline in profit for the fourth quarter of 2008 compared to the fourth quarter of 2007.
During a conference call held earlier today, Mike DeWalt, director of investor relations for Caterpillar, said that by the end of the first quarter of 2009, the company would eliminate nearly 8,000 temporary, contract and agency workers; lay off as many as 5,000 support and management employees while offering voluntary separations to about 2,500 others; and reduce the number of full-time production employees by about 4,000 through both voluntary and involuntary separations and layoffs. The company has about 110,000 employees around the world.
In addition, DeWalt said that some factories have begun to reduce their workweeks to three or four days and many employees have seen their hours decrease from 40 to 35. Caterpillar added thousands more employees have been or will be affected by temporary layoffs or full and partial plant shutdowns.
Caterpillar Inc. will reduce its workforce by approximately 20,000 employees, the company said, as it announced a 32% decline in profit for the fourth quarter of 2008 compared to the fourth quarter of 2007.
During a conference call held earlier today, Mike DeWalt, director of investor relations for Caterpillar, said that by the end of the first quarter of 2009, the company would eliminate nearly 8,000 temporary, contract and agency workers; lay off as many as 5,000 support and management employees while offering voluntary separations to about 2,500 others; and reduce the number of full-time production employees by about 4,000 through both voluntary and involuntary separations and layoffs. The company has about 110,000 employees around the world.
In addition, DeWalt said that some factories have begun to reduce their workweeks to three or four days and many employees have seen their hours decrease from 40 to 35. Caterpillar added thousands more employees have been or will be affected by temporary layoffs or full and partial plant shutdowns.
“While 2008 was our sixth consecutive year of record sales and revenues, it was an extraordinarily challenging year,” said Caterpillar chairman & CEO Jim Owens. “Through the first three quarters we experienced booming demand from key global industries, notably mining and energy, and most emerging market countries…Then we were whipsawed in the fourth quarter as key industries were hit by a rapidly deteriorating global economy and plunging commodity prices. In anticipation of lower demand we encouraged dealers to align inventory with declining volume, and they responded with significant order cancellations, particularly in December.
Total profit for 2008 was flat compared with 2007, Caterpillar said, with higher price realization, improved sales volume and lower income tax expense offsetting higher operating costs, primarily due to increases in material and freight costs. However, although fourth-quarter sales and revenues were up 6% year-over-year, profit after tax fell from $975 million to $661 million and profit per share (PPS) dropped 28% to $1.08, the OEM said.
DeWalt said that the company expects profit to drop significantly in 2009, forecasting a total of $40 billion in sales and revenues for the year, which would be almost 25% lower than 2008’s total of more than $51 billion.
“This is likely to be the most difficult year for Caterpillar since the early 1980’s,” he said. “Our view of 2009 has declined, and declined rather sharply. After the third quarter this year, we were expecting flat growth in 2009, but now we are projecting further decline.”
Caterpillar also said it would reduce selling, general and administrative (SG&A) and research and development (R&D) costs supporting its machinery and engines business by about 15%, and save half a billion dollars through eliminating redundancies and other budgetary measures.
“Without a doubt, 2009 will be a very tough year, but it’s important to remember that economic cycles aren’t new, and we will emerge from this even stronger than we are today,” Owens said. “We’ve strengthened our market position in past recessions, and we have done so over the past few months. In addition, we will continue to invest in product technology and operational efficiency through these tough times. When the economy does recover, the need for better housing, roads and capacity for energy and mining will still be there, and we will be prepared to respond.”
