Caterpillar Inc. is trying to fight the odds, despite being faced with a lower outlook for its sales and revenues. The company is responding to its weakened earnings forecasts by undergoing what is being described as “significant restructuring and cost reduction actions.” This includes the possible laying off of over 10,000 workers, which may take place this year and all the way through 2018.
Caterpillar recently admitted that the company had been forced to revise its outlook and bring it about $1 billion lower. This means that instead of expecting $49 billion in 2015 sales and revenues, the company now expects to make only $48 billion. This is due to weakening businesses in Caterpillar’s Construction Industries, Resource Industries as well as Energy & Transportation segments. Even worse, the company also does not see things to be getting better in 2016. In fact, it expects the sales and revenues for next year to be at least five percent lower than its 2015 numbers.
Right now, the main priority of the 90-year old company is to cut costs significantly each year. This means lowering Caterpillar’s operating cost by as much as $1.5 billion annually. This much savings are expected after restructuring and other cost reduction plans have already been implemented.
Moreover, no one seems to be exempt from Caterpillar’s planned workforce reduction plan as the company is looking at doing a “permanent reduction” to all levels of Caterpillar’s employment, including management, salaried and agency workers. The company is expecting to layoff between 4,000 to 5,000 workers from now until the end of 2016. Moreover, the said job cuts will be implemented alongside planned closure and consolidation of some of the company’s manufacturing facilities. Meanwhile, Caterpillar also looks to roll out a “voluntary retirement enhancement program” for qualified employees by the end of the year.
At the same time, Caterpillar plans to reduce its manufacturing costs and gain savings by consolidating some facilities while closing others. For this plan, the company is looking at over 20 facilities and over 10 percent of its manufacturing square footage.
This move comes following a work reduction plan already implemented back in 2012 as well as some facility consolidation and closure done in 2013. Caterpillar expects to incur around $2 billion in pre-tax costs for its recent workforce reduction and facility consolidation plans.