Caterpillar announces restructuring and cost-reduction plans

Caterpillar Inc., Peoria, Ill., has announced significant restructuring and cost-reduction actions that are expected to lower operating costs by about $1.5 billion annually once fully implemented. The cost-reduction steps will begin in late 2015 and reflect recent, current, and expected market conditions.

The company’s 2015 sales and revenues for 2015 are expected to be about $48 billion--$1 billion lower than the previous outlook. For 2016 sales and revenues are expected to be about 5 percent below 2015.

Key steps planned by the company include:

• An expected permanent reduction in salaried and management workforce, including agency, of 4,000 to 5,000 people between now and the end of 2016, with most occurring in 2015, and with a total possible workforce reduction of more than 10,000 people, including the contemplated consolidation and closures of manufacturing facilities occurring through 2018.
• A voluntary retirement enhancement program for qualifying employees, which will be completed by the end of 2015.
• A reduction in selling, general, and administrative costs across the company. This will be largely in place and effective in 2016.
• A reduction in period manufacturing costs from additional contemplated facility consolidations and closures that could affect more than 20 facilities and slightly more than 10 percent of the firm’s manufacturing square footage. A portion of these cost reductions are expected to be effective in 2016, with more savings anticipated in 2017 and 2018.

This year is the company's third consecutive down year for sales and revenues, and 2016 would mark the first time in Caterpillar's 90-year history that sales and revenues have decreased four years in a row.

"Several of the key industries we serve—including mining, oil and gas, construction, and rail—have a long history of substantial cyclicality. While they are the right businesses to be in for the long term, we have to manage through what can be considerable and sometimes prolonged downturns," said Doug Oberhelman, Caterpillar chairman and CEO.

Since 2013 Caterpillar has closed or announced plans to close or consolidate more than 20 facilities, affecting 8 million sq. ft. of manufacturing space. The company also has reduced its total workforce by more than 31,000 since mid-2012.