Ohhh ……. Shhh——ooot!!!!! Caterpillar Downsizing!!!!!

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Well, there are economic indicators, and then, there are economic indicators. 

While leftarded Canadians, and a complicit media try to claim GDP is a euphemism for an economy.  (It is not).  Towards a global economy, I’ve found that Caterpillar is a much better economic indicator than GDP.  Caterpillar is probably the world’s largest maker of …… well, big machines.  Earth moving, construction, drilling machines and equipment, electricity generators…..  In other words, if someone is growing, building, drilling, or otherwise doing the stuff necessary in a growing economy, then, Caterpillar is probably involved.  

CATERPILLAR SAYS COULD CUT 10,000 JOBS TO REDUCE COSTS

(AP) — Caterpillar is planning another round of job cuts that could exceed 10,000 people through 2018, as the construction and mining equipment maker adjusts to downturns in key markets.

That could amount to more than 8 percent of the 126,800 employees it had globally as of June.

The Peoria, Illinois, company said Thursday that it will cut as many as 5,000 people mostly by the end of this year from its salaried and management workforce. It then could cut thousands more, raising the total above 10,000, as it figures out which factories and manufacturing sites to close through 2018.

Caterpillar also said Thursday that it was dropping its 2015 revenue outlook by $1 billion, and its profit forecast will take a hit as well.

Caterpillar makes diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives, aside from construction and mining equipment. Several sectors that it serves have been hit by problems beyond the company’s control.

Low oil prices have hurt the company’s Energy & Transportation business, which makes products used in oil and gas production. Caterpillar said its construction equipment sales have fallen far below peak levels in North America, Latin America, Europe and the Middle East. Mining equipment sales have stayed well below a level considered normal for customers replacing or upgrading their equipment.

The company has been hurt, in particular, by a slowdown in China’s construction boom. That contributed to a 21 percent drop in Caterpillar’s Asia-Pacific region sales during the second quarter.

Caterpillar has been cutting costs to counter those problems.

But the company also had kept a more positive outlook than its competitors about its end markets for much of this year, said Kwame Webb, an analyst who covers Caterpillar for Morningstar.

“I’m sort of surprised it took them so long to come to this point,” he said after the cuts were announced.

Caterpillar executives said Thursday in a statement that industries like mining, oil and gas and construction are the right businesses to be in for the long term, even with a history that includes prolonged downturns.

Caterpillar now expects 2015 revenue of about $48 billion, and it said 2016 sales should be about 5 percent lower.

Analysts expect, on average, revenue of $48.93 billion this year, according to FactSet.

The company didn’t update its 2015 profit forecast, but it noted that the lower sales outlook and higher restructuring costs will hurt its bottom line. It said it would provide an update when it releases third-quarter results in late October.

Caterpillar brought in brought in $55.18 billion in revenue last year. If sales drop again in 2016, that would mark the first time in Caterpillar’s 90-year history that the company’s topline figure has decreased four years in a row.

The company said the job cuts announced Thursday and other expense reductions are expected to help lower operating costs by around $1.5 billion.

Caterpillar has trimmed its total workforce by more than 31,000 since the middle of 2012. Caterpillar Inc. It also has closed or laid out plans to close more than 20 manufacturing locations since 2013.

Peoria Mayor Jim Ardis said Thursday that he expects the city and region to absorb a sizable hit from the latest round of job cuts, though he said the company has not shared specifics.

Caterpillar said in February that it had decided to keep its global headquarters in Peoria, about 160 miles southwest of Chicago, after considering other locations. It said then that it would expand and modernize the complex. Chairman and CEO Doug Oberhelman wrote Thursday in a guest column for the Peoria Journal-Star that plans for the new headquarters “still stand, although given current conditions we can’t say when the project will begin.”

Shares of Caterpillar Inc. sank more than 6 percent, or $4.49, to $65.71 Thursday afternoon, while broader indexes dropped nearly 1 percent. Caterpillar’s stock price had fallen more than 28 percent so far this year.

The globe has stopped.  If Caterpillar is struggling, so is the rest of the world.  If they’re considering closing plants, then, it also means the world’s prospects for near-future growth are dim. 

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9 Responses to Ohhh ……. Shhh——ooot!!!!! Caterpillar Downsizing!!!!!

  1. Latitude says:

    …but I thought they were the shinning star on how good the economy was doing! /snark

  2. gator69 says:

    Cue the squirrel.

  3. DirkH says:

    zerohedge has tracked CAT for 4 years of declining sales – yes through the entire Obama “recovery” their sales declined year on year… It’s a depression, papered (literally) over by moneyprinting and CPI falsification…

  4. Bruce of Newcastle says:

    I’ve seen little analysis about the real reason for Caterpillar’s decline. I’ll tell you the reason.

    Near my house are several land developments which have finally gotten underway after a decade of sitting around with nothing happening. So the developers at the end of my street most days have about four big diggers in operation and the other one over the other side of the railway has about five.

    They are Chinese manufactured.

    You can get a Chinese back hoe for something like a third of the price of a Caterpillar back hoe (or etc). So what if they don’t last as well? If it expires you just buy another and you are still ahead. You can even sell the dead one to someone else to fix up.

    Capitalism is what is mugging Caterpillar.

    • suyts says:

      Bruce, I’m skeptical. The reason is China is a large buyer from Caterpillar. So, if people are money ahead by buying Chinese manufactured crap, why is China buying from Cat?

      • Bruce of Newcastle says:

        James – I suspect you would need a breakdown of what is being bought. Mining machinery where scale is important? The suburban developments around where I live don’t need sophisticated stuff.

        Part of what I was saying also comes from a farmer who commented on another blog that the same goes for headers and tractors on the land. Increasingly Australian farmers are taking up Chinese equipment because the price is so compelling – he was the guy who said to us that their prices were a third and the farmers could afford to live with gear breaking down (which they’d often fix themselves anyway). Since farmers are usually up to their eyeballs in debt the interest cost is massively less if you can get cheap gear and pay it off quickly.

        It would make sense if the Chinese manufacturers start with the simpler gear and move up the scale. Caterpillar makes the high tech stuff best of anyone. Also a lot of people will buy the best if they have a choice, including Chinese people.

  5. Lars P. says:

    Well this post explains a bit the financial status:
    http://www.zerohedge.com/news/2015-09-25/table-set-next-financial-crisis

    To Caterpillar’s decline: would it not be much more efficient to invest the 0% interest money in infrastructure instead of lending it to Wall Street?
    I must give it to the Chinese, they plan huge infrastructure investment in China and around China (the new Silk Road projects) – even with much mal-investment – that sounds better then “Investment Banks”. That would do a change also to Caterpillar… Are there not enough roads and airports and railways to be maintained? Schools?

    And speaking of the 0% interest – the very cute question – why is interest on credit cards still 13% if the banks get it for free?
    So the post says it nicely, 0% interest for Wall Street, not anybody else…. Who else is getting 0% interest?

    • gator69 says:

      Credit card customers are getting 0% intererst, and usually for 12 months, and often with no annual fees. Without even buying points, bank customers can get mortgage rates as low as 3.75%, for 30 years.

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