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Caterpillar announces restructuring and cost reduction plans

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World Coal,

Caterpillar announces restructuring and cost reduction plans

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

Key steps planned by the company include:

  • An expected permanent reduction in Caterpillar’s salaried and management workforce, including agency, of 4000 – 5000 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.
  • The company will offer a voluntary retirement enhancement program for qualifying employees, which will be completed by the end of 2015.
  • Slightly less than half of the US$1.5 billion of cost reduction is expected to be from lower Selling, General and Administrative (SG&A) costs. The reduction in SG&A will largely be in place and effective in 2016 and occur across the company.
  • The remaining cost reductions are expected to come from lower period manufacturing costs, including savings from additional contemplated facility consolidations and closures, which could impact more than 20 facilities and slightly more than 10% of manufacturing square footage. A portion of these cost reductions are expected to be effective in 2016, with more savings anticipated in 2017 and 2018.

“We are facing a convergence of challenging marketplace conditions in key regions and industry sectors – namely in mining and energy,” said Doug Oberhelman, Caterpillar Chairman and CEO. “While we’ve already made substantial adjustments as these market conditions have emerged, we are taking even more decisive actions now. We don’t make these decisions lightly, but I’m confident these additional steps will better position Caterpillar to deliver solid results when demand improves.”

2015 is the company’s third consecutive down year for sales and revenues.

“Our strategy is to deliver superior total shareholder returns through the business cycle, and growth is a key element of that strategy. However, 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,” added Oberhelman.

Pre-tax costs associated with these actions are expected to be about US$2 billion for employee-related severance and other termination benefits, and other exit-related costs associated with the consolidation of manufacturing facilities.

Caterpillar Announces New Organisational Structure for Mining

Chris Curfman, Vice President with responsibility for Caterpillar’s Mining Sales & Support Division is retiring, effective 31 December 2015. His division will be integrated into the existing Global Mining machine business divisions. Bringing product, operations, sales and marketing organisations 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.

Caterpillar announcers customer and dealer-facing organisational changes

The company is reorganising divisions across the company into a new structure, including: Global Aftermarket Solutions Division, Wear Components & Aftermarket Distribution Division, Marketing and Digital Division, Sustainable, and the Work Tools & Industry Solutions Division.

“Our team will be more responsive, agile and better positioned to work with our dealers as we serve our customers,” Rob Charter, Caterpillar Group President with responsibility for Customer & Dealer Support said.

Edited from press release by

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