New Caterpillar Layoffs Reflect Mining Industry Distress
January 30 2009 - 12:20PM
Dow Jones News
Construction machinery maker Caterpillar Inc.'s (CAT) plans to
lay off additional workers underscores the swift downturn in the
global mining industry.
Nearly half the 2,110 job cuts announced Friday by Caterpillar
will come from the company's Decatur, Ill., assembly plant where
its massive earth moving trucks are produced.
Sales of the trucks, which cost about $2 million each, boomed in
recent years on increased demand from miners of copper and iron
ores and other mined commodities. The trucks also became an
indispensable component for increased oil production in western
Canada's tar sands region.
Caterpillar's order backlog for the off-road trucks stretched
for as long as three years.
But plunging prices for oil and other commodities in recent
months have put the brakes on miners' orders.
"They've all effectively cut their capital expenditures in
half," said Eli Lustgarten, an analyst for Ohio-based Longbow
Research. "What you're seeing now is a spate of deferrals and
cancellations."
Lustgarten's firm on Friday cut its 2009 and 2010 earnings
estimates for two other equipment makers dependent on mining sector
sales: Bucyrus International Inc. (BUCY) and Joy Global Inc.
(JOYG).
Longbow analyst Paul Bodnar lowered his earnings-per-share
forecast for Bucyrus by 16% to $3.30 from $3.93 for 2009 and by 35%
to $2.85 from $4.40 for 2010. He dropped his forecast for Joy
Global's earnings by 17% to $3.23 from $3.90 for 2009 and by 30% to
$3.10 from $4.40 for 2010.
The reductions followed industry surveys that showed contracting
demand for machinery.
Equipment makers Komatsu Ltd. (6301.TO) and CNH Global NV (CNH)
also have signaled major pullbacks in production for 2009.
In addition to the Decatur plant layoffs, Caterpillar said 500
workers will be furloughed at a plant that makes excavators and
wheel loaders and 584 production workers will be laid off at a
bulldozer assembly plant. Both of the plants are in Illinois.
The layoff are on top of the 20,000 job cuts Peoria, Ill.-based
Caterpillar announced on Monday
Caterpillar said Friday more layoffs may be required as the year
unfolds, depending on demand and other business conditions.
Caterpillar said earlier this week it's trying to work down
about $1.5 billion worth of equipment inventory this year.
Caterpillar's stock was recently down 4.5% at $30.43.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
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