Caterpillar announced Monday, Jan. 26, that it is rapidly executing strategic “trough” plans and implementing actions throughout the company to deal with the global business environment, including the removal of about 20,000 workers from its business and scrutinizing every indirect spend dollar.
These actions support lowering production costs in line with a 25-percent decline in sales volume and reducing selling/general/administrative and research/development costs supporting the company’s machinery and engines business by about 15 percent.
The Peoria, Ill.-based company cited global economic conditions and key commodity prices that have continued to decline significantly, financial markets that remain under stress, and lower expectations for 2009 anchored by uncertainty around the depth and duration of the recession, making it difficult to forecast sales and revenues.
The company says that while it is encouraged by government stimulus programs and actions taken by central banks around the world to spur growth, it is planning for 2009 sales and revenues to be in a range of plus or minus 10 percent from $40 billion.
“These are very uncertain times, and it’s imperative that we focus Team Caterpillar on dramatically reducing production schedules and costs in light of poor economic conditions throughout the world,” says Jim Owens, the company’s chairman and chief executive officer. “While it’s painful for our employees and suppliers, it’s absolutely necessary given economic circumstances. We expect to have most of the actions needed to lower employment and cost levels in place by the end of the first quarter.”
Owens says that although 2009 will be a tough year, “it’s important to remember that economic cycles aren’t new, and we will emerge from this even stronger than we are today. Throughout our 83-year history, Caterpillar has successfully managed through the Great Depression, several recessions, a world war and numerous other adversities. We’re a strong company with a management team that’s been through tough times before. We are the global leader, with an unparalleled dealer network. We’ve strengthened our market position in past recessions, and we have done so over the past few months.”
Owens says Caterpillar will continue to invest in product technology and operational efficiency. “When the economy does recover, the need for better housing, roads and capacity for energy and mining will still be there, and we will be prepared to respond,” he said.