Slow demand in the mining division is one cause of a reorganization of Caterpillar's sales force.
Facing soft demand in the mining sector and slow overall global sales, Caterpillar Inc. announced Sept. 24 that it would be reducing its workforce by at least 4,000 to 5,000 employees, with total reductions of 10,000 possible through 2018.
The Peoria, Ill.-based equipment manufacturer also announced a restructuring of some of its underperforming businesses, consolidating the mining sales and support division into the larger global mining division.
According to Caterpillar, these and other measures will reduce costs by about $1.5 billion annually. The announcement comes as the company says it will lower its 2015 sales and revenue forecast from $49 billion to $48 billion.
"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, in a press statement. Citing the layoffs and other cost reduction measures, Oberhelman said "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."
In addition to reducing staff levels, Caterpillar is looking to lower its manufacturing costs. Since 2013, the company has been in the process of closing or consolidating more than 20 facilities that constitute more than 10% of its manufacturing square footage. These reductions in Cateprillar's manfacturing footprint will be fully in effect by 2016, according to a company statement.
Caterpillar's reorganization goes beyond consolidations in its global mining division. The company says that its global construction and infrastructure division will absorb new duties, taking over sales responsibilities for work tools, industrial and waste, paving and forestry products, as well as responsibility for heavy rentals.
Looking to Caterpillar's future performance, Oberhelman chose to take the long view. "Several of the key industries we serve—including mining, oil and gas, construction and rail—have a long history of substantial cyclicality," he said. "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."