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Caterpillar plans up to 5000 job cuts as key markets slow

As many as 5,000 jobs will be cut by the end of this year from its salaried and management workforce, and thousands more will follow as the Peoria-based company decides which of its factories and manufacturing sites to close.

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Given those challenges, Caterpillar dimmed its 2015 sales targets and warned next year’s revenue could decline by 5%. If revenues also fall in 2016, that will be the first time in the company’s 90-year history of four straight revenue declines. Because Peoria is our global headquarters and we have the largest concentration of employees in Illinois, the impact here will be significant. Caterpillar holds a #3 (Hold) on the Zacks Rank.

Caterpillar is facing “challenging marketplace conditions in key regions and industry sectors – namely in mining and energy”, Chief Executive Doug Oberhelman said in a statement. We don’t make these decisions lightly, but additional steps are necessary to position Caterpillar to deliver solid future results. To free up production capacity overseas, it moved operations from Japan and elsewhere to the USA, opening new plants in Texas, Georgia and North Carolina. That’s led mining and oil exploration companies to cut back on spending on the heavy equipment that Caterpillar produces.

This past year, Deere & Co, the world’s largest farm machinery manufacturer, has laid off over 1,000 workers amid tumbling grain prices and demand for equipment. “That’s enabled $8.2 billion of share repurchases over the past three years”.

For 2015, the company expects revenues of $48 billion, down by $1 billion from a prior view and below the $48.9 billion consensus.

Still, its share price has fallen sharply.

Morningstar analyst Kwame Webb said: “That they had hung in with their guidance for so long was probably the most surprising, given the… accumulating evidence around them that things were slowing”.

Caterpillar is predicting another drop in overall revenue for the third year in a row.

The reduction in SG&A, which will account for slightly less than half of the $1.5 billion in cost reductions, will largely be in place and effective in 2016 and occur across the company.

Caterpillar spokeswoman Rachel Potts tells the (Peoria) Journal Star (http://bit.ly/1Kxh9Ig ) that “given the current conditions, now is not the time to start, and we cannot say now when that will happen”.

Ardis said he’s “been assured” that the latest downsizing will have “zero impact” on the new Caterpillar headquarters.

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Tess Stynes contributed to this article.

Caterpillar to Cut More Than 10,000 Jobs Part of Restructuring and Cost Reduction Plans