Caterpillar announced a restructuring plan on Thursday that it said could lead to around 10,000 jobs being cut from its workforce by the end of 2018.
The moves come amid weakened revenue forecasts for the Peoria, Ill.-based manufacturer, which said the plan would lower its operating costs by about $1.5 billion once it is fully implemented. By the end of 2016, Caterpillar will see a 4,000-5,000 person reduction of its salaried positions with the total layoffs potentially reaching 10,000 once all is said and done.
In a statement, the firm’s Chairman and CEO Doug Oberhelman said the company is “facing a convergence of challenging marketplace conditions in key regions and industry sectors – namely in mining and energy.”
“While we’ve already made substantial adjustments as these market conditions have emerged, we are taking even more decisive actions now,” he added. “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.”
If projections meet expectations, the company said “2016 would mark the first time in Caterpillar’s 90-year history that sales and revenues have decreased four years in a row.”
Shares of Caterpillar were down nearly 8% in early trading after the market opened on Thursday.
Oberhelman stood by his company’s business as a long-term bet, but pointed to short-term trends causing undue hardship for Caterpillar’s bottom line.
“[S]everal 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.”
Caterpillar expects its 2015 revenues to be down $1 billion form earlier projections, to $48 billion, and 2016 sales and revenue about 5% lower. The company’s share price, meanwhile, has dipped about 23% this year.