DECATUR — Caterpillar Inc. announced a series of plant shutdowns and temporary layoffs in Decatur on Monday, saying it hoped actions taken now might avoid “indefinite layoffs” in the future.
Citing tough global economic conditions and falling customer demand, Caterpillar said certain areas of its massive Decatur plant would be idled for a week in November and then for a whole month in December.
The company stressed these were not shutdowns and layoffs that affected the entire plant and its more than 4,000-member workforce, but rather targeted actions aimed at certain sections of the production crew whose products include the world’s biggest mining trucks. The layoffs would include shop floor workers, support staff and management.
Caterpillar did not specify the precise areas and numbers of workers who would be affected, and a spokesman said it was still early in the process with employees informed in plant-wide announcements Monday morning.
“We have just started notifying employees that this is coming and all the details are still being hashed out,” Caterpillar spokesman, Jim Dugan said. “We recognize such decisions are difficult for our employees and their families. We are taking actions today with the hope that indefinite layoffs can be avoided.”
Dugan said other Caterpillar facilities, including a component plant in East Peoria had taken similar actions to reduce costs.
News that trouble might be on the way had been telegraphed a week ago at the huge MINExpo equipment show in Las Vegas. Talking to industry analysts there, Caterpillar chairman and CEO Doug Oberhelman even raised the possibility of a renewed recession in 2013 as the world’s economy showed distinct signs of decelerating into the breakdown lane.
After recent quarters of record earnings, Caterpillar cut its 2015 earnings forecast to $12 to $18 per share from a previously rosy estimate of $15 to $20 per share. Caterpillar says it’s now worried about a struggling European continent and continuing signs that China’s roaring economy had developed a major limp. At home, the U.S. economy had been showing signs of life, particularly in housing, but political gridlock and the threatening fiscal cliff including big tax hikes and spending cuts due in 2013 if no budget deal is reached remain a serious concern.
“These factors are impacting Caterpillar’s Decatur facility,” Dugan said. “As a result, we’re taking a number of actions (the layoffs and partial shutdowns) to adjust production levels to better align with these circumstances.”
Craig Coil, president of the Economic Development Corporation of Decatur and Macon County, said global companies such as Caterpillar were being battered by an economy tormented by doubt about what the future held and compounded by uncertainly at home as the presidential election loomed.
“We hear more and more employers talking about their concerns for the future,” Coil said. “There is just awful lot up in the air and people are being conservative about their medium- and long-term approaches right now.”
Longtime Caterpillar observer Jim Minton, an investment adviser with Decatur-based Investment Planners Inc., said the prospects of things getting better anytime soon didn’t look good. He likened the global economy to a body battling cancer, with the efforts of the Federal Reserve here and other stimulus efforts in other countries the equivalent of a “chemo” treatment to fight the disease.
“But it would certainly appear at this point that the cancer is winning,” Minton said. “And at some point the chemo of everything governments are doing could actually end up making it all a lot worse,” he said, citing the risks of increased inflation “mortgaging our future.”
Minton said many of the mined commodities dug out of the ground by Caterpillar’s customers help feed global demand driven by consumers buying things such as new homes and cars and electronics. But he said increasingly tapped-out consumers don’t have the means or the appetite to spend like they used to. And he said a U.S. economy built on racking up large amounts of debt and putting off the day of reckoning by “kicking the can down the road” was now in danger of running out of road.
“At some point we’re going to have to get our house in order in a lot of different ways and there is probably going to be some pain that goes along with that,” Minton said.
He said Caterpillar stock remained an attractive choice for many investors because it paid a healthy dividend, but he believed investors assessing their overall holdings might not want “to be overly allocated to the stock at this point.”