Decline in revenues forces Caterpillar Inc to cut 475 jobs further

The sluggishness in global mining and construction sectors forced Caterpillar Inc to slash its headcount to minimize the costs. The Illinois-based heavy machinery manufacturer has taken up cost cutting exercise to reduce the staff number by 475 in its new round of layoff.

As part of the consolidation process, Caterpillar has already laid off 270 employees at Illinois office recently. 

This takes the total number of employees laid down reached to 4,800 during the past one year and 20,000 employees globally since 2012 accounting for over 10 percent of the total workforce across the world.

The company's spokesperson said: "The restructuring is a result of a consolidation of several divisions combined with current business conditions."

The drastic decline in revenues from the mining and construction sectors put pressure on the bottom line of the company. The latest layoff measures affect mostly Central Illinois including Peoria and Morton offices. The cost cut down plan is also trimming headcount marginally at other overseas offices as well.

The layoff exercise is effective from different time schedules for several departments depending upon the internal mechanism. Some layoffs may not come into force for several months. Caterpillar fired office personal only, but not employees, who are members of the union.

According to the spokesperson, the slashed jobs were in aftermarket supporting services, parts and services, handling customer relations and dealer support, etc. 

The heavy machinery manufacturer in July registered a decline in profits on dwindling revenues from the construction activity in China and Brazil. Adding to this the construction activity in the global oil and gas sector has also eased. Above this, the stronger US dollar is impacting its sales in Europe.

All these factors are impacting the financial performance of Caterpillar and forcing the company to reduce manpower. The restricting activity is aimed at consolidating several divisions within the company. 

The company's earnings per share (EPS) during the second quarter dropped to $1.16 from $1.57. EPS excluding restructuring costs also eased to $1.27 from $1.69 during the quarter. 

Since the company serves mostly cyclical industrial sectors, it's focusing operation execution and cost control in the wake of the considerable decline in sales. The company has been implementing a restructuring plan for the past two years.

The main aim of the company in managing costs is to keep operating profit less than 30 percent of the decline in sales and revenues. The outlook for 2015 sales and revenues is at $49billion down by $1bn from the previous forecast.