Heavy-equipment maker Caterpillar announced today that they will be cutting 5,000 jobs by next year as a cost saving measure. Shares of the company have since dropped dramatically.
USA Today reports that layoffs could reach up to 10,000 jobs through 2018, and that it is likely sales will drop continuing into 2016.
The global economic climate is damaging the sales of Caterpillar equipment. The company plans to cut anywhere between 4,000 and 5,000 jobs by the end of 2016, with the majority of layoffs occurring this year. Caterpillar also reevaluated their their sales projections to $1 Billion less than the previous outlook. The layoffs are expected to help reduce costs by $1.5 Billion. Caterpillar says sales and revenue will drop 5% from this year.
The company says that it is due to have its third consecutive year down for sales and revenue. They noted that 2016 may bring the first time in the company’s 90 year history in which sales and revenue dropped four years in a row.
Caterpillar is also offering a voluntary retirement enhancement program, as an effort to cut costs, for qualifying employees. The company was aware of potential financial difficulties back in July. In the second quarter, Asia/Pacific based sales fell due to a lower demand for construction equipment in the region.
CEO Doug Oberhelman said in a statement, “Several of the key industries we serve – including mining, oil and gas, construction and rail – have a long history of substantial cyclicality. 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.”
The company also plans to close around 20 manufacturing facilities. The closings focus on key businesses like construction, energy, and transportation.