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Caterpillar (CAT) to Shut Plant in Illinois, Lay off 800 Jobs
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In an effort to slash production capacity in the wake of dropping sales, Caterpillar Inc. (CAT - Free Report) is closing its machine production plant in Aurora and will shift production to other sites. This move will lead to a retrenching of about 800 employees.
The company has been contemplating this move since January. Per the plan, it will shift production of large wheel loaders and compactors to its Decatur, IL plant while production of medium wheel loaders will move to North Little Rock, AR plant.
Although manufacturing will shift from the Aurora plant, Caterpillar will still have about 1,200 workers, including management, engineering and support jobs in Aurora. As per a tentative agreement between Caterpillar and the United Auto Workers, severance benefits for affected Aurora workers will include 40 hours of pay for each year of service. Following the move, about 500 positions will likely be added in Decatur and about 150 positions in North Little Rock. Some jobs will move to various suppliers, and other positions will be eliminated.
Expected to be completed by the end of 2018, this move will help the company to efficiently leverage manufacturing space while still having the capacity to meet demand in the case of a revival in demand.
Over the past few years, Caterpillar’s top -line has been affected by weak mining demand due to the slump in commodity prices. This has affected the mining and construction equipment behemoth’s bottom-line as well. In this scenario, Caterpillar’s goal has been to reduce costs, such that the decline in operating profit is no more than 25–30% of the decline in sales and revenues. In Sep 2015, Caterpillar set upon significant restructuring and cost reduction initiatives, with actions expected through 2018. Once fully implemented, the plan would aid lower annual operating costs by about $1.5 billion, primarily attributable to the consolidation or closure of more than 20 facilities that would decrease manufacturing square footage by more than 10% and reduce the workforce by more than 10,000 people. In Sep 2016, Caterpillar announced that it is contemplating to allocate the volumes produced at the Gosselies, Belgium facility to other manufacturing facilities. It also stated that the action is likely to lead to layoff of about 2,000 employees and the closure of the Gosselies site.
While commodity prices have improved lately, it is not sufficient to drive a relevant increase in short-term demand for new equipment. As prevalent in recent years, mining customers continue to focus on improving productivity in existing mines and reducing total capital expenditures. The company expects miners’ capital spending to be about flat in 2017.
Caterpillar is currently facing a probe regarding, among other things, export filings that relate to business with its Swiss subsidiary, CSARL. If the allegations against Caterpillar are proven true, this could have a substantial impact on the company. Further, it could be restricted from bidding for federal contracts, which would be a big blow given that Caterpillar is touted to be one of the biggest beneficiaries from the infrastructure spending promised by President Trump.
Caterpillar has underperformed the Zacks categorized Machinery – Construction/ Mining sub industry in the last one year. While the stock increased 27.1%, the industry has witnessed a gain of 29.4%.
Caterpillar currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks worth considering in the broader sector include ACCO Brands Corporation (ACCO - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and Brady Corporation (BRC - Free Report) . ACCO Brands has an average positive earnings surprise of 24.74% in the past four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Parker-Hannifin Corporation has delivered an average positive earnings surprise of 12.44% in the past four quarters and flaunts a Zacks Rank #1. Brady Corporation, a Zacks Rank #2 (Buy) stock has an average positive earnings surprise of 20.84% in the same time frame.
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Caterpillar (CAT) to Shut Plant in Illinois, Lay off 800 Jobs
In an effort to slash production capacity in the wake of dropping sales, Caterpillar Inc. (CAT - Free Report) is closing its machine production plant in Aurora and will shift production to other sites. This move will lead to a retrenching of about 800 employees.
The company has been contemplating this move since January. Per the plan, it will shift production of large wheel loaders and compactors to its Decatur, IL plant while production of medium wheel loaders will move to North Little Rock, AR plant.
Although manufacturing will shift from the Aurora plant, Caterpillar will still have about 1,200 workers, including management, engineering and support jobs in Aurora. As per a tentative agreement between Caterpillar and the United Auto Workers, severance benefits for affected Aurora workers will include 40 hours of pay for each year of service. Following the move, about 500 positions will likely be added in Decatur and about 150 positions in North Little Rock. Some jobs will move to various suppliers, and other positions will be eliminated.
Caterpillar, Inc. Price
Caterpillar, Inc. Price | Caterpillar, Inc. Quote
Expected to be completed by the end of 2018, this move will help the company to efficiently leverage manufacturing space while still having the capacity to meet demand in the case of a revival in demand.
Over the past few years, Caterpillar’s top -line has been affected by weak mining demand due to the slump in commodity prices. This has affected the mining and construction equipment behemoth’s bottom-line as well. In this scenario, Caterpillar’s goal has been to reduce costs, such that the decline in operating profit is no more than 25–30% of the decline in sales and revenues. In Sep 2015, Caterpillar set upon significant restructuring and cost reduction initiatives, with actions expected through 2018. Once fully implemented, the plan would aid lower annual operating costs by about $1.5 billion, primarily attributable to the consolidation or closure of more than 20 facilities that would decrease manufacturing square footage by more than 10% and reduce the workforce by more than 10,000 people. In Sep 2016, Caterpillar announced that it is contemplating to allocate the volumes produced at the Gosselies, Belgium facility to other manufacturing facilities. It also stated that the action is likely to lead to layoff of about 2,000 employees and the closure of the Gosselies site.
While commodity prices have improved lately, it is not sufficient to drive a relevant increase in short-term demand for new equipment. As prevalent in recent years, mining customers continue to focus on improving productivity in existing mines and reducing total capital expenditures. The company expects miners’ capital spending to be about flat in 2017.
Caterpillar is currently facing a probe regarding, among other things, export filings that relate to business with its Swiss subsidiary, CSARL. If the allegations against Caterpillar are proven true, this could have a substantial impact on the company. Further, it could be restricted from bidding for federal contracts, which would be a big blow given that Caterpillar is touted to be one of the biggest beneficiaries from the infrastructure spending promised by President Trump.
Caterpillar has underperformed the Zacks categorized Machinery – Construction/ Mining sub industry in the last one year. While the stock increased 27.1%, the industry has witnessed a gain of 29.4%.
Caterpillar currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks worth considering in the broader sector include ACCO Brands Corporation (ACCO - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and Brady Corporation (BRC - Free Report) . ACCO Brands has an average positive earnings surprise of 24.74% in the past four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Parker-Hannifin Corporation has delivered an average positive earnings surprise of 12.44% in the past four quarters and flaunts a Zacks Rank #1. Brady Corporation, a Zacks Rank #2 (Buy) stock has an average positive earnings surprise of 20.84% in the same time frame.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>