Caterpillar announced Thursday that it expects to permanently reduce its workforce by 4,000 to 5,000 by the end of 2016. It said the cuts could reach 10,000 through 2018.
The reductions are part of a corporate restructuring that the company said will lower operating costs by about $1.5 billion annually once implemented.
Caterpillar also lowered its guidance for 2015, saying sales and revenues for the year are now expected to be about $48 billion—$1 billion lower than the previous outlook. Thursday’s announcement also said that expected 2016 sales and revenues will be about 5 percent below this year.
Shares of Caterpillar—which has a market cap of about $42 billion—fell more than 6 percent after the announcement.
Beyond the short-term expected layoffs, Caterpillar said that its total workforce reduction could amount to more than 10,000 people—including possible manufacturing closures through 2018.
“We are facing a convergence of challenging marketplace conditions in key regions and industry sectors—namely in mining and energy,” Chairman and CEO Doug Oberhelman said in a statement. “While we’ve already made substantial adjustments as these market conditions have emerged, we are taking even more decisive actions now. 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.”
The company also noted in its restructuring announcement that 2015 is the company’s third-consecutive down year for sales and revenues—and 2016 “would mark the first time in Caterpillar’s 90-year history that sales and revenues have decreased four years in a row.”
Oberhelman pointed to areas of global weakness in explaining the company’s move.
“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,” he said.
The construction and mining equipment manufacturer said it lowered its guidance because of “broadly weaker business conditions” in its three largest segments: construction industries, energy and transportation, and resource industries. The largest sales and revenue decline has come from the company’s oil- and gas-related business, Caterpillar said.
Thursday’s announced workforce reduction follows the company’s total workforce reduction of more than 31,000 since mid-2012.