Caterpillar announced significant restructuring and cost reduction actions that are expected to lower operating costs by about $1.5 billion annually once fully implemented.
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The cost reduction steps will begin in late 2015 and reflect recent, current and expected market conditions.
For 2015, the company’s sales and revenues outlook has weakened, with 2015 sales and revenues now expected to be about $48 billion, or $1 billion lower than the previous outlook of about $49 billion. For 2016, sales and revenues are expected to be about 5 percent below 2015
An expected permanent reduction in Caterpillar’s salaried and management workforce, including agency, of 4,000 – 5,000 people between now and the end of 2016, with most occurring in 2015, and with a total possible workforce reduction of more than 10,000 people, including the contemplated consolidation and closures of manufacturing facilities occurring through 2018.
The company will offer a voluntary retirement enhancement program for qualifying employees, which will be completed by the end of 2015.
Slightly less than half of the $1.5 billion of cost reduction is expected to be from lower Selling, General and Administrative (SG&A) costs. The reduction in SG&A will largely be in place and effective in 2016 and occur across the company.
The remaining cost reductions are expected to come from lower period manufacturing costs, including savings from additional contemplated facility consolidations and closures, which could impact more than 20 facilities and slightly more than 10 percent of our manufacturing square footage. A portion of these cost reductions are expected to be effective in 2016, with more savings anticipated in 2017 and 2018.
Caterpillar announced a reorganization in its dealer and customer support divisions. These changes are designed to improve and speed the delivery of customer support while simplifying the way Caterpillar interacts with its global dealer network.
“These organizational changes will drive needed simplicity to the business, further enabling us to meet customer and dealer needs by becoming more nimble, lean and responsive,†said Rob Charter, Caterpillar group president with responsibility for Customer & Dealer Support.
The company is also placing added executive office emphasis on three strategic initiatives – data analytics, digital and innovation capabilities; Lean Transformation; and the Across the Table initiative. Having this additional, executive office focus complements the new structure of Caterpillar’s customer and dealer-facing divisions.
Distribution Services Divisions – the primary interface with dealers, these divisions will remain but be reduced to two from three. The two groups will maintain sole responsibility for dealer development and performance, succession and continuity, along with portfolio management, operational excellence and Across the Table strategy execution.
Global Aftermarket Solutions Division, Vice President Nigel Lewis – new organization created to accelerate the growth of aftermarket sales and service solutions. This organization combines the aftermarket sales and marketing resources, with a focus on improving and growing aftermarket sales and service for Resource Industries, Construction Industries and Energy & Transportation, including Cat Work Tools and Cat Reman products.
Wear Components & Aftermarket Distribution Division, Vice President Doug Hoerr – new division that merges the design and manufacturing of components and aftermarket distribution into one division to enhance the company’s focus on components availability and inventory improvements.
This organization will be closely aligned with the Global Aftermarket Solutions Division to ensure product offerings meet or exceed customer and dealer expectations.
Marketing and Digital Division, Vice President George Taylor – newly created division that builds on the current Analytics & Innovation Division. Taylor, who has also been named Caterpillar’s Chief Marketing Officer, and his team will establish a go-to-market strategy for the integration of data analytics, providing state-of the-art solutions and support for customers and dealers.
In addition to the digital transformation of the dealer and customer experience, the division’s functions include global brand management, marketing, rental services and retail sales development.
Sustainable, Work Tools & Industry Solutions Division, Vice President Greg Folley – new division that brings together the sustainable businesses of Cat Reman and Caterpillar Safety Services with the company's machine attachment business – Cat Work Tools (design and manufacture). The new division also includes two external sales groups, Cat OEM Solutions and Defense and Federal Products.
In addition to these changes, the Global Construction & Infrastructure Division has added responsibilities. As part of the company’s move to improve its dealer and customer coverage model, the division will also assume sales responsibilities for work tools, industrial and waste, paving and forestry products, as well as responsibility for heavy rentals.
The above moves will be effective November 1, 2015. ■