Caterpillar’s world woes ripple out by means of provider base

Workers walk past Caterpillar excavator machines at a factory in Gosselies February 28, 2013. REUTERS/Eric Vidal

Employees stroll previous Caterpillar excavator machines at a manufacturing facility in Gosselies February 28, 2013. REUTERS/Eric Vidal

(Reuters) – – Caterpillar Inc’s (CAT.N) suppliers had been feeling the ache of slumping gross sales on the world’s largest mining and development gear maker lengthy earlier than it introduced an in depth cost-cutting program.

J-TEC Chief Government Officer Gary Roling stated Peoria, Illinois-based Caterpillar, his single largest buyer, had lately pushed again an enormous order due this month to December.

“We’ve been promoting to Caterpillar for an extended, very long time, and this 12 months will possible be the bottom 12 months for gross sales we’ve ever had,” stated Roling, whose firm makes instruments to measure the movement of gas, exhaust and different gases.

Mixed with declining orders for a defense-related undertaking, whole gross sales are down 75 % at J-TEC. The Cedar Rapids, Iowa, firm’s workforce has fallen to 10 from 25 and is on a four-day week.

J-TEC is in search of new enterprise in different sectors to spice up gross sales.

“Our hope is that issues will begin to get higher within the first half of 2016,” Roling stated. “However now we have no visibility, and primarily based on (Caterpillar’s) information, a restoration could possibly be a way off.”

J-TEC is just not alone. The issues at Caterpillar have rippled by means of its provider base and can in all probability worsen. On Thursday, the gear maker forecast gross sales declines for 2015 and 2016 and introduced plans to chop as much as 10,000 jobs.

At Elk Grove Village, Illinois-based Acme Industries, which makes transmission components for Caterpillar and rival Komatsu Ltd (6301.T), the gross sales drop has come at a time when its clients within the oil trade are additionally struggling.

Simply final summer season, the corporate was on a hiring spree and manufacturing across the clock. However proprietor Warren Younger stated it had minimize workers to 200 from 240 as gross sales to Caterpillar and Komatsu have fallen 50 %, dragging Acme’s whole down 10 % to 20 %.

“When a downturn hits a few your companies on the similar time, it leaves you fewer locations to cover,” Younger stated.

Like J-TEC, Acme executives are “out pounding the streets” for brand spanking new enterprise.

Different, bigger Caterpillar suppliers like Tenneco Inc (TEN.N) and Dana Corp (DAN.N) didn’t return calls in search of remark.

However Mike Schroeder, joint proprietor of DuPage Precision Merchandise of Aurora, Illinois, summed up the state of affairs for the diesel engine element maker, which provides Caterpillar’s mining and development enterprise.

“Clearly this impacts us, our enterprise and our employees,” he stated, declining to offer particulars. “Like everyone else, now we have to make changes.”

(Reporting by Nick Carey; Enhancing by Lisa Von Ahn)


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