Caterpillar to End Production of On-Highway Vocational Trucks

Rebecca Cook/Reuters

Caterpillar Inc. said it will stop production of its on-highway vocational trucks due to the “current business climate in the truck industry,” according to the construction machinery and equipment company

The move is part of a restructuring plan that includes combining two divisions dealing with power and energy by June.

“Remaining a viable competitor in this market would require significant additional investment to develop and launch a complete portfolio of trucks, and upon an updated review, we determined there was not a sufficient market opportunity to justify the investment,” Ramin Younessi, vice president of Caterpillar’s Industrial Power Systems division, said in a statement. “We have not yet started truck production in Victoria [Texas], and this decision allows us to exit this business before the transition occurs.”

This announcement will affect about 70 positions. The reductions will begin in March, the company said in a statement.  

Caterpillar launched its first vocational truck in the North American market in 2011, working with Navistar on the products’ design and build.

The world's largest construction and mining equipment maker said Feb. 24 it will create the Electric Power, Marine and Oil and Gas Division through consolidation. 

The company has closed plants and reduced its workforce in a restructuring announced last year as it copes with global weakness in construction and mining, soft commodity prices and slowed demand for heavy machinery.

At the end of 2015, the global workforce totaled 105,700 employees, down nearly 11% from 2013.

In its fourth-quarter report Jan. 28, Caterpillar said the outlook for 2016 "does not anticipate improvement in world economic growth or commodity prices."

"If conditions stay soft, more cuts will be made. Much of the decline in mining, commodities, coal and energy have more than just cyclical weakness, and the firm needs to right-size operations to the likely 'new normal,' " said Eli Lustgarten, an analyst at Longbow Research.

Last year ,Caterpillar announced it would consolidate and possibly lay off up to 10,000 employees by 2018. Analysts expect more details on the restructuring and see additional cuts to office personnel.

"It is normally a high-cost area, and people can be asked to do more work-related functions [for the ones let go], while the mining and construction world hopefully start to improve," said Bill Seleksy, an analyst at Argus Research.

Caterpillar's 2016 outlook included about $400 million in restructuring costs. Last year, restructuring costs totaled $908 million, with about 75% coming in the fourth quarter.

The company has reduced management by 13% since 2013, Caterpillar CEO Doug Oberhelman said.


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