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Caterpillar plant closures
Construction and mining equipment maker Caterpillar is closing plants in the US and Europe with a combined loss of around 2,800 jobs, in reaction to a drop in demand in the construction, mining and energy industries.
Products made at the plants, in Aurora, Illinois and Gosselies, Belgium, will be shifted to other manufacturing plants. In the US, this equipment will be supplied from locations within the country but supply of equipment to Europe will now come from a range of global locations.
In a statement, Caterpillar said it would move production from the Aurora plant, which makes large and medium wheel loaders, to another facility in Illinois, at Decatur, and to its North Little Rock facility in the state of Arkansas to the south. Decatur will handle the large wheel holder production and North Little Rock the medium wheel loaders. The transfer of production is expected to be complete by the end of 2018.
“Moving production from Aurora to other existing facilities allows Caterpillar to efficiently leverage manufacturing space while still preserving capacity for an upturn,” said Denise Johnson, Caterpillar group president of resource industries. “Supporting impacted employees through this transition is a top priority, as we know these actions are difficult for our talented and dedicated people.”
The company said it would maintain an office in Aurora for engineering and product support work.
The closure of the Aurora plant is expected to cost 800 jobs but the majority will be reallocated to the other two plants.
In the US, the company is reported to be looking at a further $500m in restructuring costs this year.
Global supply realignmentIn Belgium, meanwhile, the company said all production operations at Gosselies were expected to end by the middle of this year, after a decision in September 2016 to reallocate production at the site to other manufacturing facilities.
A spokesperson for Caterpillar in Europe told Automotive Logistics that the excavators currently made in Belgium would in future be sourced from China, Japan and the US. Caterpillar’s facilities in Akashi (Japan), Xuzhou (China) and Victoria, Texas (US) will supply the excavators to Europe in future.
“The reason for the facility closure is to substantially reduce operating costs and to adjust our manufacturing surface to current and expected market conditions,” added the spokesperson. “This decision is not a reflection of the team’s performance. It is a reflection of the capacity challenges we are up against.”
Caterpillar said it had reached an agreement with authorities in the region of Wallonia to sell the Gosselies site to investment company Sogepa.
According to Belgian news source, L’Avenir, the value of the transaction to Caterpillar is €143m ($152m), which is what the group invested in the site – though according to the government, the overall value of the 500 hectare site is €500m.
Caterpillar: 6 Surprising Way CAT Makes Money
The Caterpillar Inc. (CAT) is a multinational company with over 500 manufacturing and servicing locations in approximately 180 countries worldwide.1 2 The publicly-traded company manufactures and sells a range of industrial products, including industrial machines, engines, and small-scale industrial tools. Caterpillar also manufactures and sells a full line of branded Caterpillar gifts and apparel. Founded in 1925 through the merger of Holt Manufacturing Company and C. L. Best Tractor Co., the company has grown substantially in size and revenue, with over 100,000 employees around the globe.
You may have figured that most of CAT’s revenue is generated from producing and selling large industrial work vehicles and machinery, but we have found additional and perhaps surprising ways that the company makes money.
Industrial Smartphone Manufacturer
Although Caterpillar is known as a leading manufacturer of large-scale machinery, the company also has a hand in producing durable smartphone development and has released a number of smartphones for the industrial market. Caterpillar released the Cat S60 phone in February 2016, which allows users to detect heat patterns using a unique thermal imaging feature. Similar to Caterpillar’s other smartphone models, the Cat S60 was known for its rugged durability. Advertised as “water-resistant,” the Cat S60 could operate in underwater depths of up to 16 feet for approximately one hour. This phone has now been replaced by the S61 which also offers air quality monitoring.
While Caterpillar generates the majority of its revenue from machinery sales, the company also makes money from its trademark and licensing agreements. Caterpillar machines are easily recognizable from the company’s branded yellow, but that shade of yellow has not been with the company from day one. Caterpillar’s machine color originated in 1931 after years of gray machinery design. The distinctive yellow color of Caterpillar machines is now trademarked by the company, along with its logo design too. Additionally, the licensing of its branded products and apparel are also key revenue drivers for the business. The company’s products are sold in retail stores worldwide and in 2018 the company was ranked 28 out of 150 by License Global for its global licensor status.
Caterpillar’s machinery is sold through a broad network of dealers, and its roots run deep. Many Caterpillar dealers have been working with the company since 1925. Yancey Brothers is one of the company’s longest-standing dealership relationships.8 With 168 dealers serving 193 countries, the company’s dealership network has more employees than Caterpillar itself.9
While Caterpillar services a global network, the company’s business operations have been located in Illinois since its founding in 1925 (and even before, when Holt produced the first Caterpillar tractor.)10 The first manufacturing plant affiliated with Caterpillar’s business operations opened in Peoria, Illinois, where most of the company’s business operations are still located. While most of Caterpillar’s machines are manufactured in the Midwest, some of the company’s other leading manufacturing plants are located in Russia, China, and Brazil.11
Caterpillar moved its headquarters closer to Chicago to Deerfield, Illinois, just a few miles north of the city.12 Deerfield is also home to major company headquarters like Walgreens and Underwriters Laboratories (UL).
Caterpillar generates a significant amount of revenue through subsidiary businesses. Its leading subsidiaries include Caterpillar Financial Services, FG Wilson, Perkins Engines, Progress Rail Services Corporation, and Solar Turbines. In February 2015, the federal government conducted an ongoing investigation of Caterpillar’s subsidiaries to ensure that it was appropriately using and disseminating funds within its U.S. and international business accounts. As of January 2018, no criminal charges had been filed against the company or any of its employees.13
Machines for Sale and Rent
Caterpillar produces large-scale industrial machinery for a wide range of industries including energy, transportation, and construction. Leading machinery manufactured by the firm includes tractors, on-highway trucks, off-highway trucks, pavers, loaders, combines, bulldozers, shovels, and excavators. The company also specializes in energy drilling and commodity mining machines.
While Caterpillar generates most of its revenue from selling newly-manufactured machinery to businesses, the firm also rents and sells used machinery. Rental machinery is convenient for construction projects that don’t require long-term assets. Companies can also significantly reduce costs by buying used machinery. Used machinery is insured by Caterpillar, and companies can customize their used machinery purchases.