Caterpillar Inc. (NYSE:CAT) announced on Friday they will be closing down their plant at Aurora in Illinois that employs about 800 workers. A leading construction and mining equipment manufacturer in the world, Caterpillar is headquartered at Peoria, Illinois. The company also sells insurance and financial products to customers.
Production is going to be shifted to other facilities in the United States. A spokesperson of the company disclosed their wheel loader and compactor manufacturing is now going to be moved to the Decatur facility, which will create 500 jobs here. Medium wheel loader production will go to North Little Rock in Arkansas. These moves are expected to be completed by the end of next year.
While speaking to the press, Caterpillar spokeswoman Lisa Miller said, “Out of about 800 production positions, about 500 positions would likely be added to Decatur and about 150 positions would be added in North Little Rock”.
Caterpillar Agrees to Provide Severance Pay and Employee Benefits
Caterpillar has already reached an agreement with the union, United Auto Workers to provide severance pay and benefit extensions to the employees who will be affected by this move. The Chicago Tribune reports that according to the reached agreement, employees will get 40 hours of severance pay for every year of service with the business.
In another separate development, Caterpillar announced they will be closing down the facility at Gosselies in Belgium. Production from Gosselies will be moved to Grenoble in France, among other places. According to reports, they may also shift component production to their external suppliers. Another production facility at Elkader in Iowa is also going to be closed, costing 75 jobs.
Caterpillar is Restructuring to Save Costs
Caterpillar started closing down their facilities and consolidating to bring down costs in the last quarter of 2015. The company wants to save $1.5 billion every year through 2018. They have already shed 16,000 of the workforce to cope better with a slumping economy. They have set aside $500 million in restructuring costs for 2017.
A year after these plans were unveiled, Caterpillar said market conditions have forced them to be “more aggressive”. Initially, they had estimated that 10,000 jobs would have to be slashed globally. But now, Caterpillar is expecting the figure to be around 20,000.
Last January, Caterpillar’s (NYSE:CAT) forecast for 2017 was below the estimates of analysts because of low demand in the energy and construction industries.