Caterpillar (CAT, Financial) announced on Thursday a number of changes that will help it reduce its operating costs. The cost reductions will lower Caterpillar’s operating costs annually by $1.5 billion. The plans follow a lowered estimate for sales revenue in 2015 and 2016.
The main part of the cost reduction plan includes cutting 4,000 to 5,000 employees from its workforce by 2016. Further workforce reductions will also likely continue through 2018 with a total reduction of about 10,000 workers. Overall, the cost reduction plans go through 2018 and also include the closing of many of Caterpillar’s manufacturing facilities.
Caterpillar's sales have struggled, especially since a large part of its business is devoted to the energy and mining sectors. In 2014 the company reported a total revenue decrease of 1% with total sales of $55.2 billion. For the first half of 2015, total revenue is down 8.7% with total sales of $25 billion. Revenue estimates for 2015 were recently revised down to $48 billion from $49 billion. A further revenue decrease is also expected for 2016, with a revenue estimate of $45.6 billion, down 5%.
On Thursday, Guy Adami and other CNBC Fast Money traders discussed industry challenges and Caterpillar’s cost reduction plan.
