equipment maker Caterpillar Inc. was caught off-guard by the
depth of shrinking demand for mining equipment, but it is
adapting to changing market conditions.
Caterpillar has implemented a range of cost-saving measures,
including temporary plant shutdowns, a worldwide headcount
reduction of more than 13,000 over the past year, a 20-percent
capital spending cut and general austerity measures
companywide, Mike DeWalt, vice president of strategic services,
said during an earnings conference call (
amm.com, Oct. 23).
After all that, "our
mining group is looking at structural cost reductions that we
would take with us as volume turns up, (like) shifting
production between facilities, rationalizing some product
lines, rationalizing smaller facilities, consolidating
functions and other actions," president and chief financial
officer Bradley M. Halverson said.
Its difficult to
predict where the market is heading, but Caterpillar leaders
said they are getting good anecdotal information that is
helping them adapt and become more flexible.
seeing strong mine production," DeWalt said. "Some of the big
mining companies are setting production records. But were
still not receiving nearly as many orders as we expected and
our outlook is lowered as a result."
Caterpillar, which saw
mining equipment sales fall 42 percent in the third quarter
compared with a year earlier, is expecting another decline in
end-user demand in 2014.
Several mining company
executives have indicated that "any expansion in the near-term
is dead. Its over. Its not going to happen,"
chairman and chief executive officer Douglas R. Oberhelman
said. However, mines have raised output of commodities like
iron ore and coal. "In my discussions with these guys, they
have been pretty bullish (and) are really focused on increasing
productivity, getting a lot more production out with fewer
Oberhelman does not
believe mining machinery demand will stagnate for long. "One to
three years out, the world will grow," he said. "China will not
implode. It will continue to attract iron ore and coal."