Caterpillar Inc. expects flat to slower business activity
across its energy, power systems, rail and mining equipment
segments next year.
The company will
continue to consolidate its mining equipment manufacturing
capacity, strategic services vice president Mike DeWalt said
Dec. 4 during Credit Suisses Industrials Conference.
Capacity added in the
last up cycle was meant to get "more production out of existing
facilities," he said, adding that the Peoria, Ill.-based
company did not open new plants and does not have multiple
facilities doing the same job. While Caterpillar "certainly
(has) a lot more capacity than what were producing and
selling, it does not follow that we should rip out an assembly
line and throw the equipment away. That really doesnt buy
Instead, DeWalt said,
"were closing some facilities and consolidating some. We
announced three full closures and one partial closure in the
last month. There are more structural cost reductions we have
yet to announce in 2014 and probably beyond."
"We (are) essentially
forecasting a fairly substantial decline in end-user demand
next year," DeWalt said.
For oil and gas
applications, Caterpillar manufactures reciprocating engines
used in drilling and fracturing, solar gas turbines and natural
gas compressors used in offshore oil production. Customers
include Schlumberger Ltd. and Halliburton Co., both of Houston,
Caterpillars Power Systems Group president Jim Umpleby
projecting flat revenue from the oil and gas sector in 2014, he
"We serve diverse
sectors within electric power, from small retail generators
sold by our dealers to large power plants. Most of the
softness" in equipment demand is from electricity producers
above 750 kilowatts, Umpleby said, attributing the dip "to
general economic uncertainty and caution about making capital
power systems unit includes its Progress Rail/ElectroMotive
Division subsidiary, which builds locomotives and locomotive
and railcar parts.
to expand internationally and we sold our first transit
locomotive within the last year. We will have our first Tier
4-compliant freight locomotive in 2017," he added, noting Tier
4 refers to the latest U.S. emission standards.
"(W)e believe that
there will be limited demand for Tier 4 freight locomotives in
2015 and 2016," as roughly 5 percent of the railroads
locomotive fleet is currently idled.
Caterpillars railroad customers is using a liquefied
natural gas (LNG)-powered locomotive in a demonstration trial,
while others are testing LNG units.