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UPDATE 1-Caterpillar to close facilities, could cut 880 jobs

(Adds comments by company spokeswoman, details of restructuring, company background, stock price)

CHICAGO, March 16 (Reuters) - Caterpillar Inc will close two facilities and is contemplating the closure of its engine manufacturing plant in Illinois, which together could potentially result in about 880 job losses, a company spokeswoman told Reuters on Friday.

The restructuring, announced over the past two months, is part of the heavy equipment maker's overall strategy to boost profitability and make itself better able to manage business cycles.

The move will affect its work tools facility in Waco, Texas, and its demonstration center in Panama, said the company spokeswoman.

Separately, Caterpillar's Progress Rail unit is contemplating the closure of its engine manufacturing facility in LaGrange, Illinois, shifting the work to Winston-Salem, North Carolina, and outside suppliers.

"If the LaGrange decision is finalized, the closure would impact approximately 600 full-time positions related directly to engine manufacturing," Caterpillar's spokeswoman said.

Caterpillar's workers were informed of the plans about the LaGrange and Panama facilities in January. The decision on the Waco facility was announced in late February.

The company's shares were up 1.5 percent at $156.93 on Friday morning.

The world's largest heavy-duty equipment maker emerged last year from the longest downturn in its history, when sales dropped more than 40 percent between 2012 and 2016.

The struggle led not only to a leadership change at the company, but also resulted in a credit rating downgrade by Moody's.

Chastised by that experience, the Deerfield, Illinois-based company has embarked upon a restructuring strategy, looking to squeeze more production out of its existing factories, focusing on lean manufacturing, margin expansion and asset efficiency.

The work at the Texas plant will be shifted to Wamego, Kansas, affecting 200 regular and contract positions, and the closure of the Panama facility will eliminate about 80 positions, the spokeswoman said. (Reporting by Rajesh Kumar Singh in Chicago Editing by Matthew Lewis)