Caterpillar lays off 120 workers as trade war hits sales

Key Points
  • Caterpillar has laid off 120 temporary workers at a plant in Texas following its decision to cut production in the wake of a fall in sales due to U.S. President Donald Trump's trade war with China.
  • The Illinois-based manufacturer said trade tensions made customers wary of committing to large capital expenditures, hitting quarterly profits and forcing a cut in its full-year profit outlook.
  • Other manufacturers have also let go of workers, citing weak demand.
Construction machinery of the US producer Caterpillar can be seen at the BLG Logistics Group Car Terminal, ready for shipping in Bremerhaven, Germany, 12 June 2017. Photo: Ingo Wagner/dpa (Photo by Ingo Wagner/picture alliance via Getty Images)
Ingo Wagner | picture alliance | Getty Images

Caterpillar has laid off 120 temporary workers at a plant in Texas following its decision to cut production in the wake of a fall in sales due to U.S. President Donald Trump's trade war with China.

The layoffs, which took place at the hydraulic excavator facility in Victoria on Nov. 1, were confirmed to Reuters by a company spokeswoman on Monday. The facility had about 820 employees.

Kate Kenny, Caterpillar's spokeswoman, attributed the decision to "market conditions."

Caterpillar shares closed up 1.7% at $146.92.

In October, the world's largest heavy equipment maker said it was taking steps to cut production after sales fell across all product segments and in most regions in the latest quarter.

Sales in Asia-Pacific, its third-biggest market, fell 13% as Caterpillar faced falling demand in China and competition from cut-price domestic rivals, while revenue in its main developed world market in North America fell almost 3%.

The Illinois-based manufacturer said trade tensions made customers wary of committing to large capital expenditures, hitting quarterly profits and forcing a cut in its full-year profit outlook. It expects the uncertainty to result in lower sales this year.

Kenny did not say whether the production cuts would lead to workforce reductions at other facilities. When asked, she said Caterpillar was taking "a variety of actions at its global facilities to align production with demand."

Caterpillar, an industrial bellwether and proxy for global economic activity, benefited in the past year from the strongest global growth since 2010. However, a tariff war between the United States and trade partners, including China, has sapped business confidence and weakened the global economy.

Last month, the International Monetary Fund warned that the Sino-U.S. trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, adding that the outlook could darken further if trade tensions remain unresolved.

Henry Guajardo, who runs Workforce Solutions — a state-funded local workforce development agency — said the affected employees were all production workers.

Since Caterpillar notified his agency about the layoffs at the Victoria facility, Guajardo said dozens of workers have come to his office seeking help in securing a livelihood.

Other manufacturers have also let go of workers, citing weak demand. Last month, farm equipment maker Deere & Co announced indefinite layoffs for 163 manufacturing workers.

In September, analysts at Moody's Analytics estimated the trade war had cost almost 300,000 jobs in the United States.

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