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  March 24th, 2015 | Written by

Caterpillar Relocates Illinois Factory to Mexico

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Global construction-equipment maker Caterpillar Inc. will relocate some of the manufacturing operations at its Joliet, Illinois, plant south of the border to Mexico, in an effort “to remain cost competitive.” The move is expected to be completed by the end of next year and will reportedly involve the production of two specific components: gear/engine oil pumps and valves produced at the plant that are installed in Caterpillar heavy equipment that is exported worldwide.

The company publicly announced late last year that it was considering the move with Caterpillar Vice President Jean Savage saying that, “In studying the global landscape for producing these types of components, it is becoming clear that the Joliet location is not as competitive for these particular components.”

The shift south of the border comes as Caterpillar is seeing a significant downward slide in its core business—the ultra-heavy-duty equipment used in such activities as mining, heavy construction and earth moving—with less-than-stellar projections for this year. In January, Caterpillar said it would shutter operations at its plant in Toccoa, Georgia, and its two-year-old facility in Franklin, North Carolina, by the end of 2016. Both plants produce the gaskets and seals installed in the company’s heavy equipment. About 275 workers will be affected with production consolidated at its foundry in Mapleton, Illinois.

The decision is the latest measure taken by the company to cut costs amidst changing economic realities in some of its key international markets.

China, for example, is seeing an overall economic slowdown which led to its market for construction equipment shrinking by 10 percent in the first nine months of 2014, year over year. Globally, the mining industry is struggling as prices for iron ore and coal could drop by as much as 20 percent and 4 percent, respectively, over the next 12 months.

Peoria, Illinois-headquartered Caterpillar holds the largest share of the world market in heavy-construction and mining equipment. The company also produces diesel and natural-gas engines, industrial-gas turbines and diesel-electric locomotives, and generated 2013 sales and revenues of $55.6 billion.