Caterpillar Considering a Move to Mexico
Global construction-equipment maker Caterpillar Inc. is considering relocating some of the manufacturing operations at its Joliet, Illinois, plant to Mexico. The company says it would make a decision by the end of March, adding that it had informed the 250 employees who work at the facility, which produces some of the major hydraulic components installed in Caterpillar heavy equipment that is exported worldwide.
If given the go-ahead, the company says the transition would begin in 2016 and involve two specific components—gear/engine oil pumps and valves produced at the plant.
“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,” says Caterpillar’s vice president, Jean Savage. “We recognize that this decision, if finalized, will be difficult for our employees … and we value and appreciate our employees’ hard work and their dedication to producing quality components.”
Last week, Caterpillar said it would shutter operations at its plant in Toccoa, Georgia, and its two-year-old facility in Franklin, North Carolina. 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.
Mulling over the decision to reposition some of its U.S. production operations 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.
China, one of Caterpillar’s prime markets, is seeing an overall economic slowdown which has contributed to shrinking its market for construction equipment 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. One bright light in the equation is North America’s construction-equipment market which grew by 9 percent, year over year, in the last quarter of 2014 alone. But that could be offset by the current decline in oil and gas prices that might reduce the demand for the heavy specialty equipment used in well servicing, gas compression and drilling, with a resultant drop in Caterpillar sales in that industry sector.
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