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Caterpillar Layoffs Reflect Oilpatch Slowdown

05/10/2015


Another good example of the extent of the oilfield service (OFS) supply chain is heavy equipment giant Caterpillar Inc. “Cat”, the origin of the term “yellow iron” for construction equipment, supplies all the earthmoving equipment used by the oil industry, giant trucks and shovels for oilsands mining, and diesel prime movers from everything from trucks to rigs to frac spreads to remote electricity generation.

Therefore, it should come as no surprise Cat announced on September 24 it would be eliminating as many as 10,000 jobs worldwide, about 9% of its workforce. This follows another major retrenchment of 13,000 personnel in 2013. A Bloomberg report said, “The announcement marks a capitulation to a prolonged downturn in energy, the segment that had helped shield Caterpillar’s earnings as mining slumped and construction growth remained tepid”.

The drop in metal prices has affected the global mining industry. Now the massive capital expenditure cutbacks resulting from the world oil price collapse has reduced Cat’s order book for new equipment and engines substantially. Diesel engines are the prime source of energy (transportation, direct rotating equipment drive, electricity generation) for all oil and gas operations in remote locations.

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