Sunday, 27 September 2015

The Cat trims its tail

The past week has been a topsy-turvy world for the vehicle industry: the self-savaging of VW, Caterpillar’s 33-rolling months sales decline in the Far East and a dividend award of £60 million for JCB’s chairman and family.
Last Thursday, Caterpillar Inc. announced plans to cut 10,000 jobs as part of a restructuring plan in the face of what it called "a convergence of challenging marketplace conditions in key regions and industry sectors — namely in mining and energy."

Caterpillar is a principal bellwether for the global economy as its equipment is not only large and expensive, but most frequently is purchased when industry – private and public – is on the move, i.e. expanding.

Caterpillar also has been an indicator of China's economic decline as the off-highway company’s sales in that region over the past several years have slowed.

Caterpillar noted that 2015 would be its third straight year of sales declines. With sales also expected to decline in 2016 to around $48 billion, the company could be looking at its first four-year stretch of sales falls in its 90-year history.

Caterpillar is not alone. VW will likely see its sales of diesel cars stall for a quite different reason as it was caught with its trousers down, cheating diesel emission standards in the USA.

The company has changed its leader and admitted to fitting special software that would allow its cars to cheat their way through EPA emissions tests, potentially leading the way to many ‘collective actions’ on the part of owners seeking redress for cars and vans they had purchased in good faith, but in fact were something quite different.

Caterpillar and VW were not alone with their woes. JCB in the UK, the privately-owned construction and agricultural equipment maker which has ploughed its own successful furrow since being founded by Joe Bamford in 1945, warned that it would have to cut jobs because of a slowdown in Russia, China, and Brazil.

In figures just filed at Companies House in London, however, JCB Service showed that “The directors approved a dividend of £60 million during the year, which was paid post year end” to the company’s chairman, Lord Bamford (son of the founder) and his family.

JCB accounts show pre-tax profits fell to £202.2 million for the year ending December 31 2014, from £210.9 million previously, on sales of £2.51 billion, down from £2.68 billion the year earlier. Earnings before interest and tax etc. (EBIT) fell three per cent from £313 million to £303 million.

In May this year it was stated JCB last year started operations at a £63 million factory in the northern city of Jaipur in India. It is also building two plants in the UK and expanding operations at its Staffordshire headquarters under a £150 million scheme that it said would create 2,500 jobs by 2018.

Back to Caterpillar, in a statement, Caterpillar chief executive officer Doug Oberhelman said: "We recognize today's news and actions taken in recent years are difficult for our employees, their families and the communities where we're located. We have a talented and dedicated workforce, and we know this will be hard for them."

The company’s three-month rolling sales figures have now been declining now for 33 months.

In August, rolling sales to the Asia/Pacific region were down 29 per cent for Caterpillar over the prior year, with sales to resources-industry customers in this region falling 46 per cent.

Meanwhile, back to Volkswagen AG, it remains to be seen how many jobs are lost in the company; more important are the questions: Will the company reveal why it implemented the ‘cheating’ device, who developed it and under whose authority? Did Ferdinand Piech know about the matter when he resigned this year?

Certainly, in the UK customers pay a premium for diesel cars on the pretext that their greenhouse gas emissions are ‘kinder’ to the environment. They may be left wondering why they went down that route.

The diesel engine, invented in Germany by Rudolf Diesel has become a universal power unit for cars, commercial vehicles, buses and coaches, construction equipment, gen sets and marine vessels of all shapes and sizes – even JCB, which once vowed it would never make its own diesel engines, has succumbed to its glamour.

In the last week, some of the diesel’s gloss has been removed. And not only VW has been affected.  

1 comment:

Alan Bunting said...

Makes you wonder whether Cat might now be regretting its decision to pull out of the on-highway truck engine business. It was another string to its bow. If it had persevered with its emissions control technology as part of its collaboration with Navistar, Cummins might not have moved in so decisively as Navistar's vital partner.