Caterpillar Plans to Sell Underground-Mining Equipment Lines

Caterpillar Inc. is retreating from the slumping coal industry, saying it plans to put its equipment lines for underground mines up for sale and lay off workers.

The Peoria, Ill., company said Thursday it will cut the workforce at its Houston, Pa., plant by about 155 jobs and will consider closing the plant if a buyer can’t be found. The plant produces a variety of coal-harvesting equipment and hauling vehicles and gear used in underground mines.

About 40 jobs also will be cut from a mining-equipment plant in Denison, Texas, where drills are made for underground mines. Caterpillar said it will stop taking orders for the for coal-mining equipment made at the Houston and Denison plants but will continue to support equipment already in use.

Demand for coal in the U.S. has fallen sharply in recent years as stricter environmental standards and low prices for natural gas make coal less attractive to burn in domestic power-generating plants. Caterpillar acquired the underground equipment lines as part of its $8 billion-plus purchase in 2011 of mining equipment company Bucyrus International.

“Caterpillar remains committed to an extensive mining-product portfolio,” said Denise Johnson, president of the mining-equipment business. “We firmly believe mining is an attractive long-term industry. At the same time, we continue to manage through the longest down-cycle in our history.”

Caterpillar is expected to log its fourth-straight year of lower sales in 2016. The mining-equipment business has been among the company’s weakest units recently amid slumping prices for mined commodities and reduced investments in mine expansions and new equipment. Caterpillar’s mining unit lost $163 million in the second quarter as sales dropped 29% during the quarter from a year earlier.

Caterpillar also announced it will revamp its plant in Winston-Salem, N.C. The plant has been producing powertrain components for giant trucks used in surface mines. But slumping demand for the trucks has left the Winston-Salem plant, as well as a plant in Decatur, Ill., where the trucks are assembled, severely underused in recent years.

The company said it will move the component assembly work to Decatur and repurpose the Winston-Salem plant for warehousing, machining or fabrication operations for its railroad-equipment business, Progress Rail. The Winston-Salem plant was opened in 2011 as part of a push by Caterpillar to expand production capacity, particularly for big mining trucks. But demand for the trucks began dropping shortly after the plant opened.

Credits: The Wall Street Journal