CHICAGO (Reuters) - Caterpillar Inc’s (CAT.N) suppliers were feeling the pain of slumping sales at the world’s largest mining and construction equipment maker long before it announced an extensive cost-cutting program.
J-TEC Chief Executive Officer Gary Roling said Peoria, Illinois-based Caterpillar, his single largest customer, had recently pushed back a big order due this month to December.
“We’ve been selling to Caterpillar for a long, long time, and this year will likely be the lowest year for sales we’ve ever had,” said Roling, whose company makes tools to measure the flow of fuel, exhaust and other gases.
Combined with declining orders for a defense-related project, total sales are down 75 percent at J-TEC. The Cedar Rapids, Iowa, company’s workforce has fallen to 10 from 25 and is on a four-day week.
J-TEC is seeking new business in other sectors to boost sales.
“Our hope is that things will start to get better in the first half of 2016,” Roling said. “But we have no visibility, and based on (Caterpillar’s) news, a recovery could be some way off.”
J-TEC is not alone. The problems at Caterpillar have rippled through its supplier base and will probably worsen. On Thursday, the equipment maker forecast sales declines for 2015 and 2016 and announced plans to cut up to 10,000 jobs.
At Elk Grove Village, Illinois-based Acme Industries, which makes transmission parts for Caterpillar and rival Komatsu Ltd (6301.T), the sales drop has come at a time when its customers in the oil industry are also suffering.
Just last summer, the company was on a hiring spree and manufacturing around the clock. But owner Warren Young said it had cut staff to 200 from 240 as sales to Caterpillar and Komatsu have fallen 50 percent, dragging Acme’s total down 10 percent to 20 percent.
“When a downturn hits a couple of your businesses at the same time, it leaves you fewer places to hide,” Young said.
Like J-TEC, Acme executives are “out pounding the streets” for new business.
But Mike Schroeder, joint owner of DuPage Precision Products of Aurora, Illinois, summed up the situation for the diesel engine component maker, which supplies Caterpillar’s mining and construction business.
“Obviously this affects us, our business and our workers,” he said, declining to provide details. “Like everybody else, we have to make adjustments.”
Reporting by Nick Carey; Editing by Lisa Von Ahn