February 24, 2016 / 3:36 PM / 3 years ago

Caterpillar announces further division consolidation

(Reuters) - Caterpillar Inc (CAT.N) said on Wednesday it will combine two divisions dealing with power and energy, adding more detail to a restructuring plan announced last year that it aims to complete by June.

The CAT logo is seen on back of a Caterpillar excavator machine at a work site in Detroit, Michigan January 25, 2013. REUTERS/ Rebecca Cook

The company will create a new Electric Power, Marine and Oil & Gas Division by consolidating the Electric Power and Marine & Petroleum Power Divisions.

Global weakness in construction and mining, soft commodity prices and slowed demand for heavy machinery has caused the manufacturer to reduce its operation capacity by closing plants and reducing its workforce.

In fourth-quarter earnings posted Jan. 28, the world’s largest construction and mining equipment maker said its outlook for 2016 “does not anticipate improvement in world economic growth or commodity prices.”

“If conditions stay soft, more cuts will be made. Much of the decline in mining, commodities, coal and energy have more than just cyclical weakness and the firm needs to right-size operations to the likely ‘new normal,’” said Eli Lustgarten, analyst at Longbow Research.

Caterpillar shares were down 2.99 percent at $63.78 during morning trade.

Last year Caterpillar said it would consolidate and could layoff up to 10,000 employees by 2018. Analysts have been expecting more details on the restructuring and some said the consolidation could mean additional cuts to office personnel.

“It is normally a high cost area and people can be asked to do more work-related functions (for the ones let go), while the mining and construction world hopefully starts to improve,” said Bill Seleksy, analyst at Argus Research.

Caterpillar’s 2016 outlook included about $400 million for restructuring costs. Last year restructuring costs totaled $908 million, about 75 percent of which came in the fourth quarter.

The company has already reduced executive leadership by 13 percent since 2013, Caterpillar Chairman and Chief Executive Doug Oberhelman said in a written statement.

Reporting By Meredith Davis; Editing by Alan Crosby

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