Caterpillar extending plant closures with virus sapping demand

  • Luke Sharrett/ Bloomberg photo Caterpillar excavators at the Whayne Supply Co. dealership in Louisvi

 
By Joe Deaux
Bloomberg
Updated 6/11/2020 8:52 AM

Deerfield-based Caterpillar is keeping some of its plants shut for longer than expected with demand languishing, in a sign that the economic recovery is progressing slowly.

Among Caterpillar's operations across the Americas, its Curitiba Brazil and Campo Largo BCP Brazil plants are idled until the middle of June, while parts of its Piracicaba Brazil facilities aren't slated to reopen until June 30, according to a document seen by Bloomberg. Additionally, the company had more than 10 facilities shuttered at some point during May, the document shows.

                                                                                                                                                                                                                       
 

The shutdowns give a peek inside the impact the global coronavirus pandemic is having on the company, considered a bellwether for parts of the economy. Caterpillar's plants are typically operating at this time of year, according to a person with direct knowledge of the operations who asked not to be identified because the information isn't public. The second quarter traditionally is Caterpillar's highest factory output as it ramps up for seasonal demand.

"It's reasonable to assume that they're limiting their production schedules to align demand that's still very muted," Matt Arnold, an analyst at Edward Jones & Co., said in a telephone interview. "In general, we know that demand across construction and mining markets and of course energy is still in a depressed state and as a result they're going to have to have production schedules that are kind of aligned with that."

Many of the facilities being idled are for two weeks or longer, according to the document. Curitiba is shut from June 1 to June 15, Piracicaba's motor grader line is down from May 18 to June 30 while the medium wheel loader, medium track-type tractor and soil asphalt and pneumatic compactor line is idled from June 1 to June 30. The North Little Rock facility in Arkansas was closed from May 18 until June 8, and the BCP Clayton and BCP Stanford facilities were shut from May 18 to May 26.

Caterpillar spokeswoman Kate Kenny referred Bloomberg to the company's previous public statements.

Chief Executive Officer Jim Umpleby in April departed from his normally staid commentary on earnings calls to warn analysts of a "severe and chaotic" impact from the crisis. CFO Andrew Bonfield at the time made it clear that the company isn't necessarily saying the second quarter for sure would be the trough, saying it is "going to take a little while to recover."

During the same call with analysts, Umpleby said it had suspended operations at "certain" facilities due to supply-chain constraints, weak customer demand and government mandates -- referring to the lockdowns. He also warned that the company sometimes has facility closures to align production with customer demand, even when the world isn't going through a pandemic.

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