Caterpillar Shuts West Virginia Mining Factory to Cut Costs

Caterpillar Inc. (CAT), the world’s biggest maker of mining equipment, plans to shutter a plant in West Virginia to curb costs as demand drops for machines used to dig up coal and copper.

Production of highwall miners used in underground mines will move to Pennsylvania from Beckley, West Virginia, by the middle of 2014, Caterpillar said today in an e-mailed statement.

The closing is among a half dozen announced in the past year by Caterpillar as it copes with its first drop in sales and profit since 2009. Others include a Summerville, South Carolina, plant that does re-manufacturing work for the auto industry, a tunneling business near Toronto and a facility that makes jumbo shaft drills in Sudbury, Canada, Rachel Potts, a company spokeswoman, said in an e-mail last week.

“This is consistent with the company’s strategy and something we expect to see more of as the company right-sizes its manufacturing footprint for the current demand environment,” Ted Grace, a Boston-based analyst for Susquehanna Financial Group, said in a telephone interview today.

A limited number of engineers among the 40 workers to be affected by the latest closing may be retained and moved to the Pennsylvania plant, Barbara Cox, a spokeswoman for Peoria, Illinois-based Caterpillar, said in a telephone interview today. Caterpillar also will offer a severance package, according to the statement.

Cost Reductions

The factory closing is part of the company’s efforts to “improve its cost structure,” Cox said. Caterpillar is “looking at structural cost reductions” including shifting production between plants, scaling back some product lines and consolidating functions, Chief Financial Officer Brad Halverson said on a conference call with analysts on Oct. 23.

The Beckley plant and the factory in Kilgore, Texas, that makes dippers and ballast boxes, which Caterpillar announced last week would also be closed, will be put up for sale, Cox said.

The biggest hit to demand is coming from mining. Analysts on average expect capital spending plans for major mining companies to fall 16 percent in 2013 and as much as 12 percent in the next two years, Karen Ubelhart, an analyst at Bloomberg Industries, wrote in a report on Oct. 15

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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