Caterpillar Inc. will lay off up to 300 employees at its Milwaukee-area factories before June and says it will reduce labor costs at its other U.S.
plants as sales of mining and construction equipment have slowed.
The local layoffs, described by the company as short-term and temporary, will include up to 40% of the blue collar workforce at the South Milwaukee and Milwaukee plants that build some of the world's biggest mining machines.
How long people are out of work will depend on the company's business outlook, according to Peoria, Ill.-based Caterpillar. Locally, it also could depend on contract negotiations with the United Steelworkers union that begin next week.
The timing of the layoff announcement is scary, said Ross Winklbaur, a Steelworkers subdistrict director.
"We wonder whether this is for real, or whether it's just another way to try and intimidate people," he said.
Companywide, the extent of the layoffs will vary by location and will include salaried and hourly employees, Caterpillar says.
"It's not a one-size-fits-all response," said company spokesman Rusty Dunn, who declined to say how many people, companywide, are being laid off and for how long.
In January, Caterpillar said its fourth-quarter profit was cut in half by a deal in China that went bad and by slower growth around most of the world.
In February, the company said it planned to cut 1,400 of 3,400 jobs at a plant in Belgium because of high labor costs and sluggish sales growth in Europe.
Caterpillar is the world's largest maker of construction and mining equipment.
In late January, the company said there was a wide range of possibilities in its business outlook for 2013 because of the high level of uncertainty in the world economy. It said growth in China would improve but wouldn't rebound to the levels seen in 2010, and it expected relatively weak growth in the U.S. economy.
Caterpillar says its mining customers have been canceling and delaying equipment orders. Industry-wide, orders are down about 25%, said analyst Joel Tiss with BMO Capital Markets.
Analysts say a layoff of up to 40% of the union workforce here comes as a surprise -- and at least part of it could be an attempt to scare the union during negotiations.
The Steelworkers union has represented employees at the mining equipment factory in South Milwaukee for decades, but this will be the first contract negotiations since Caterpillar acquired the factory as part of its $7.6 billion purchase of the former Bucyrus International in 2010.
The negotiations could get off to a rough start as already the company has trained replacement workers through Milwaukee Area Technical College to step in should there be a strike.
The company has a history of tough labor negotiations.
"One thing Caterpillar has done very well since the 1960s is to get rid of the union," Tiss said, adding that the company now has many nonunion factories.
In 2012, Caterpillar opened a $200 million plant in Victoria, Texas, to build hydraulic excavators.
This week, the company announced the opening of a plant in Wuxi, China, to produce axles, transmissions, and final drives for use in earthmoving and mining machinery. It also completed an expansion of another plant in Wuxi to build hydraulic cylinders for Caterpillar machines.
Caterpillar now has 24 factories, four research and development facilities and three logistics and parts centers in China. The company has more than 15,000 employees in China.
"Success in China is an important part of our long-term strategy, and we are focused on bringing the complete Caterpillar business model to China in order to better serve and support our customer base," Chairman and CEO Doug Oberhelman said in a news release.
The Associated Press contributed to this report.
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