Caterpillar (CAT) Says it Will Explore Strategic Alternatives for Certain Mining Products

August 18, 2016 5:16 PM EDT

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To focus on those products with the greatest growth potential, Caterpillar Inc. (NYSE: CAT) announced today it intends to pursue strategic alternatives, including a possible divestiture, for its room and pillar products, which serve a segment of underground soft rock mining customers. The company will also discontinue production of track drills within its Resource Industries portfolio.

The company and its dealers remain committed to existing customers and will support those room and pillar and track drill fleets currently in operation.

"These moves, which align with Caterpillar's ongoing restructuring, will allow us to focus resources on those areas of the business that provide the highest, sustainable growth and best long-term returns," said Denise Johnson, group president with responsibility for Resource Industries.

Room and Pillar and Track DrillsThe room and pillar underground mining products under strategic review include continuous miners, feeder breakers, coal haulage systems, highwall miners, roof bolters, utility vehicles and diesel vehicles. While under review, Caterpillar will stop taking new orders.

Production of track drills will be discontinued, and no new orders will be taken.

"Caterpillar remains committed to an extensive mining product portfolio. We firmly believe mining is an attractive long-term industry, and we continue to invest in a broad range of products, both surface and underground. We are targeting our investments within the mining product portfolio to concentrate on those areas with the highest profitability potential," said Johnson. "At the same time, we continue to manage through the longest down-cycle in our history. We know these ongoing restructuring actions are not easy on our workforce; I'm grateful for our team's ongoing dedication."

Workforce ImpactIn conjunction with the announcement, Caterpillar expects to take actions to reduce the workforce in Houston, Pennsylvania, where the room and pillar products are manufactured. While the company intends to sell the room and pillar products, it will also assess other options, including a possible closure of the Houston facility.

Total workforce reductions of up to 155 positions associated with the room and pillar business are expected, with some occurring immediately. These actions will more closely align employment levels with current end-market demand.

In Denison, Texas, where track drills are produced, approximately 40 positions will be eliminated as a result of the track drill exit and other facility restructuring.

Repurposing of Winston-Salem FacilityIn addition to these moves, the company also continues to evaluate the most efficient and effective use of its manufacturing footprint. The company announced today it will repurpose its Winston-Salem, North Carolina, facility, transitioning it from a mining to a rail facility beginning later this year. Operations will transfer to Progress Rail, a wholly owned Caterpillar subsidiary.

As a result, the company will relocate the manufacturing of some components used in large mining trucks from its facility in Winston-Salem to its existing facility in Decatur, Illinois.

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