Cat Stock Blog

Workers at Caterpillar’s articulated-truck plant in Peterlee, United Kingdom, approved a break in production:

The layoffs start next Monday when the factory will halt work on its line of articulated lorries for five weeks, with the staff to receive 75 per cent of their usual wages.

Union officials say a further break of six weeks with full pay and another week are also expected leading up to the end of May.

The decision was made after months of negotiations between unions and the company, which employs 700 people at its factory in Mill Hill, in the North West Industrial Estate.

Articulated trucks are basically two-piece machines with a big hinge connecting the tractor to the load carrier in the back. They work best over varied, uneven terrain.

They’re far smaller than the huge mining trucks Caterpillar builds in its Decatur, Illinois, plant, where I’ve been told demand for smaller trucks has also dried up.

Hernando Today, a fine Tampa Tribune product, quotes a Caterpillar dealer on how things are going in Florida’s comatose construction sector:

Hernando County’s lone Caterpillar dealer, Ring Power Corp. in Brooksville, has been scaling back considerably during the past two years.

The construction market has crashed in Hernando County and that has affected Ring Power. Vice President Mick Fields said the company’s warehouses haven’t been as packed lately. That is typical among most Caterpillar dealers these days, he said.

“We’ve cut our inventory pretty drastically over the past two years,” Fields said. “It’s all based on customer demand. We’re off by about 25 percent … maybe more.”

That squares with what Cat brass said during the conference call the other day: the company actually wants dealers to avoid letting the tractors fill up their lots if there are no buyers.

(Disclosure: I worked for the Tampa Trib for five years a long time ago).

Bloomberg reports on a company that’s making a killing off second-hand machines:

A global recession that’s hobbling sales growth at farm- and construction-equipment makers including Amsterdam-based CNH Global NV and Caterpillar Inc. hasn’t hurt Ritchie Bros. The Canadian company auctioned off a record $3.57 billion worth of equipment last year, a 12 percent increase over 2007, as financially strapped buyers sought alternatives to high-priced new machines.

Ritchie Bros. opened new sites last year including one in Paris and is expanding in Orlando, Florida, its biggest U.S. venue. While Caterpillar is eliminating workers, Ritchie Bros. said it hopes to add to its sales force this year.

See, General Motors would never sell a car or pick-up that lasts as long as a good old Cat dozer.

Of course, Cat also has its own site for selling used tractors.

Caterpillar, which I presume has lots of company in this regard, now wants out of its relationship with Satayam, the disgraced Indian outsourcing firm, according to one report.

The company may terminate the contract on stability concern after some key employees engaged in the project left Satyam, the newspaper reported.

Cat officials are mum (another surprise).

Previously: Satyam could fail, InfoWeek says

Dan Walters, a columnist with the Sacramento Bee, wrote that California, which will be $40 billion in the hole over the next 18 months, might be able to make up some of the difference with federal stimulus dollars.

California’s share of direct spending in the package has been calculated at $21-plus billion, and Jed Kolko, an economist for the Public Policy Institute of California, told an economic seminar in Sacramento Monday that about $14 billion of that could underwrite state education, medical care and other spending programs over the next two years.

What’s this got to do with the fate of giant yellow earthmovers? Well, if California can spend two-thirds of its stimulus bonanza on spending that was going to happen anyway, doesn’t that water down the stimulus effect quite a bit?

I heard the other day that the state of Texas, which usually runs a pretty tight ship, has an $8 billion deficit on its hands. With state budgets drowning in red ink from coast to coast, I can’t help wondering how many are going to be tempted to use Obama’s billions to clean up their balance sheets rather than launch a bunch of big construction projects.

Caterpillar is letting go of about 15 percent of the staff at its Pontiac, Illinois, factory, the Bloomington Pantagraph reports.

The layoffs, which will take effect Feb. 16, are the latest blow to the community of about 12,000 people. Since the start of 2008, the city has seen extensive flooding damage, battled the governor’s still-pending decision to close Pontiac Correctional Center — the city’s third largest employer — and learned of layoffs at Interlake Material Handling Inc.

At Caterpillar, the layoffs represent about 15 percent of the work force of more than 860 workers. The number doesn’t include an undetermined number of managers who may accept buyouts.

I once applied for a job at the Pontiac plant just before the economy cratered in about 1981 or so. Fate smiled on me, I figure.

As long as we’re on the subject, Cat won’t say how many of the 5,000 working in Decatur will be let go.

U.S. district court in Tennessee said union-represented employees who retired while no contract was in effect in the mid-1990s aren’t entitled to lifetime health benefits, which were provided in a contract that expired amid a protracted labor dispute. From the Peoria Journal Star:

… their right to receive those benefits did not vest until they actually retired, not when they became eligible for the benefit but continued working, the U.S. Court of Appeals for the 6th Circuit ruled in a majority decision.

Also, the court said Tuesday, most of the 4,000 plaintiffs retired when there was no labor contract in effect between Caterpillar and the United Auto Workers. The 1988 contract granting the benefit had expired in 1991, and the 1998 contract did not grant the benefit.

The court’s ruling, written by Judge Boyce Martin Jr., sent the case back to U.S. District Court Judge Aleta Trauger and directed her to dismiss any claims in the lawsuit that hinge on the plaintiffs’ theory that retirees’ medical benefits vested before actual retirement.

That, the court said, could resolve the vast majority of the claims. In other words, it could gut the plaintiffs’ case.

Not much to say here without taking sides, so I’ll just skip it.

Caterpillar looked like it might spend the day in the green till a dive in crude oil futures sent it back underwater. After yesterday’s mauling, though, 1 percent down feels like a day off from school. Full quote at Yahoo Finance.

Broader markets are acting like they’re chained to a Cat D11, but managed to close positive. Dow, up 0.72%; Nasdaq, up 1.04%; S&P 500, up 1.09%. Wrap-up at Market Watch.

Cat’s volume, 20 million shares, was a sharp drop-off from Monday, but still almost twice the average. It feels like the market’s ready for a breather. Cat could catch a bid from pure seller exhaustion in the next few days, I suppose.

Over the weekend I was invited to join the cast of contributors at Seeking Alpha, the aggregator site for investment-related blog posts.

Basically it gives Seeking Alpha the right to republish anything I post here for free — they keep whatever ad revenue it generates and I get the prestige of being named among the financial blogger elite.

Here’s my profile page.

Of course this obliges me to write the occasional post that might prove meaningful for Real Live Stock Market Participants. I did that yesterday with Caterpillar’s earnings report.

Most of the time, though, I plan to keep serving up tasty links and news of interest to anybody interested in Caterpillar. “Stock” is only one-third of the blog’s title, after all. It’s also the one thing that binds everybody in the Cat universe together, so it’ll remain a big part of the show. But not the only thing.

Afraid to Trade blog profiled Caterpillar’s chart action yesterday.

In short, from a technical perspective on the daily chart, Caterpillar is finely balanced beween doom and hope at the moment, and it might be best to wait until a clear victor (buyers or sellers) emerges before entering a new position here. Although, this would be a decent spot to enter if you are a Caterpillar bull, because you could place your stop just beneath this level and would stand to make a good profit should price find support here.

Check out the link to see the whole thing .. the blog targets day traders, who tend to follow the charts more closely than folks who buy on fundamentals.

One observation: Cat is at the bottom of its trading range while the rest of the Dow and S&P500 are roughly near the middle. It stands to reason the broader markets will test the bottom of their range over the next few weeks as more ugly earnings reports unfold. That could spell downward gravity for everybody.