Caterpillar leans on old playbook

CLAYTON: Six months into the U.S. tariffs on imported aluminum and steel, Caterpillar Inc (CAT.N) is finding that one of the best ways it can protect profits is a cost cutting strategy that is more than two years old.At this sprawling factory in central North Carolina where it makes small front-end loaders, the company laid off workers in 2016 in response to plunging sales, consolidating two shifts into one under a program it calls the Operation & Execution Model.

Even though demand has picked up since then, its Clayton plant still runs a single shift and operates only four days a week. One third of the facility’s 550 employees are on flexible contracts.

The result: CAT is producing more loaders here with 30 percent fewer people on the factory floor than in the past, the company told Reuters.

It has redesigned all new machines it makes with over 20 percent fewer parts, cutting back on the consumption of steel which brings down the cost, Tony Fassino, vice president at Caterpillar’s building construction products, said after a factory tour in Clayton.

“Fewer parts numbers are a huge win,” Fassino told Reuters. “It improves safety, it improves the quality, it improves the cost.” Now, these cost cutting approaches are helping counter the financial impact of U.S. President Donald Trump’s trade wars.