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Merry Christmas Caterpillar axes 900 jobs

A story in the London Finacial Times reported that Caterpillar, the world's largest manufacturer of heavy earthmoving equipment, is to cut 900 jobs as it tries to reduce costs.

About 520 positions will be eliminated through the closure - already announced - of its Perkins Engines plant in Shrewsbury, in the UK. Another 420 people will lose their jobs in the US, although Caterpillar said it hoped to achieve most of the reductions through a voluntary redundancy programme.

It expects the cutbacks to be implemented by June 30.

The cost of the plant closure and the employment reduction will necessitate a pre-tax charge of about $55m, Caterpillar warned. However, it said that, aside from that charge, it was comfortable with the 2001 outlook which it released in October. According to First Call, analysts expect the company to earn around $2.60 this year, down from $3.02 in 2000.

This week, Caterpillar also announced that it was selling the design, assembly and marketing rights to the new MT series of its Challenger farm tractors to Agco, another farm equipment maker. As part of the deal, Agco would acquire a plant in Illinois, and assemble four new Challenger models, with Caterpillar supplying the engines.

Some analysts believe that Caterpillar had been losing money in the agricultural equipment area, and raised their 2002 earnings expectations as a result. UBS Warburg, for example, suggested that 2002 earnings could benefit to the tune of 5-10 cents a share.