By James B. Kelleher - Analysis
CHICAGO (Reuters) - Things are getting worse, not better. Can somebody please do something?
That's the plea from corporate boardrooms as U.S. lawmakers, faced with the worst recession and banking crisis in 70 years, get bogged down in debates and hearings on Capitol Hill rather than take bold, unified action.
The latest poster child for this vocal pessimism is Peoria, Illinois-based Caterpillar Inc, the world's largest maker of construction and mining equipment. For companies like Caterpillar, which until recently sounded confident because its mining and energy customers enjoyed boom times, creeping along won't cut it anymore.
Now that commodity and energy prices have gone into the tank along with the global economy, Caterpillar has been transformed from Pollyanna to Cassandra. It's sounding the tocsin and slashing head count. Over and over and over again.
In three separate announcements over the past 17 days, Caterpillar has laid off, bought out or offered early retirement to nearly 25,000 employees -- or about 15 percent of its full-time global workforce.
The latest round of cuts came on Wednesday, when Caterpillar said it was offering voluntary early retirement packages to about 2,000 production workers.
The ad-hoc, serial cuts -- and the warning there may be more -- have suggested Caterpillar is struggling to keep up with a drop in demand for its yellow earth-moving equipment that is happening faster than executives can react.
Two years ago, Caterpillar CEO Jim Owens worried that the greatest threat to U.S. prosperity was an activist Congress that might pass restrictive trade policies that would derail the U.S. export boom.
Now, it is inaction in Washington -- the failure to pass a stimulus bill, the failure to address the financial crisis with detailed, clear and credible plan -- that is killing Owens' business, and there are signs he is lining up with President Barack Obama to prompt lawmakers to act quickly.
Company spokesman Jim Dugan would not immediately confirm a report in the Peoria Journal Star newspaper on Wednesday that Owens had told Obama, who will visit Caterpillar on Thursday, that the company would begin recalling laid-off employees if an acceptable economic stimulus package is approved and enacted quickly.
But that's what Obama was telling an audience in Virginia. Dugan would only say: "We think quick, thoughtful action on a stimulus is appropriate."
LONG AND NASTY
Caterpillar is hardly alone in warning that the current downturn is an unprecedented crisis that calls for swift, dramatic action.
Harold McGraw, the chairman of Business Roundtable and chief executive of McGraw-Hill Companies Inc, told a briefing in Washington on Wednesday that "we need to tone down the rhetoric and act."He joined a number of top executives from bellwether companies, including Microsoft Corp founder Bill Gates, Cisco Systems Inc's John Chambers and Macy's Inc's Terry Lundgren, who have said the current downturn is going to be far nastier and far longer than anything most living Americans have ever experienced.
"No doubt, we've got three or four years here that are going to be very tough," Gates said last week. "We're going through a period ... where a 50-year credit expansion has moved to contraction. You're going to have a number of years where aggregate demand is low."
Certainly, the economic data is grim. Nearly 600,000 U.S. workers lost their jobs in January, the Labor Department reported on Friday, the largest one-month contraction in employment since 1974.
That followed word last week that U.S. gross domestic product, the broadest measure of economic activity, tumbled at a 3.8 percent annual rate in the final quarter of 2008, the steepest rate of decline in 27 years.
"Being very candid, no one, including us, knows how long it will last," Cisco's Chambers says.
And consumer confidence has tumbled to a 40-year low, levels that "indicate that the current recession could be protracted," says Geoff Richards, the co-head of William Blair & Co's special situations and restructuring group.
He predicts curtailed spending will weight down a broad range of industries, from retailing to financial services to automotive to newspaper publishing for many quarters to come.
Source :Reuter news