Caterpillar announces pay cuts, buyouts

CHICAGO (Reuters) - Heavy equipment maker CATERPILLAR (CAT.NY)Inc said on Monday that it would cut white-collar pay by up to 50 percent and offer buyouts to some employees as it looks to cut costs during what it characterized as "uncertain times."

The news, which sent Caterpillar's stock down 3.6 percent, came just days after the blue-chip industrial company said it planned to lay off 814 workers at its Mossville, Illinois, engine assembly plant.

Word of the pay cuts at Caterpillar follows news last week that package delivery giant FedEx Corp was forcing salaried workers to take pay cuts of at least 5 percent and suspending the company match to the employee 401(k) retirement plan.

Experts say the takebacks are an ominous sign of things to come at many other U.S. companies in the coming months as businesses -- even relatively healthy ones like Caterpillar and FedEx -- take defensive measures in response to the worst economic downturn in decades.

According to the employment consulting firm Watson Wyatt, 11 percent of all the companies it recently surveyed either already had cut wages or planned to do so over the next 12 months.

Analyst Eli Lustgarten at Longbow Research, who thinks Caterpillar's earnings may fall as much as 33 percent next year, said the pay cuts were necessary given the broad-based and fast-spreading deterioration in business the equipment company faces.

"The news coming out of the construction world is not wonderful," Lustgarten said. "And now all the big sectors that were supposed to hold out, like energy and mining, are softening, too, and projects are either being deferred or postponed at a minimum. So the environment the company faces is much tougher than what they've seen the last few years."

Caterpillar said that compensation for the most senior executives would be cut by as much as 50 percent, while pay for senior managers will be reduced 5 to 35 percent and other management and support staff will see cuts of up to 15 percent.

Caterpillar said the cuts would come in the form of reductions in the company's incentive compensation program and equity-based compensation.

The company said it would offer some members of management and U.S.-based support staff buyouts. Caterpillar said eligible employees would have three weeks to elect to take part in the program.

Caterpillar said additional involuntary layoffs, like the one announced last week, could be necessary. It said it would also implement temporary factory shutdowns as needed "in response to economic conditions that impact the markets for its products."

The company's shares fell $1.53 to $41.16 in late-morning trading on the New York Stock Exchange.

(Additional reporting by Scott Malone, editing by Dave Zimmerman)