Caterpillar’s loss reflects unhealthy bottom line

Heavy-equipment maker Caterpillar, Peoria, Ill., has issued its earnings report, posting its first quarterly loss in 16 years with sales dropping 22 percent and slashing in half its January forecast for this year's profits, according to The Washington Post.

Visiting Caterpillar's headquarters two months ago, President Barack Obama said, "You can measure America's bottom line by looking at Caterpillar's bottom line." Caterpillar's bottom line and the profit and loss statements of some of the world's largest businesses have shown that the economy has suffered one of its most significant downturns since the 1930s.

Since the end of 2008, Caterpillar has cut 10,000 full-time jobs and 15,000 part-time and contract jobs. It has said business conditions could require more layoffs and reductions this year. The company posted a first-quarter loss of $112 million; a year earlier, it earned $922 million during its first quarter.

Caterpillar's Chief Executive Officer Jim Owens is disappointed in the recent economic stimulus package, saying it will have a limited effect on total construction spending. He says about $70 billion could be disbursed in 2009, which is about 6.5 percent of total construction spending in 2008.

"We do not expect this increase to offset steep declines in private construction spending," Owens says.

There has been some good news and possible signs of a turnaround recently regarding the economy as some companies have reported profits that exceeded analysts' low expectations and inventories of unsold goods have been reduced. During the past two weeks, the stock market has been volatile as corporate earnings reports have been released.

"It's bad, but it's about as bad as expected," says Mark Zandi, chief economist for Moody's Economy.com.

Date : 4/22/2009


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