Caterpillar, Other OEMs Slashing Jobs

The European debt crisis is not only depressing investors’ risk and saver appetites - it is causing major long-term harm to Europe’s manufacturing capability.

Caterpillar Inc. (CAT) became the latest American firm to announce major job losses and rationalization at its European operations. Last Thursday, the firm announced that it is planning 1,400 job cuts at its Belgium plant which employs 3,700 people.

In addition to Caterpillar, Reuters reports a string of other firms cutting down staff.

Ford announced the closure of its Belgium plant leaving 4,300 people unemployed; General Motors closed its Opel plant in Germany, shedding more than 3,000 jobs; ArcelorMittal, after fraught discussions with the French government, now plans to slash hundreds of jobs at its steel plants in France and Belgium. Dow Chemical announced the closure of operations in the Netherlands, Belgium, Spain and the UK.

The paper quotes research by the consultants and auditors Grant Thornton, who interviewed over 12,000 executives in 41 countries. The firm said that companies have lost about $2 trillion since 2009 because of the eurozone crisis, while unemployment has reached record levels with nearly 19 million unemployed.

Interestingly, the economic crisis is not the only reason why global companies are quitting Europe, according to the paper. The burden of costly regulation and labor as well as taxation is forcing many to look for better opportunities in the emerging markets.

If the French needed any further indication of the folly of their recent tax changes, they only have to look around.

The sad fact is that in spite of rising unemployment and low inflation, Europe is, for many global manufacturers, just too expensive as a manufacturing base. As Caterpillar is quoted as saying: “It currently costs less to import machines to Europe from other Caterpillar locations than to produce them in Gosselies.”

So why would they?

by Stuart Burns