United Steelworkers Local 1343, which represents 803 workers at the South Milwaukee facility, says the timing of the layoff announcement is suspicious.
Caterpillar will begin its first labor negotiations Tuesday with USW since the South Milwaukee facility became part of the company. It was acquired as part of Caterpillar's acquisition of Bucyrus International Inc. in 2011.
USW Local 1343 sent the following update to its membership Thursday:
"As most everyone should be aware by now, Caterpillar management informed us today that the company plans to lay off 40% of its workforce in South Milwaukee. Your USW negotiating committee is taking this threat very seriously, as you would expect.
"Your committee also believes the timing of this layoff announcement is hardly coincidental, with negotiations scheduled to begin in less than a week. We urge you to avoid overreacting or swallowing every detail that management tries to feed us over the coming weeks.
"We believe that Caterpillar is frustrated that our union didn't panic over salaried and administrative employees 'shadowing' us on our jobs or its use of our publicly funded technical school to train
potential scabs how to weld.
"Instead, we are calmly and thoroughly continuing to prepare for negotiations and investigating the company's suspiciously timed layoff announcement.
"When negotiations begin next week, we are going to represent all 803 Steelworkers who have been nothing but loyal, productive and profitable for the 70 years we've operated our plant.
"We anticipate the negotiations to be tough, though we are committed to fairness and ready to engage Caterpillar in good faith at the table. We expect management to do the same, despite the company's recent attempts to intimidate us.
"We will continue to share information throughout the process, and as always, we will need your continued support and solidarity as we face the challenges ahead."
According to Caterpillar, the layoffs are a result of industry conditions.
"Short-term layoffs and other actions will be taking place," Caterpillar spokesman Rusty Dunn told BizTimes. "We are not getting into specific numbers, as we continue to evaluate the situation given the fluctuating economic and business environment. Various Caterpillar facilities and business units are taking action to bring our production in line with demand, including our operations in South Milwaukee. This includes some short-term temporary layoffs and other actions. These actions vary from location to location and impact both production and support and management employees. We know this is difficult for our employees, but we are taking steps to better align with the current economic circumstances, while at the same time remain focused on positioning the company for long-term success."
Ross Winklbauer, United Steelworkers union sub-district director of District 4, received word of the layoffs from union president Kevin Jaskie, who was present for the company announcement.
The union is unsure if layoffs will affect only union staff or both union members and management staff.
The union also remains uncertain about whether the layoffs will be temporary cuts or permanent dismissals, Winklbauer said.
Any company that lays off a significant number of employees in Wisconsin is required to notify the state Department of Workforce Development at least 60 days in advance. The DWD has not received any notification from Caterpillar at this time, said DWD spokesman Dick Jones.
City of South Milwaukee officials have heard nothing about the company's layoff plans, said city administrator Tami Mayzik.
"We have not been notified," she said.
According to information Winklbauer received from Jaskie, Caterpillar cited low sales as the reasoning for the layoffs.
Winklbauer, however, said he has not had any conversations with the company about low sales.
"Maybe there (are) some low sales, but the timing of it just makes it suspicious," Winklbauer said.
Recently Caterpillar has been getting contingency workforce planning training for salaried and management personnel in case of a labor strike at the South Milwaukee plant. The training, which readies managerial and support staff for production jobs, is a normal part of Caterpillar's planning cycle prior to any union negotiations, Dunn said.
The United Steelworkers asked Milwaukee Area Technical College to stop training Caterpillar's salaried and management personnel for production jobs. MATC officials rejected that request.
"If (Caterpillar is) really this slow as what they're saying, why would they spend money to have MATC train replacement welders?" Winklbauer said.
The MATC training was intended to intimidate union workers, according to Winklbauer.
The tactic has not worked, he said.
"Is this the next thing they're using to try to intimidate the workers by trying to scare them by saying, 'You'll be out of a job?'" Winklbauer said.
Caterpillar is facing some difficulties because of a slowdown in demand in China.
China's manufacturing industry, which has slowed amid slack external demand, is being challenged by poor innovation, excessive competition for low-end products and insufficient core components and key technologies, Chen Qihua, vice president of Caterpillar told ChinaDaily USA.
The overcapacity of low-end products has been a problem for China's construction equipment industry, Chen said.
China's economic growth fell under 8 percent for the first time since 1999 last year, mainly due to cooled manufacturing production and property investment.
In January, Caterpillar chief executive officer Doug Oberhelman admitted the company had overpaid for the acquisition of Chinese company Zhengzhou Siwei Mechanical & Electrical Manufacturing Co. last year. Siewei makes equipment to support the roof in coal mines.
Caterpillar paid about $700 million for Siwei parent ERA Mining Machinery Ltd., but later learned of the company's deliberate accounting misconduct, which was designed to inflate profits ahead of the sale. As a result, it wrote the value down by $580 million.
After the write down, which halved Caterpillar's fourth quarter 2012 earnings expectations, the company said it was exploring all avenues to recover the losses from the bad deal.
Meanwhile, Bloomberg Business News analysts are forecasting a global bear market for iron ore, which has led to some iron ore mines to be closed and workers to be laid off in North America in recent months.