Japan Disaster Hits Caterpillar Global Output

Japan Disaster Hits Caterpillar Global Output

Caterpillar, a major global manufacturer of industrial, agricultural and transportation equipment including for trucking and rail markets, said it is "experiencing sporadic production disruptions at many of our facilities around the world," because many of its suppliers in Japan were affected by the earthquake and tsunami there.

The U.S. company reported first-quarter profit of $1.2 billion, up from $233 million in the 2010 first quarter, as sales volume surged amid the global recovery. It also raised its outlook for the rest of 2011for both top-line sales of up to $54 billion and bottom-line income that will top its 2008 record high.

However, Caterpillar said the outlook would be even stronger except for continuing effects of the disaster in Japan, which also killed two employees of a Caterpillar dealer.

While company facilities in Japan were not damaged, those of many suppliers were, as well as their own suppliers further down the chain. That is causing manufacturing disruptions both at Caterpillar plants in Japan and in many areas elsewhere in the world where factories depend on Japan-based component suppliers.

The situation has already improved some as employees and suppliers work to get operations back to levels that existed before the disaster struck.

However, "we expect the disruptions will have a negative impact on sales, factory efficiency and costs - particularly in the second quarter," Caterpillar said. "While the situation has steadily improved in the aftermath of the disaster, it will likely have a negative impact on 2011 sales of about $300 million and negatively impact operating profit by about $100 million."

-- Contact John D. Boyd at jboyd@joc.com. Follow him on Twitter @jboydjoc.