COVID-19 pandemic hits Caterpillar supply chain

Caterpillar says the spread of the COVID-19 pandemic is starting to impact its supply chain, with the mining OEM weighing up alternative options to ensure it can continue to operate the majority of its facilities at this difficult time.

The company mentioned such a possibility in its risk factors back on February 19.

This week, Cat said it was monitoring the situation closely and supply chain teams had been executing business continuity plans, which include, but were not limited to, being alert to potential short supply situations, and, if necessary, using alternative sources and/or air freight, redirecting orders to other distribution centres, and prioritising the redistribution of the most impactful parts.

“Caterpillar is committed to continuing to execute these plans and will remain in close contact with its supply chain to monitor future possible implications, especially on production facilities,” it said.

While the company is continuing to run most of its US domestic operations and plans to continue operations in other parts of the world, as permitted by local authorities, it said it was temporarily suspending operations at “certain facilities”. It did not name these facilities.

Cat put this decision down to “uncertain economic conditions resulting in weaker demand, potential supply constraints and the spread of the COVID-19 pandemic and related government actions”.

It added: “The company will continue to monitor the situation and may suspend operations at additional facilities as the situation warrants.”

On top of shutting certain facilities in reaction to the COVID-19 outbreak and other related issues, Cat said it was continuing to implement several preventive measures to protect the safety, health and well-being of employees, customers, dealers, suppliers and communities, while also meeting the needs of global customers, at this time.

This included increased frequency of cleaning and disinfecting of facilities, social distancing practices, remote working when possible, restrictions on business travel, cancellation of certain events and limitations on visitor access to facilities.

Cat concluded: “The magnitude of the COVID-19 pandemic, including the extent of any impact on Caterpillar’s business, financial position, results of operations or liquidity, which could be material, cannot be reasonably estimated at this time due to the rapid development and fluidity of the situation. It will be determined by the duration of the pandemic, its geographic spread, business disruptions and the overall impact on the global economy.”

Following the factors mentioned above and the continued global economic uncertainty due to the COVID-19 pandemic, Cat said it was withdrawing its financial outlook for 2020, which previously estimated a profit per share outlook range of $8.50-$10.