Hope and Fail

Obama: Stimulus will let Caterpillar rehire employees. Caterpillar CEO: Not so much

Obama says the stimulus package will allow Caterpillar to rehire its laid-off employees, but the company's CEO says it will still have to shed more workers.

During a swing through Illinois to pitch the stimulus package, President Obama said that Caterpillar Inc. will be able to rehire employees it had laid off. But Caterpillar CEO James Owens said the company will have to lay off even more workers.

The White House really played up the Caterpillar story line before the event, too. From the Swamp:

Three times during the day, the White House asserted that Caterpillar Inc., the giant maker of construction and other equipment that has laid off workers recently, would be able to rehire employees if Congress approved the stimulus bill.

But as the president prepared for a trip today to visit a Caterpillar plant in East Peoria, Ill., it was not clear how strong an example the company would provide of the job-creating powers of the stimulus bill.

And here’s what the president said at the plant, located in Peoria, Ill.:

And I’m not the only one who thinks so. Yesterday, Jim, the head of Caterpillar, said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off. And that’s a story I’m confident will be repeated at companies across the country — companies that are currently struggling to borrow money selling their products, struggling to make payroll, but could find themselves in a different position when we start implementing the plan. Rather than downsizing, they may be able to start growing again. Rather than cutting jobs, they may be able to create them again.

Owens wasn’t nearly as enthusiastic after the speech, according to ABC News:

But when asked today if the stimulus could do that, Owens said, “I think, realistically, no. The honest reality is we’re probably going to have more layoffs before we start hiring again.”

Caterpillar announced last month that it will lose 20,000 jobs worldwide through layoffs and attrition, of which 15,000 had already occurred in 2008 or were in the process of happening. Caterpillar also reported that profits fell 32 percent in the fourth quarter of 2008 as a result of sharply declining sales.

Four days after that Jan. 26 layoff announcement, Caterpillar said it would let go of an additional 2,110 Illinois-based employees, including 584 at the Peoria plant. Caterpillar has lowered its profit expectations for 2009 as the global economic woes dampen the demand for heavy equipment. The company is betting on $40 billion in sales for this year, which would be a 22 percent drop from 2008.

Owens also cautioned that even if a stimulus is passed within the next month, the effects will not be immediate and are more likely to impact construction activity at the end of 2009 or spring 2010.

“As these projects kick in, one concern I have that we need to be mindful of, is that even if this stimulus package passes, not only here but around the world, it still takes a little time to bid the contracts and get the dirt work started,” said Owens, who serves on the president’s recently announced Economic Recovery Advisory Board and flew to Peoria aboard Air Force One.

Owens paints a much more realistic picture, even if the stimulus works. The president just stuck his foot in his mouth.

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