Caterpillar asks for relief on jobs requirement in North Carolina

After failing to meet job-creation goals for the past three years, Caterpillar Inc. is requesting amendments to the $10 million economic development deal it struck with Forsyth County in 2011.

Journal Now reports, the company is asking the county to lower — from 196 down to 50 — the number of jobs it must maintain here to prevent a “clawback provision” from taking effect on its economic incentives. Should the company fall below that threshold, the county could recoup some of the nearly $5.4 million it has paid Caterpillar.

The request is a sign that the slump in global demand for mining products is continuing to plague the company’s axle-manufacturing plant in Winston-Salem.

“They basically came to us and discussed an amendment to the current agreement,” said Kyle Haney, an economic development specialist with the county.

The proposed amendments are on the agenda of today’s briefing session for county commissioners ahead of their Aug. 8 meeting.

In exchange for the leniency in job requirements, five years would be added to the life of the deal extending the county’s window to recoup at least some of its investment from 10 years to 15 years and extending the company’s eligibility for incentive payments by five years, as well.

Also, Caterpillar is looking into adding operations with a better economic outlook in hopes of getting closer to the nearly 400 full-time jobs it promised to create. It wants to add Progress Rail, a wholly owned subsidiary, to the current plant and agreement. Based in Alabama, Progress Rail is not experiencing the same difficulty as the plant’s current business and could expand its operations into Winston-Salem.

“They’re concerned about meeting that 196 goal,” Haney said. “They wanted to look at how they could keep this plant open, so what they’ve done is locate this expansion operation here to create some additional jobs.”

As of January 2016, Caterpillar had 289 full-time employees at the Winston-Salem plant, down from 341 the year before. The job goal for the last year was 392, meaning Caterpillar is likely to again receive less than the maximum yearly incentive. It was eligible for up to $700,947, half of which is based on employment numbers.

In a statement Wednesday, Caterpillar said it also will request amendments to a similar incentive plan it has with the city of Winston-Salem.

“Based upon global economic conditions, Caterpillar Inc. has requested modifications to its original economic development agreement with the City of Winston-Salem and Forsyth County,” said the statement from spokeswoman Lisa Miller. “Caterpillar is requesting to amend the original agreement to add the operation of Progress Rail, a wholly owned subsidiary of Caterpillar Inc., to the current facility and agreement. The company will notify employees first of any decisions it will make as a result of the response to this request.”

Forsyth County has paid incentives of $5.36 million to Caterpillar, including $3.73 million upfront to reimburse the company for its land purchase. There have been three annual incentive payments totaling $1.64 million.

Winston-Salem paid an upfront amount of $3.27 million and a combined $780,127 in three annual payments.

By Arika Herron Winston-Salem Journal