Caterpillar said Monday its cost cutting included significant compensation reductions for executives, management and support staff. The company will also suspend merit pay increases for management and support employees.

Executive compensation will be cut in half, compensation for senior managers will be slashed by 5-35% and other management and support staff will see up to a 15% reduction.

Caterpillar is also offering US-based management and support employees a voluntary redundancy package.

The OEM blamed continued deterioration of conditions in many of the markets its customers serve and on-going uncertainty in credit and financial markets.

"We understand these decisions will disrupt the lives of many of our employees and their families, and we regret the need to take these steps," Caterpillar CEO Jim Owens said.

"We considered waiting until January to make this announcement, but decided it was better to communicate these plans with our employees as we approach the completion of our 2009 planning process."

To further reduce costs, Caterpillar will look to save money elsewhere through temporary factory shut downs and layoffs.

Thursday last week Caterpillar laid off 814 production employees at its Mossville, Illinois engine assembly facility.

"Good companies become great companies when facing and addressing adversity,” Owens said.

Caterpillar is the world's biggest manufacturer of construction and mining equipment.