The world's largest maker of construction and mining equipment, Caterpillar Inc. said on Thursday that forced by the dampened demand for its products, due to the economic turmoil, it will lay off employees in Illinois and North Carolina.

Peoria, Ill.-based Caterpillar plans to cut more than 800 production workers at a plant in Illinois that assembles small engines for construction machinery and for trucks that haul freight.

The company said it notified the employees of the layoffs, which are scheduled to begin February 23.

Gary Stroup, Caterpillar vice president with responsibility for the Large Power Systems divisions, said: "These decisions are never easy." The laid-off workers are members of the United Auto Workers union and work at a plant in Mossville, Illinois.

Moreover, Caterpillar also announced an unspecified number of temporary layoffs at two plants in North Carolina - the Clayton and Sanford plants, adding that it is planning additional non-production days at both factories in 2009.

To help offset costs, a 10-day furlough was already scheduled at the Clayton plant, which employs about 800 people.

Caterpillar also said in a separate statement that, as part of a long-term strategic plan, it was moving engine assembly, testing and painting operations to a new facility in Seguin, Texas, from Mossville, and a facility in Greenville, South Carolina. Officials in Texas said the new operation is expected to create about 1,400 jobs.