(Corrects advisory line to show story was published on Oct. 17; corrects spelling of Oberhelman in paragraph 2 and Umpleby in paragraph 5)
CHICAGO, Oct 17 (Reuters) - Caterpillar Inc insider Jim Umpleby will become chief executive of the heavy equipment maker on Jan. 1, faced with the challenge of reversing a multiyear sales decline triggered by the global commodities slump.
He replaces Doug Oberhelman, who will retire as CEO on Dec. 31 but stay on as executive board chairman until March 31, the company said on Monday.
Caterpillar shares were down about 0.58 percent to $87.20.
Under Oberhelman the company recorded record high revenue in 2012, two years after he became CEO. However, a decline in metals and oil prices hit the company hard and its sales have fallen since 2013.
A 35-year company veteran, Umpleby must grapple with Caterpillar's sober outlook.
In July, the company said it expects no upturn this year in the mining, oil and gas and transportation industries as commodity prices have apparently stabilized at low levels.
To cut costs, the company has shed nearly 14,000 employees since 2015 and more layoffs are planned.
Oberhelman said on Monday the future is bright partly because of Caterpillar's lean and agile manufacturing and industry-leading digital capabilities.
Umpleby is currently group president for energy and transportation, which makes equipment for the oil, gas, power generation and rail industries.
"It is worth noting that much of the energy and transportation business is sold directly to end customers and not through dealers, so there will likely be a learning curve for him as he develops the critical relationships with CAT dealers," JP Morgan analyst Ann Duignan said.
CFRA Research now recommends Caterpillar stock as a "sell" as demand for new heavy machinery will likely remain low with a "lack of any positive catalysts on the horizon," analyst Jim Corridore said in a note.
Under its restructuring plan Caterpillar has started to move part of its mining operations from South Milwaukee, Wisconsin to Tucson, Arizona. The company said in August it was considering options, including a sale, for a portion of its underground mining equipment business.
One challenge Umpleby faces is a glut of used mining machines available for rent or lease that has hit Caterpillar's new mining equipment sales.
Additionally, construction equipment sales have suffered as weak crude prices sapped building demand in oil-rich countries.
When Oberhelman retires as the board executive chairman, board member Dave Calhoun will become non-executive chairman, Caterpillar said. Umpleby will also join the board.
Reporting by Meredith Davis in Chicago; Nick Carey in Detroit and Ankit Ajmera in Bengaluru; Editing by Anil D'Silva, W Simon and Meredith Mazzilli