PEORIA, Ill. (AP) - Caterpillar Inc., the world's largest maker of mining and construction equipment, says about 2,500 laid-off employees will be permanently cut from the company and 550 others will be brought back to work by the end of next year.

The Peoria based company has struggled with lower demand since the world economy deteriorated late last year.

Lower prices for commodities such as iron ore, a key steel ingredient, have undercut orders for its giant mining trucks.

A housing market slump has eaten into sales of other machines, such as bulldozers and excavators.

On Monday, Caterpillar said it had started notifying the 2,500 employees of the permanent layoffs, but would not provide a breakdown of their locations.

It plans to offer them severance packages.