Deere announce production worker layoffs
Oct. 3, 2019
Ken Golden, director, global public relations at Deere, said Tuesday about 50 workers at Harvester Works were informed they will be placed on indefinite layoff as of Oct 28. About 113 workers at Davenport Works also were informed they will be placed on indefinite layoff effective Nov. 18.
Because of decreased customer demand, Deere lowered its expectations for sales and net income as FY2019 progressed, Golden said in an email response. "In response to these market conditions, Deere employees at two Quad-City locations were informed they will be placed on indefinite layoff."
Each Deere factory balances the size of its production workforce with customer demand for products from their individual factory, he said.
No other Deere location is included.
"Despite uncertainties of current market conditions, we remain confident in our business strategy and long-term future," Golden said.
Mark Grywacheski, investment adviser with Quad-Cities Investment Group, said a number of factors are involved with the layoffs.
"Obviously, there is the U.S.-China trade dispute," Grywacheski said.
China has two key targets: The U.S. agriculture industry and the U.S. manufacturing industry.
"Deere has significant ties to both of these industries that have been targeted by China," he said. "Deere is really getting pummeled on both sides."
Additionally, the global economy is very weak, he said. "In my opinion it is the biggest factor impacting the U.S. manufacturing industry."
In 2018, he said, the global economy started to weaken. In 2019, the global economy is predicted to have its slowest pace of growth in 10 years.
China, Canada, Mexico and the European Union compose about 64% of U.S. trade.
"The economic growth rate of these four nations is a fraction of what it was two years ago," he said.
China, in 2019, is predicted to have the slowest pace of economic growth in 30 years.
"When these economies are in this downward spiral, they will inherently reduce their purchases of American manufactured goods," Grywacheski said.
Grywacheski said the pace of growth in the manufacturing sector has slowed in the past year.
The ISM Manufacturing Index, a key measure of the health of the U.S. manufacturing industry, has been in gradual decline since August 2018, when it hit a 14-year-high.
On Tuesday, the index measured 47.8, the lowest index level since June 2009, he said.
The index benchmark is 50. More than 50 means U.S. manufacturing is growing and expanding. Below 50 means it is contracting, or shrinking, he explained.
The August 2019 level of 49.1 was the first level below 50 in 35 months, Grywacheski said.
"August ended a string of 35 consecutive months of growth for the U.S. manufacturing industry," he said.
In September, the ISM level was 47.8, the second consecutive month the manufacturing industry was contracting, he said.
Earlier this year
In May, Deere & Co. scaled back production at some of its major North American plants after trade disputes and bad weather hurt farmers' incomes and lowered the demand for farm equipment.
Deere reported second-quarter earnings of $1.13 billion, or $3.52 per share, down from $1.21 billion, or $3.67 per share, during the same quarter in 2018.
Deere officials said forecasts were lowered because farmers weren't buying as much equipment and were worried about dwindling crop prices, international trade disputes and extreme weather that delayed planting.
The forecast was an indicator that farmers, especially those in the Midwest, were hurt by Trump administration trade battles. Trump sought to calm fears about the escalating trade disputes by lifting tariffs on industrial metals with Mexico and Canada and promised another aid package for farmers impacted by tariffs.
Deere manufactures large agriculture equipment, such as combines and tractors, in East Moline and Waterloo.
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