Business

Deere to lay off about 160 employees in Quad Cities

Manufacturer cites lowered customer demand

Equipment for sale is seen at a John Deere dealership in Denver. (Reuters)
Equipment for sale is seen at a John Deere dealership in Denver. (Reuters)

Deere and Co. has announced layoffs for more than 160 production employees in the Quad Cities.

Ken Golden, director of 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.

Moline, Ill.-headquartered Deere manufactures large agriculture equipment, such as combines and tractors, in East Moline and Waterloo.

Because of decreased customer demand, Deere lowered its expectations for sales and net income as fiscal year 2019 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,” he said.

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 in the action.

“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.

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“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.”

In addition, the global economy is very weak, he said.

“In my opinion, it is the biggest factor impacting the U. S. manufacturing industry,” Grywacheski said.

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 make up about 64 percent of U.S. trade.

“The economic growth rate of these four nations is a fraction of what is 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.

The pace of growth in the manufacturing sector, Grywacheski noted, has slowed in the past year.

The ISM Manufacturing Index, a key measure of the health of the 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 50:50, and a higher number means U.S. manufacturing is growing and expanding, he said. Below 50 means it is contracting.

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.

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In September, the ISM level was 47.8 — the second consecutive month the manufacturing industry was contracting, he said.

In May, Deere and 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. President Donald 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.

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