In the face of the economic downturn, machine manufacturers are announcing layoffs

With farm net income set to decline by 25% in 2024, the agricultural machinery and equipment industry is tightening its belt. Major equipment brands including John Deere, CNH Industrial and AGCO saw revenue decline by more than 10% year-over-year in their quarterly earnings reports. At least partly due to low revenues, layoffs were announced at manufacturing plants in the Midwest.

“We are actively managing production and inventory levels to adapt to changes in demand and position our company for the future,” John C. May, president and CEO of John Deere, said in a statement about the company’s latest earnings report. “Despite market conditions, we are committed to our strategy and are actively investing and implementing innovative technologies, products and solutions to ensure the success of our customers.”

Deere & Co., which employs more than 80,000 workers worldwide, disclosed in a May 31 filing with the U.S. Securities and Exchange Commission that it plans to “reduce production and headcount to help the company achieve strategic priorities while limiting duplication and redundancy.” employees’ roles and responsibilities. Actions related to full-time employees are expected to occur in the third quarter of fiscal year 2024.”

In a mid-May call with investors, Josh Beal, the machinery brand’s director of investor relations, said the “planned underproduction” was a strategic response to falling corn, wheat and soybean prices. The company forecasts that year to year it will earn 26% less.

Layoffs

Over the past few months, Deere & Co., according to a public notification about employee adjustments and retraining. based in Illinois, has laid off hundreds of workers at its Iowa manufacturing plants (at least 120 in Ankeny, about 60 in Urbandale and almost 550 in Waterloo). Act (WARN) Notices. The company recently announced internally another 120 layoffs at its seeding and cylinder plant in Moline, Illinois.

The Bridgestone-Firestone tractor tire plant in Des Moines also reduced its workforce by about 100 workers due to falling demand for farm equipment. In May, AGCO also laid off a number of workers at its manufacturing plant in Hesston, Kansas. Late last year, CNH reduced the size of its senior management team and reduced the number of full-time employees by 5%. AGCO is also expected to cut production by 10%.

Not all layoffs may be related to the current economic downturn. In the long run, Deere & Co. intends to move production of skid steer loaders and compact truck loaders from its Dubuque, Iowa, plant to Ramos Arizpe, Mexico by 2026. Deere announced earlier in 2022 plans to move cab production from its Waterloo plant to Mexico by 2024 . At that time the brand estimated that the move would impact approximately 250 employees, citing the need to “balance workforce needs in a tight labor market.”

Notably, 10,000 John Deere employees and United Auto Workers members went on strike for several months after rejecting a new contract three years ago. Strikers accepted a third proposed six-year contract, ending the strike on November 17, 2021. It was John Deere’s first strike in three decades.

Work outsourcing

Deere & Co. is not the only brand that outsources labor to Mexico. A recent letter written by U.S. Senator Tammy Baldwin of Wisconsin highlighted the anticipated layoffs of more than 200 CNH Industrial employees at its manufacturing facility in Racine, Wisconsin. Baldwin cited the British machinery brand’s decision to move production to Mexico as the reason for the job losses.

AGCO will reportedly move part of its baler and rotary mower production in Hesston to a facility in Querétaro, Mexico next year. In June, Doosan Bobcat announced that it had begun construction on a $300 million, 700,000-square-foot facility outside Monterrey, Mexico. It is expected to be operational by 2026.

Data from the U.S. Census Bureau show that domestic agricultural machinery and equipment companies sell about $24 billion in equipment each year, with annual earnings of $3 billion.

Meanwhile, a leadership shake-up is underway at CNH Industrial following the announced departure of CEO Scott Wine, who will be replaced by former Iveco Group CEO Gerrit Marx. Derek Neilson, president of agriculture, is the latest executive to “leave the company later this year to pursue a new entrepreneurial project outside the sector after 25 years of dedicated service,” according to a company statement.

Long-term perspective

While the agricultural machinery industry may be in decline for now, its profits are expected to increase in the coming years. For example, according to a May report by Technavio, a market research and consulting company, the global combine harvester market is expected to grow by $25.3 billion, or about 8% annually, through 2028.

The main reason is the current and projected labor shortage. Without enough workers, the industry becomes increasingly mechanized and autonomous. At the same time, American farms are consolidating and becoming increasingly corporate.

“The growing size of farms in the country is leading to a decline in the number of farms in the United States,” he added. according to Mordor Intelligence analysis, a market research company. “According to the USDA, there were 2.02 million farms in 2020, and that number dropped to 2.01 million farms in 2021 due to agricultural productivity and increased off-farm employment opportunities. Almost 50% of farms in the country are family farms.”