Jul 10, 2024
Founded by John Deere in 1837, Deere & Co (DE) has grown into a leading manufacturer of agricultural, construction, and forestry machinery, known for its iconic green and yellow equipment.
But it’s not always sunshine and rainbows, as the company announced it will be laying off nearly 600 employees across three U.S. factories in Illinois and Iowa. The workers will be out of a job by the end August.
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Retired Deere employee Chris Laursen is concerned about the direction his former employer is taking.
“There's going to be a significant impact to the small towns here around Iowa that have manufacturing facilities for John Deere here,” he told Fox Business. “Already this year they’ve laid off almost 1,000 workers. More cuts are expected at the end of July, and you know, it's going to be devastating for a lot of these small communities.”
‘Good American jobs shifted to Mexico’
In June 2022, Deere announced plans to move tractor cab production from its Waterloo, Iowa plant to Mexico, with the transition slated for completion in 2024.
Further relocations are on the way. By June 2024, the company had also announced that it will move manufacturing of skid steer loaders and compact track loaders from its facility in Dubuque, Iowa to Mexico by the end of 2026.
Laursen cautioned that shifting American jobs to Mexico may not bode well for the company’s reputation.
He explained that John Deere is known for making quality equipment, and that “the reason why farmers and others buy this expensive equipment — is because it's made by American union workers.”
Laursen expressed doubts about the brand's continued allure if this changes. “When you take that out of the equation, what do you got left? I don't think anyone is interested in seeing good American jobs being shifted to Mexico, especially these loyal farm families that are buying John Deere equipment for generation after generation, and even live in some of these small communities that will be devastated by the loss of jobs,” he said.
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‘John Deere is not hurting for cash’
In a statement to Fox Business, Deere said, “We can confirm Deere leadership recently communicated that rising operational costs and declining market demand requires enterprise-wide changes in how work gets done to achieve our goals and best position the company for the future.”
In May, Deere lowered its forecast, projecting a net income of $7 billion for fiscal 2024. Previously, the guidance range was $7.50 billion to $7.75 billion.
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For the second quarter of Deere’s fiscal 2024, which ended Apr. 28, the company reported a net income of $2.37 billion or $8.53 per share, which beat expectations but was a decrease from $2.86 billion or $9.65 per share in the same period last year.
Still, Laursen contends that the company is not lacking in funds, highlighting its substantial returns to shareholders and executive compensation.
“The thing to remember is John Deere is not hurting for cash,” Laursen stated. “They've been in the wake of record profits for years now. In fact, last year, in 2023, they experienced $10 billion in profit. They spent $7.2 billion in stock buybacks, paid $1.4 billion in shared dividends, and awarded $26.7 million to CEO John May.”
Larsen also noted that the company is in the process of acquiring new property in Ramos, Mexico to build new factories — a move he views critically.
“Let's not kid ourselves. These are jobs that won't be returning,” he remarked.
Deere shares have fallen by around 13% in 2024.
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Jing is an investment reporter for Moneywise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
