Agricultural machinery specialist Deere (NYSE:DE) — which conducts business as John Deere — encountered choppy price action in the market on Friday. Regional news reports indicate that management will implement job cuts. Obviously, the John Deere layoffs are most damaging to the impacted workers. However, the move also features broader economic implications.
On Thursday, KWQC — a news channel based out of Davenport, Iowa — stated that it obtained a Deere corporate memo regarding a mandatory meeting set for earlier this morning. The letter stated that management will discuss with employees about certain “adjustments” to production. While the language was ambiguous, some workers feared the worst: upcoming John Deere layoffs.
It doesn’t take much to read between the lines. In September, Deere let go of 225 workers at its East Moline facility. Management also stated earlier this year that it anticipates workforce reductions due to fading demand for farming equipment.
In another report by ABC affiliate WQAD, the agency stated that it received a letter sent to Deere employees about expected layoffs by the end of the third quarter. Moreover, the company confirmed in a statement that “salaried layoffs in the U.S. are expected to occur by the end of July.”
John Deere Layoffs Carry Broader Implications
Notably, in the letter that WQAD received, the agricultural machinery manufacturer stated that it attempted to respond to the double hit of escalating operational costs and declining market demand. Some of the measures included a hiring freeze. Unfortunately, management has concluded that stronger efforts are needed; hence, fears of imminent John Deere layoffs.
It’s worth stating that the cost-cutting initiative won’t just center on pink slips. Instead, Deere will attempt to simplify the organization, such as reducing overlap and redundancies. It will also optimize its factories for building out future products, which also involves eliminating low or non-value-added endeavors.
Last month, Deere disclosed its results for the second quarter. On paper, the numbers beat Wall Street’s expectations. Unfortunately, per WQAD, the company “lowered its full-year profit forecast as farmers purchase fewer tractors and other equipment as they deal with declining crop prices.”
Essentially, the John Deere layoffs carry broader implications for the economic recovery. Prior to the Covid-19 pandemic, the average age of American farmers stood at 57.5 years. Over the years, an increasing number of young people have sought entry into white-collar careers.
Further, the farming industry isn’t just impacted by the underlying difficulties. Other barriers to entry, including money to buy land, equipment and other necessary components, hinder the agricultural career path. Therefore, Deere’s challenges extend beyond its corporate walls, adding pressure to its decision-making processes.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
