Ag equipment manufacturers are taking steps to combat the spread of the coronavirus, officially referred to as COVID-19. Deere & Co., CNH Industrial, Alamo Group and others have all commented on planned actions and expected impacts as a result of the spread of the virus.

According to a March 11 report in the Quad City Times, Deere is restricting domestic travel to vehicles for its employees as COVID-19 continues to spread throughout the U.S. Deere “puts the health and well-being of its team members, customers, and partners first. We are monitoring the evolving COVID-19 outbreak closely and have put restrictions on all international travel until the threat subsides,” said Jen Hartmann, director of Deere’s strategic public relations.

“In addition to restricting all international business travel and domestic business travel by air or rail to business critical only, Deere & Co. has temporarily suspended all international travel from, to and through several locations including China, Italy and South Korea. Domestic travel by vehicle is not restricted.”

In a press release issued on March 11, CNH Industrial say it has expanded its already extensive measures to ensure a safe working environment for its employees in light of the COVID-19 emergency.

“Reflecting the emergency decrees announced earlier this week by the Italian Government, the company has started to introduce additional measures at its facilities in Italy, which strictly follow the mandated requirements. To this end CNH Industrial today announced that, where necessary, it will temporarily close Italian production facilities, during which time additional safety measures will be implemented. These protocols will be applied across all CNH Industrial´s manufacturing sites should conditions require.”

CNHI also said it has extended its “Smart Working” (working from home) program, in addition to spacing measures and the provision of protective face masks where appropriate. This is in conjunction with intensive sanitization and deep cleaning of all work and rest areas, changing rooms and related facilities in all its locations. The Company’s global COVID-19 taskforce is working closely with national jurisdiction health authorities and is ready to extend its developed safety protocols as needs arise.”

During its conference call with analysts on March 3, Alamo Group said it expected possible disruption of components sourced in China. Executive vice president and CFO Dan Malone discussed how the coronavirus is affecting the company. He said Alamo buys between $40 million and $50 million in component parts from China. Most of these parts can be sourced from elsewhere, but there are exceptions.

“Most of our agricultural division sales would be exposed through such a disruption,” he said. “But as of today, our major suppliers are back up and running, they’re not necessarily at full staff.” Alamo is anticipating delays and actively pursuing alternative sourcing options, he said.

A Bigger Picture View

On March 11, The Kiplinger Washington Editors, issued its assessment of the impact of COVID-19.

“Here's how we see the situation, based on data and cool analysis, not panic or hype: The odds of a recession are about 50:50. Certain industries, especially travel-related ones, have already taken a beating. That damage alone is enough to cause a significant slowdown in U.S. GDP growth. If fear of getting sick causes consumers to pull back on their normal spending habits — or if losses in their stock portfolio make them too queasy — we'll have an outright recession on our hands.

“The good news: Any recession should be brief and mild, not a long, wrenching downturn like the Great Recession. Prior to the coronavirus scare, the economy was in good shape. And unlike in 2008, the financial system is ready to withstand an economic shock. Banks aren't at risk of failing like they were in 2008. Above all, the labor market is strong. Today's rock-bottom jobless rate of 3.5% might rise to 5% if a recession hits: Still quite low by historical standards.

“The plunge in interest rates caused by market reaction to the coronavirus will be a boon for many consumers. Mortgage rates are headed for their lowest levels ever, with the average rate on a 30 year fixed loan likely to slip below 3%, and 15 year fixed loan rates dropping below 2.5%.”

Ag Equipment Intelligence readers who are interested in digging deeper on the virus and potential impacts, McKinsey & Co. issued a report on March 9, “COVID-19: Implications for Business.” The full report is available by clicking here.

 Summarizing the economic impact of the virus, McKinsey researchers say, “In our analysis, three broad economic scenarios might unfold: a quick recovery, a global slowdown and a pandemic-driven recession. [In the report] we outline all three (Exhibit 4). We believe that the prevalent pessimistic narrative (which both markets and policy makers seem to favor as they respond to the virus) underweights the possibility of a more optimistic outcome to COVID-19 evolution.”