On September 29, 2024, The Chicago Tribune published an editorial-board piece titled, “Trump's attack on Deere was off-base.”
The op-ed piece came down on former President Donald Trump for his threatening words about Deere’s layoff and resourcing plans. From a speaking gig in Pennsylvania last week, the GOP presidential hopeful shared his intent to slap a 200% tariff on green machinery returning to the States. The piece’s authors wrote “Trump’s threat of tariffs is particularly rich because as president he negotiated the 2018 trade deal with Mexico and Canada under which Deere is shifting some production to Mexico.”
I agree with the criticism of Trump’s words in this case, but for different reasons than what’s covered by the Tribune Editorial Board.
In fact, I was asked about the topic yesterday at a tailgate party in the most blue-collar town in the NFL – Green Bay, Wis. And hopefully I’ll state it a little more eloquently than I did in the Lambeau Field parking lot, in-between sips of my Wisconsin-Style Bloody Mary (for you folks keeping score, that includes pickle spear, mozzarella, venison sausage and mushrooms).
But First, John Deere’s Response. Two days after Trump’s words in Pennsylvania, a response came from a John Deere spokeswoman. The Tribune article shared the statement: “We are not ‘moving production’ to Mexico as continues to be reported; instead, we’ve strategically leveraged our footprint in Mexico for cab production (that transition was announced in 2022 and is being completed this year) and now mid-size skid steers and CTLS — by 2026.” The company added that it’s had a presence in Mexico since 1952 and that 75% of the equipment sold in the U.S. is made in the U.S. as well.
Agree & Disagree. I agree with the article on several points, including that Deere is not alone in shipping work to Mexico; that it’s coping with a serious downturn in the ag economy and is free to adjust its production as needed. And finally, that its decisions, right or wrong, will be widely politicized for party gain. Sure, no objections there.
What I don’t agree with is Illinois Democratic Rep. Eric Sorensen’s accusatory tone regarding Deere responsibility to his local office, which would include telegraphing the OEM’s every business move “for the future of agriculture.” I also don’t regard Trump’s promise as an effective vote-grubbing tactic. On the contrary, I believe. I don’t see it as likely to lure the conservative voters he needs.
Here’s why I’m stepping out in front of the pitchfork-carrying villagers on this story… The strike, and the poorly negotiated labor agreement demanded by the United Autoworkers in 2021 brought John Deere to its knees. Deere had production demands to meet, and Deere HQ made a business decision to keep its lines moving. Deere was willing to pay top labor hour to produce and protect its premium-priced machinery – at that time, at least.
But when the demand cycle turned, as it always does in farm machinery, the major-line OEM also had an anchor around its neck in unprecedented labor and benefit expenses. In late 2021, before the current downturn was coming in to focus, The Wall Street Journal quoted Jefferies Research Service’s Stephen Volkmann as saying “The 10% pay raise and $8,500 bonus that each UAW member will receive and raises awarded to nonunion employees as well are expected to cost Deere about $235 million in the first year of the 6-year contract.”
I can repeat my arguments again here, but it’s found here my blog “Union Contracts & Pyrrhic Victories … It’s 'Still' About the Margin, Stupid!” that was last updated in mid-July 2024.
On numerous fronts, the U.S. should again be careful what it asks for. We’ll begin to find out what that is starting on November 5.
If you want to review the Deere-UAW events as they occurred, see this curated content from Ag Equipment Intelligence.
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