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5 Key Things You Need To Know About The John Deere Strike

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Roughly 10,000 members of the United Auto Workers union have been on strike against Deere & Company (NYSE: DE), the parent company of farm and construction equipment maker John Deere, since midnight on Oct. 14.

The strike is the largest of the pandemic era and also the largest private-sector walkout since the UAW’s action against General Motors (NYSE: GM) in 2019.

Here are five key considerations to help understand how the strike began and how it could possibly end.

The Genesis Of The Conflict: The strike against Deere is the first labor action against the company in 35 years and shuts down shuts operations at 11 factories in Illinois, Iowa and Kansas, plus three distribution centers in Colorado, Georgia and Illinois.

The UAW and Deere negotiated a contract that would have raised the base pay of union members by up to 6% plus additional wage hikes totaling approximately 20% over the coming six years. It would have also erased a lower tier of pay for some recently hired workers and returned the cost-of-living adjustment to the union contract.

To the surprise of both Deere and the UAW, 90% of the union rank-and-file members rejected the contract, arguing the offer was insufficient in the wake of the company’s ongoing financial vibrancy.

Part Of A Trend: There has been a new wave of labor strikes across the country that includes approximately 1,400 cereal production workers in Michigan, Nebraska, Pennsylvania and Tennessee on strike against Kellogg Company (NYSE: K); 2,000 nurses, technical and clerical employees on strike against Mercy Hospital in South Buffalo, New York; and 1,000 employees of Warrior Met Coal in Alabama.

Hollywood faced the threat of a strike by members of the International Alliance of Theatrical Stage Employees that would have halted film and television production, but that walkout was averted.

As the U.S. moves out of the pandemic, it has been faced with a pushback by many employees in a wide variety of jobs and industries. This so-called “Great Resignation” resulted in a record-breaking 4.3 million workers quitting their jobs in August, with others agitating for better wages, benefits and working conditions.

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Potential Economic Impact: The timing of the strike couldn’t have been worse, as the U.S. economy is struggling with a tag team of rising inflation and supply chain disruptions.

Farmers were facing shortages of agricultural equipment and parts before the strike began and this exacerbates the situation. Lance Lillibridge, a farmer and president of the Iowa Corn Growers Association, told NewsNation.com that not having replacement parts for his John Deere equipment could result in crops not being readied for distribution.

“We have a lot of big equipment out here that we’re using to bring in a harvest, and if a part breaks down that we can’t get, we’re done,” said Lillibridge.

Potential Impact To Deere: The strike occurs five months after Deere’s stock hit a record peak of new all-time high of just over $400.34 per share. The stock was trading at the $344 level Wednesday afternoon.

Deere is facing the strike in a strong financial position. According to its most recent earnings report, the third-quarter data published on Aug. 20, the company reported net income of $1.6 billion, up from $811 million one year earlier. Worldwide net sales and revenues increased 29% to $11.5 billion and net sales of the equipment operations were $10.4 billion.

Ironically, CEO John May announced the third-quarter data by crediting the quarterly results to “the exceptional efforts of our employees and dealers to keep our factories running and customers served while enduring significant supply-chain pressures.”

While it is too early to determine how the strike will impact fourth-quarter earnings, it is not difficult to assume the next quarter will not be as robust as the preceding period.

The Road To Resolution: As of this writing, both sides are working on a settlement. Brad Morris, vice president of labor relations for Deere, insisted the company “will keep working day and night to understand our employees' priorities and resolve this strike.”

However, the union is not showing signs that it is seeking a quick end to its action.

“These are skilled, tedious jobs that UAW members take pride in every day,” said Mitchell Smith, UAW Region 8 director. “Strikes are never easy on workers or their families but John Deere workers believe they deserve a better share of the pie, a safer workplace, and adequate benefits.”

Photo: David Jenne from Pixabay.

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