Major equipment manufacturers announced temporary factory shutdowns last week as the coronavirus pandemic found its way to manufacturing floors.
John Deere's Dubuque, Iowa, plant closed March 30, days after discovering one case of COVID-19. On April 1, the manufacturer announced that it had resumed production with a limited number of employees at the Dubuque construction and forestry factory. Production startup will be staggered over the coming weeks.
Deere suspended production at its hydraulic-cylinder factory in Moline, Illinois, after management learned of a confirmed COVID-19 case with an employee there on April 2. During the suspension, the facility will undergo a thorough disinfection that meets or exceeds local and state health-department guidance. Those employees able to work remotely during this time will continue to do so.
AGCO Corp. is fighting this same battle. "In Europe, depending on the location, we are seeing some operations closing," Robert Crain, senior vice president and GM, Americas, for AGCO Corp., told DTN. Those plants will reopen only with permission of European governments. "[In North America] it is somewhat better. It is tightening up, but somewhat better," he said.
Caterpillar, the construction industry giant, has announced that because of weaker demand, potential supply constraints and the spread of the COVID-19 pandemic and government actions related to it, it was temporarily suspending operations at certain, unnamed facilities.
Kubota is seeing "minor" disruptions, the company told DTN. "We are proactively working with factories, suppliers, and logistics providers to mitigate any potential issues," Alex Woods, Kubota's Senior VP Sales Operations, Supply Chain & Parts told DTN. "Deliveries have remained on schedule with a great deal of assistance from our transportation providers. There have been no disruptions to date in our parts supply, leaving our stock on hand in a healthy position."
Manufacturers told DTN they are reorganizing work areas for social distancing, focusing on hygiene and regulating grouping during lunch and breaks. AGCO is taking employee temperatures before they move to their desks or workstations. These are the new norms for employee safety and assembly line production.
Agriculture and its supporting industries have been deemed "essential critical infrastructure" by the U.S. Department of Homeland Security during the COVID-19 pandemic. Still, since ag manufacturers source some components from suppliers who also supply the automotive industry, it is often a lower-priority customer. Those suppliers, too, are struggling to remain open or are scaling back.
Key to all manufacturers is keeping parts and support functions operating.
"We've been able to maintain the same parts fill that we've historically had; one of the best in the industry," Crain said. "We've been very pleased with that. We do not see any degradation in the short term. So far, our procurement group has been able to find alternatives to keep the plants operating.
"For the short term, we think we are OK. From a production standpoint, we have secured our parts facilities," Crain said. "We're staying extremely close to our suppliers, our dealers, our customers. First and foremost, [we're] focusing on the health and safety of everyone out there -- our employees, our dealers and our customers," Crain said. "Second, from a business perspective, the majority of our time is focused on customer support."
Crain said AGCO will fill current orders. "We are continuing to take new orders. In fact, we are prioritizing any type of retail order right now," he said. "We are prioritizing all retail shipments. We are encouraging, in some cases, that dealers pull ahead equipment orders or the receipt of equipment if we have [a certain model] available. We think it would be a good idea for dealers to be able, if they are able, to accept equipment maybe a few months earlier than they normally would."
John Deere's factories remain mostly in operation. "We're able to support our customers with the parts, service, finance, support and equipment they rely on us for -- including farmers and contractors critical to the well-being of our nation and the world," Deere said in a statement to DTN. "John Deere leadership is closely monitoring guidelines issued by country and state level authorities and acting accordingly. This includes temporary and partial suspension of production due to those mandates and/or to resulting supply chain disruptions in Asia, Europe and South America." Deere closed six plants in Brazil.
The equipment industry wasn't expecting 2020 to be a blockbuster year, but there was a brief period of optimism. On Feb. 14, the Association of Equipment Manufacturers (AEM) released its 2020 industry outlook. The agricultural machinery industry grew a better-than-expected 3.2% to $15.6 billion in 2019, it said. AEM's report projected a brief "tick down" for 2020 before a 1-2%-per-year rise through 2023.
But, today, in less than two months, every equipment manufacturer has formally withdrawn its financial guidance -- the legally required document that reveals a manufacturer's forecast for revenue and expenses.
AGCO had forecast a year roughly similar to 2019. The promise of the Chinese phase-one trade deal raised some expectation that higher soybean exports would push new buying power into farm equipment markets. Today, the AGCO tractors loaded onto ships in Europe as COVID-19 unfolded will be the final European-manufactured AGCO tractors to arrive in the U.S. for the near term.
"Everything that's on the water we will receive," Crain said. "So, we are good for about another 30 days [with European-produced equipment]."
Case IH offered a brief statement to DTN: "At Case IH, the health and safety of our team members, dealers' employees, families, and, of course, producers is our first priority. But farming doesn't stop, and Case IH North America is deemed an essential business. Because of the fluidity of the COVID-19 crisis and ensuing measures -- and our current, rapidly changing environment -- we continue to keep a very close pulse on these matters and will adjust our operations accordingly."
Case IH parent CNH went a bit further. CNH Industrial announced that it is closing the majority of its manufacturing plants in the Western Hemisphere for two weeks, starting March 30. That includes construction and agricultural equipment built in North and South America, including brand names Case IH and New Holland. The company said it would keep U.S.-based plants that build components operating at low rates. Parts depots and some dealers remain open.
CNH also announced that it is suspending the majority of its assembly operations until April 17. Logistics hubs, and the related industrial and supply operations, remain operational to guarantee parts and service support to end customers.
"The company is evaluating necessary initiatives to slash costs and preserve financial flexibility in the face of rising market uncertainty due to the coronavirus crisis. It has $11.2 billion available in liquidity, providing a solid cash base and headroom within its credit facilities to tackle downturns caused by production shutdowns and revenue declines."
The big question is how these disruptions will play out on the farm during planting season. Parts and consumables such as oil, grease and filters are often stockpiled by producers. As in-season breakdowns occur, repairs could take on a whole new look, though.
"There are a lot of unknowns," said Mike Jackson, Jackson Farms, Oskaloosa, Iowa. "We have enough to go until about mid-May. From there on, we don't know."
The good news is many vendors have been proactive about reaching out to farmers and communicating how they are trying to protect ag's exemption to shelter-in-place provisions, said Marc Arnusch, Marc Arnusch Farms, Keenesburg, Colorado. "That provides us the confidence to continue planning this spring without interruptions," he said.
Jeremy Jack, Silent Shade Planting Company, Belzoni, Mississippi, hasn't had issues receiving supplies for planting, equipment and maintenance, yet. "We have big concerns about what the next two months will be like," he said.
"I think our parts situation is OK," said Stuart Sanderson, Henderson Farms, Madison, Alabama. "We were able to get our work done early. We had the parts to make the repairs. The key this season is anticipation, that Deere and we communicate."
Technology investments at the dealer level are providing an important lifeline. Todd Stucke, senior VP marketing, product support & strategic projects, Kubota, told DTN, "Kubota dealers are doing their best to be flexible, working with customers over the phone, via email or in person, following the recommendations from local health departments and the Center for Disease Control (CDC). They are responding to customer needs as best as possible, bringing their business direct for house calls, demos, deliveries and pickups for service wherever possible."
Digital technology is helping, too, said AGCO's Crain. "We are all becoming much smarter today, working away from the office in terms of digital technology. What I'm seeing is that our dealers are going up that curve very, very fast in terms of making sure [they are incorporating] the latest in digital technology, staying in touch with our customers."
AGCO is compiling COVID-19 information at: https://news.agcocorp.com/….
For additional information on how John Deere is managing the impact of COVID-19, visit https://www.deere.com/….
Caterpillar has set up a COVID-19 Resource page for dealers and customers. Go to: https://www.cat.com/….
Case IH has created a COVID-19 web page: https://www.caseih.com/….
Dan Miller can be reached at email@example.com
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