It’s been over 2 months since John Deere UAW workers ratified Deere’s third tentative labor agreement on Nov. 17, 2021, with 61% of members voting “yes.” The ratification followed a month-long strike that began on Oct. 14, after 90% of UAW John Deere employees rejected the company’s first tentative agreement.
The strike took over 10,000 workers out of 14 John Deere facilities across the U.S., and the business impact was noted in a Nov. 5, 2021, survey of Deere dealers from Farm Equipment. The survey found 80% of Deere dealers reported some loss of parts & service revenue opportunity due to a lack of parts inventory since the strike began. Another 78.8% of Deere dealers expected some loss of new wholegoods revenue in 2022 as a result of the strike.
As a follow-up to the impact the strike had on dealers, a survey from Farm Equipment conducted Jan. 5-7, 2022, asked dealers of all brands how the strike had impacted their business, what they learned and what the strike might change in the industry.
By brand, 15.3% of respondents were Deere dealers, 22.5% were Case IH dealers, 8.2% were AGCO dealers, 11.2% were New Holland dealers, 17.4% were Kubota dealers and 23.5% chose the “other” category, where dealers listed shortline brands such as Claas, Versatile and Mahindra.
Click here for Ag Equipment Intelligence's full timeline of events that occurred during the John Deere/UAW strike, including explanations of each of the 3 offers Deere made.
Brand Changes, Future Orders
Some 20.5% of all surveyed dealers indicated they’d won over more farmers to their respective major-line equipment brand than usual in the fourth quarter of 2021. Another 10.3% said they’d lost more of these attempted conversions than usual. Nearly 70% said they’d seen no change in color conversions.
Commentary from dealers suggests inventory problems were one reason a majority did not see a change in their attempts at changing farmers’ brands. As one Kubota dealer put it, “All colors were having supply problems, or so it seems. Our customers are exhibiting more patience than ever before.” Click here to view all submitted commentary from dealers on this question broken down by brand.
When asked if they would increase wholegoods and parts orders in years with expiring major-line labor contracts, nearly 28% of surveyed dealers said they would. Another 30.4% said they wouldn’t, and 41.7% were unsure.
Were Deere Dealers Ready?
Deere dealers exclusively were asked how they felt Deere had prepared them earlier in 2021 for a potential work stoppage. Some 78.6% of Deere dealers felt Deere had done well, very well or felt neutral about the preparation they had received. Among them, over one-third of surveyed Deere dealers (35.8%) felt Deere had done a good job preparing them. Some 21.4% felt Deere had not prepared them well for a potential work stoppage, but no Deere dealers felt they had been prepared “very badly.”
What Was Learned?
When asked how they felt the Deere labor dispute would affect the farm equipment ecosystem going forward and how they will react to the next labor negotiations, several dealers mentioned staying ahead on their orders. One Kubota dealer said, “The ‘just in time’ ordering mentality is now obsolete. Dealers have to switch back to preparing themselves more to respond to an ever-changing marketplace. We now deal with issues from the customer end as well as the manufacturer.”
Other dealers felt preparing for future strikes was difficult given the short time frame they occur in. One Case IH dealer said, “Typically, you do not see a contract negotiation during a supply chain issue, during a pandemic. I don’t think we will change ordering greatly, mostly because by the time you hear of an impending strike, it’s already too late.”
One concern noted by dealers was the likelihood of the strike being repeated at other manufacturers, with one Case IH dealer saying, “It will set a precedent for all the labor unions to walk out on any color and leave dealers and farmers short on parts and equipment.”
Several dealers also mentioned future price increases as a result of the ratified contract. According to one John Deere dealer, “Wallstreet says the labor agreement will add 1.5% to [the] cost of equipment. John Deere will probably leverage that to get a 3-4% price increase. So prices will rise more [than] the labor increase would actually cost.”
Click here to jump to view all submitted commentary from dealers on this question broken down by brand.
See below all the commentary submitted by survey respondents, broken down by mainline brand:
Did you see any noticeable change in brand changes (color conversions) by your customers in the 4th quarter? Why or why not?
John Deere dealers:
- Customers did not see as big of an impact because John Deere busted their ass to keep product and parts coming. We were greatly impressed in how well they transitioned during the work stoppage.
- Mostly JD here
- I believe all manufacturers are having difficulty producing machinery. This seems to be from general supply chain issues from what we're told.
- Our customers understood the situation and were patient.
Case IH dealers:
- Most customers stick with what they are comfortable with.
- I think it came down to having more inventory.
- People here do not jump around.
- We were [too] short on inventory also to be able to fill competitive purchase opportunities.
- Why would you?
- Other colors couldn't supply either.
- Brand acceptance
New Holland dealers:
- If you had it, customers bought it. But no one had anything.
- Feel people are loyal
- Don't know, I think [people are] still brand loyal
- John Deere has a loyal following.
- Sales were related to on-hand inventory.
- We were more willing to chase down equipment than other dealers.
- No product
- All colors were having supply problems, or so it seems. Our customers are exhibiting more patience than ever before.
- Customers are waiting patiently.
- Everyone is in the same boat, can't get stock inventory. If you want it, you better get it ordered retail.
- Could not get equipment
- We had the equipment they wanted in stock.
- Disgruntled with other brands.
- The strike was short, and we didn't ask customers about brand preference.
- Could not get tractors
- The major brands in our area are struggling with service and support.
- No recent consolidations
- Dealers not having parts and service
- Customers bought what they could find
- Lack of inventory
- No one had enough product for customers to make a change.
- We had buyers but couldn't find equipment to sell.
How, if at all, will this fall’s labor dispute affect the rest of the farm equipment ecosystem in the coming years? What did you learn that will impact how you and your business will react next time?
John Deere dealers:
- Price increases. I don’t have a role in the dealership that I can effectively change that.
- It was a short-term issue. John Deere has plans to ramp up production to overcome any shortages.
- Used tractors sky rocketed in price.
- Wallstreet says the labor agreement will add 1.5% to [the] cost of equipment. John Deere will probably leverage that to get a 3-4% price increase. So prices will rise more the labor increase would actually cost.
- This will affect customers' access to new equipment for years to come. While it is not all due to the work stoppage since Covid affected it prior to that. That said however the work stoppage compounded a problem that was already there so it prolonged the ability for customers to have easy access to new machines.
- I think so. We had already increased our parts inventory as a company by 1 million dollars.
- I'm not sure how to answer this question. Our dealership is more in the small ag category, and I would think large ag dealers would be more affected as a whole. Currently, our biggest challenge is getting machinery for stock and for sale.
- You never know how far greed will go.
- In the short term, customers have become very aware that ordering ahead of season by several months is a wise decision. This has been the case for a decade or more for large ag, but now the awareness has moved to our small ag and utility customers. In the long run, we will lose some sales to brands who are better able to have in season inventory.
Case IH dealers:
- Typically, you do not see a contract negotiation during a supply chain issue, during a pandemic. I don't think we will change ordering greatly, mostly because by the time you hear of an impending strike, it's already too late.
- Cannot react to something out of our control.
- This same union agreement with John Deere will trickle down to the other manufactures is the way I understand it. I think this global component shortage is much bigger than this issue though.
- Certainly will be paying attention and try to stay ahead of with orders, both parts and wholegoods.
- More union's will follow the lead established on benefits & payroll.
- Just be aware of your orders and that you have a longer stocking period vs. short
- Companies are not going to lose money. They will just pass on the increases to the end user.
- Won't affect anything. Deere didn't have the parts on-hand to continue assembly. So there was no reason to give in to the union. Also, with only 13% of the total work force in jeopardy, it would be very easy for Deere to take that production to a non-union plant or possibly go overseas.
- It will set a precedent for all the labor unions to walk out on any color and leave dealers and farmers short on parts and equipment.
- No effect.
- This year was unique in the fact that inventory was low already. Every year will be different.
- Strikes are a fact of life. They are hard to predict, and when they happen, there is no way of going back 6-12 months and increase your orders. Thus, if the strike is long, there will be shortages on dealer yards down the road. No one wins, maybe the fat cat union workers.
- More people will feel entitled. This is a cultural failure.
- It has made customers aware that they need to plan well into the future, as we do as well.
- Greed is not good.
- It won't.
New Holland dealers:
- It did not have a direct effect on our business.
- It didn’t really affect us. What I think will happen going forward is dealerships with lots of available cash will buy inventory. They will be favored by the manufacturers and be the ones that have inventory. This industry will continue to follow the path of the auto business.
- We are trying to keep all wholegoods and parts at a high right now, as we and everyone else are low on inventory right now. No one knows what the future holds.
- Lots of things to be aware of. I think the manufacturers are pricing themselves out of work, labor, materials. All we need is a 1% increase in the interest rate or a drop in the commodity prices.
- Not sure how it will affect our business or our customers.
- That the supply chain is empty, and by the time they can catch up, the pricing will be [so] out of wack that farmers will quit buying.
- Not sure.
- Make concessions and find common ground.
- Inventories will be lower, and prices will be higher.
- Deere's situation was misreported by media. On-time inventory coupled with Covid interruptions and emphasis on sell at any cost vs. quality and service support are the issues
- If we don't start getting more [equipment] than we have been, it will be bad.
- Unsure, already difficult to get product.
- Did not impact.
- No effect.
- The John Deere labor dispute did not impact us. The disruption of our normal supply chains world wide did impact us. The demand for product has out-stripped our manufacturer's ability to keep up with this demand.
- You can't do much about your wholegoods inventory, but it has forced us to find more after-market parts and do the best we can with what we can get.
- Due to all the supply issues, we will stock heavier than in the past.
- Not at all.
- The "just in time" ordering mentality is now obsolete. Dealers have to switch back to preparing themselves more to respond to an ever-changing marketplace. We now deal with issues from the customer end, as well as the manufacturer.
- Labor wants more money and benefits whether union or non-union.
- I don't think it will have much effect. The problem has been availability of attachments more than tractors. It would take a long stoppage to make it much worse than it is now.
- Order forecasting and stock up on implements.
- Customers are frustrated and forced to plan vs. last minute purchases. Perhaps better for everyone if the lesson sticks. OEM does not have the dealer's back. Protect your own turf.
- Not expecting any change, I think the markets have a much larger impact.
- Don't know.
- [It will] likely drive up the price we have to pay employees.
- Did not affect us.
- We retail used machines. The OEM dealers are expanding margins on used equipment, because of the reduced availability to originate new equipment. This trend supports our business model.
- Will and has driven the price up on everything.
- I feel that some of the surcharges will not be coming back off the price of equipment, because manufacturers will be increasing wages and benefits to retain employees.
- Put extra inventory in stock if I can get it.
- I expect that price increases that come in the near future will be due to increased labor costs, even anticipated ones. Manufacturers don't have much choice.
- It will drive alternative purchases of now marginal product.
- As a high volume Branson and Mahindra dealer, we face significant supply issues like the other brands, but the John Deere labor dispute didn't directly affect us, other than perhaps allowing us to sell a few more units due to lack of inventory at the local JD stores.
- Not to put your faith in one brand.
- We need more employees in our shop to set up and repair what we sell.
For additional coverage on what happened during the John Deere/UAW trike, click here to read Ag Equipment Intelligence's full timeline of events.