Economy downturn nothing new to Deere

File John Deere

Lessons learned from the last farm crisis were translated into a leaner, more responsive farm-equipment maker, enabling Deere to respond to rapidly changing market conditions throughout the world.

Chairman and chief executive Hans Becherer said Deere has moved "aggressively to reduce production of large tractors and combines in order to keep inventories in check and respond to levels of demand that have suffered abrupt and serious erosion."

Lower prices for grain and other commodities has forced farmers to hold off on replacing their equipment. That translated into lower production schedules and some factory layoffs last fall.

Retail demand for ag-equipment this year is now projected to decline by 20 percent in North America, 10 percent in Europe and by 15 percent in Latin America and Australia.

The impact is expected to be felt on Deere's bottom line when first-quarter financial results are disclosed later this month.

The situation has challenged Deere to balance its response to current market conditions with the company's ongoing need to invest in the future, Mr. Becherer said.

Deere has reduced its capital spending and is aggressively managing costs and assets, while striving for additional efficiencies through its quality and supply-management programs, Mr. Becherer said.

At the same time, Mr. Becherer said, "We fully intend to maintain our commitment to the key projects that underlie our plans for global growth and long-term market-share improvement."

Deere's history is filled with challenging economic conditions.

John Deere, a Vermont blacksmith who relocated to Illinois, developed the steel plow in his Grand Detour shop in 1837.

Eleven years later he and his family moved to Moline and began manufacturing plows with his new partner.

After the panic of 1857 bankrupted many businesses, Deere formed a new corporate organization and transferred ownership of the business to his son, Charles.

Under Charles, the early Deere & Co. became Moline Plow Manufacturing in 1860. Four years later, John Deere obtained his first patent for steel plow molds. The firm incorporated as Deere & Co. in 1868 and became a major plow manufacturer of "The Moline Plow."

By 1874, the company reached its first $1 million in sales.

After expanding its branches to St. Louis, Minneapolis, Council Bluffs, Omaha and San Francisco, Deere began consolidating its companies in 1901 to minimize waste and centralize manufacturing. The company became an investor-owned publicly traded company by 1910-1911.

Deere bought the Waterloo Gasoline Engine Co. tractor manufacturer in 1918.

Deere was one of 186 tractor companies in 1921 and began selling farm equipment to Russia in the 1920s. By 1927, the company was producing combines and 40 other machines.

In 1929, Deere posted record earnings, with a $16 million profit on $76 million in sales. A year later, with the start of the Great Depression, Deere's sales dropped about $63 million, although the company still posted a $7.6 million profit. The number of tractor companies shrank to 38.

Throughout the 1930s, Deere laid-off 3,530 employees and reduced the wages of the remaining 1,270 workers. Caterpillar and Deere joined forces in some aspects of its tractor business.

During World War II, Deere made transmissions and final drive units for military tanks, shells and other defense production systems. From 1945-1955 the company made numerous product improvements on its tractors, combines and other equipment.

Deere phased out its joint dealership with Caterpillar in California in the mid-1950s and, in the next decade, established a presence in Mexico, Germany, Argentina, South Africa, France and Spain.

In 1963, Deere signed a licensing agreement with Hitachi Ltd. of Japan, although it wasn't until 1972 that Deere's international operations first turned a profit. From 1972-1976, Deere spent more than $1 billion on capital investment and research and development.

From 1973-75, Deere president William Hewitt visited the People's Republic of China, which lead to a return visit of Chinese delegates and a collaboration on an equipment order. Also, in the late 1970s, Deere made a capital investment in its European operations.

Throughout a major farm recession in the early 1980s, Deere continued its capital investments and research and development, leading to new product lines and innovations and a string of record profits in the 1990s.