AGCO Announces Major Layoffs Due to Declining Demand
Agco Corp. recently announced a restructuring program aimed at reducing its workforce and overhead expenses as the agricultural equipment manufacturer adapts to operational shifts and faces challenges in demand.
The company, based in Georgia, informed investors of its strategies on Monday to cut structural costs, optimize its workforce, and boost efficiencies in certain corporate functions and back-office operations. Additionally, Agco plans to make better use of technology and its global excellence centers that produce tractors and offer technical support.
This decision follows Agco’s earlier notification to employees regarding the relocation of some manufacturing from its facility in Hesston, Kansas, to a plant in Querétaro, Mexico. Initially, this transition was said to not necessitate layoffs, with the anticipated workforce reductions expected to occur mainly through natural attrition.
As part of the first phase of the restructuring, Agco intends to reduce its salaried workforce by up to 6%. The company projects a one-time termination cost in the range of $150 million to $200 million, primarily due to severance, employee benefits, and associated expenses.
These cash charges are expected to impact earnings throughout the first half of 2025, as noted in a recent 8-K filing with investors. Once executed, the restructuring is anticipated to generate annual savings of up to $125 million.
These changes have been prompted by “a notable decline in demand within the agriculture sector,” according to Agco’s statements to investors. Earlier this year, the company also revealed a 10% reduction in production as dealers manage high inventories of tractors and combines.
With net farm incomes decreasing and persistent high interest rates, many borrowers are hesitating to make significant purchases. Consequently, machinery manufacturers such as Deere & Co. and CNH Industrial have responded by slowing production, implementing layoffs, and redirecting their focus toward precision technologies to navigate the downturn.
“We are encouraged by the momentum we’re building through our collaboration with the PTx Trimble team and the positive response from our dealers,” said Damon Audia, Agco’s CFO, in a recent earnings call regarding their latest acquisition.
Despite the challenges ahead, Agco is assessing further cost-saving measures that may result in additional restructuring.
Following the announcement of its restructuring plans, company shares fell by 4%, closing at $99.21 on the New York Stock Exchange on Wednesday.
As of December 31, 2023, Agco employed nearly 28,000 individuals globally.
Maria Sanchez completed her Bachelor’s degree in Plant Sciences from the University of California, Davis, in the USA. Her studies focused on plant genetics and biotechnology, with an emphasis on developing disease-resistant crop varieties. Maria has contributed to several research projects aimed at improving crop resilience to climate change and is now pursuing her Master’s degree in Plant Breeding.