October 1, 2019 / 8:18 PM / 21 days ago

UPDATE 2-Deere to lay off 163 U.S. workers as trade war dents equipment demand

(Adds details of layoffs, share price, background on Deere's business)

By Rajesh Kumar Singh

CHICAGO, Oct 1 (Reuters) - Deere & Co on Tuesday announced indefinite layoffs for 163 U.S. manufacturing workers at plants in Illinois and Iowa that make agricultural, forestry and construction equipment, citing decreased customer demand.

The layoffs come week after the company said it would reduce production by 20% at its facilities in Illinois and Iowa in the second of half of the year to keep inventory in line with retail demand.

The world's largest farm equipment maker is reeling from the fallout of the U.S.-China trade war that has slowed purchases from farmers.

Meanwhile, lingering trade tensions have inhibited manufacturing activity and investment in nonresidential construction.

Weaker demand in the latest quarter dented its earnings, forcing Deere to trim its full-year earnings forecast and initiate a review of costs.

In August, the Moline, Illinois-based company said it was assessing its manufacturing footprint as part of the cost structure review.

In an emailed response, Deere said 50 production employees at Harvester Works, which makes large agriculture equipment, in East Moline, Illinois, would be put on indefinite layoff. Separately, 113 workers would be laid off for an indefinite period at its construction and forestry plant in Davenport, Iowa.

Deere's shares closed on Tuesday down 1.9% at $165.50.

The year-long tariff war between the United States and China has slashed the export earnings of American farmers. China imported $9.1 billion of U.S. farm produce in 2018, down from $19.5 billion in 2017, according to the American Farm Bureau.

U.S. shipments to China of soybeans, the country's most valuable farm export, sank to a 16-year low last year as Beijing shifted purchases mostly to Brazil, leaving American farmers with a surplus.

Deere has said it expects industry sales of agricultural equipment to be about the same as last year in the United States and Canada, which account for 60% of its overall business. Sales in the region were earlier projected to be flat to up 5% earlier. (Reporting by Rajesh Kumar Singh in Chicago Editing by David Gregorio and Matthew Lewis)

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