TORONTO - Deere & Co., the world's largest maker of farm machinery, said on Tuesday it will close its Welland, Ontario, plant next year, a decision that will cost 800 employees their jobs.
The announcement comes as sky-high steel prices, driven by demand from India, China and the Gulf states of the Middle East, have weighed on Deere's earnings in each of its equipment divisions. Rising freight costs have also eaten into profits.
Deere said it will close the manufacturing facility by the end of 2009 and move production to operations in Wisconsin and Mexico in a bid to improve efficiency and profitability.
According to Deere, the decision to close the plant will result in after-tax charges of about $90 million, about half of which will be recorded in the fourth quarter of 2008. Deere said this amount was not reflected in the company's net income forecast for the quarter of $425 million issued last month.
The factory, located near Niagara Falls, makes utility vehicles and attachments for commercial and consumer equipment and agricultural equipment businesses.
Deere said production of its Gator utility vehicles now made at Welland will move to Wisconsin, while production of cutting and loading attachments will be transferred to Monterrey and Saltillo, Mexico.
Deere and its rivals have been enjoying record demand for their products, thanks to the surge in investment in biofuels and increased consumption in the developing world.
In its most recent quarterly report, Deere said its utility vehicle sales were a bright spot in its commercial and consumer business. Its key rival in the utility market, Polaris Industries, has enjoyed success with its Ranger side-by-side utility vehicle.
Shares of Deere were down $1.91, or 2.7 percent, at $68.66 at mid-afternoon in New York. (Reporting by Frank Pingue; editing by Rob Wilson)
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