Agco Corp. disclosed a restructuring program that will tighten its workforce and cut overhead costs as the farming equipment maker undergoes operational changes and faces demand challenges.
The Georgia-based company told investors Monday of its plan to reduce structural costs, streamline its workforce and enhance efficiencies related to its new operating model for certain corporate and back-of-office functions, as well as better leverage technology and its global centers of excellence that manufacture tractors and provide technical training.
The decision came shortly after Agco notified workers of a move that shifts some production from its Hesston, Kansas facility to a plant in Querétaro, Mexico. At the time, KSNW reported the change won’t require layoffs, but the company expects the worker impact to be “accomplished through typical attrition.”
As part of the initial restructuring phase, Agco has plans to cut up to 6% of its salaried workforce and estimates a one-time termination expense totaling $150 million to $200 million, mostly due to severance payments, employee benefits and other costs.
The cash charges will be reflected in earnings through the first half of 2025, according to an 8-K investor filing. Once implemented, the restructuring should yield benefits and cost savings of up to $125 million per year.
The changes come in response to “increased weakening demand in the agriculture industry,” Agco told investors. Earlier this year, the company announced production cuts of 10% as dealers work through elevated tractor and combine inventories.
With net farm income falling and stubbornly high interest rates sticking around, borrowers are pulling back on big-ticket items. In turn, machinery leaders Deere & Co. and CNH have also slowed production, laid off workers and reoriented their focus on precision technologies to weather the market downturn.
“The momentum that we’re seeing with our team now engaging with the PTx Trimble team has been very good, and the engagement from the dealers has been very good as well,” Damon Audia, Agco’s chief financial officer, said in an earnings call about its latest acquisition.
With challenges ahead, Agco is looking to evaluate additional cost-savings opportunities that could result in more restructuring.
Company shares dipped 4% following news of the restructuring plans. They closed Wednesday at $99.21 on the New York Stock Exchange.
Agco employed nearly 28,000 people around the world as of December 31, 2023.