⚒️️ Does Deere Risk Turning Into A Sloth?

Amazon accused of lying; Alibaba's challenge.

Hey Global Investor! Here’s what you need to know before the US markets open.

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⚒️️ Deere & Co: Gazelle Or Sloth?

Over 10K employees of Deere & Co. (DE), known for its tractor brand John Deere went on strike last week, a first in 35 years. Deere joins the list of companies such as Exxon, Kellogg, and J.B. Hunt, who face labor disturbances of their own. Is the union finally turning the tables? (Tweet This)

“May Day” For Companies

A record 4.3M workers quit their jobs in August – that’s 60% higher than average! While many left their previous job for a new one, 800K jobseekers in September were unemployed because they quit their last job without a new one lined up.

What gives? Exhaustion after working long hours during the pandemic; and resentment that the bosses are not parting with their huge profits. Since August 1st, workers have picketed at ~40 workplaces in the US, almost double the number during the same period last year.

For instance, around 1.4K workers at Kellogg went on strike, upset with seven-day work weeks and a two-tier retirement system. About 32K nurses from 14 hospitals and hundreds of clinics run by Kaiser Permanente in Southern California and Hawaii are also likely to join the bandwagon.

A whisker averted a strike in Hollywood over the weekend. Thousands of cinematographers, hairdressers, makeup artists, sound editors, and other film crew members – all part of a union –  reached a tentative three-year deal with the producers.

Employees of the Nabisco Snack Corporation – a subsidiary of Mondelez International – recently dropped a five-week-long strike after the company dropped plans for a two-tier pay scale.

No Traction In The Tractor?

United Auto Workers (UAW) is one of the largest labor unions in the US, representing automotive, aerospace, and agriculture workers and spans the US, Canada, and Puerto Rico. It currently has over 391K active members, over 580K retired members in over 600 local unions.

The last time Deere suffered a major strike was in 1986, which even had periods of violence. It went on for 163 days, causing record losses for the company.

Last month, the UAW voted in favour of a strike authorization after the company dragged its feet on issues such as a fully supplemented pension and post-retirement healthcare that could be passed on to a surviving spouse in case of death. The strike had impacted 14 plants of the company.

Last week, the warring parties reached a settlement: an immediate 5% hike for some workers and 6% for others depending on their positions within the company’s factories. Also included in the pact was a 3% raise in 2023 and 2025, respectively.

Under this agreement, a top-scale Deere production worker would make just over $30 per hour, which would rise to $31.84 after five years. Just as Deere heaved a sigh of relief, 90% of the union’s membership rejected the agreement. The two parties are now back at the drawing board.

The tense negotiations with UAW have certainly increased the temperature for Deere’s suppliers and contract farmers. They cannot afford protracted negotiations that will only serve to amplify the uncertainty.

But is the labor being unreasonable? Well, it depends on who you ask. Deere is on track to report record profits of ~$6B this year. The UAW believes its membership deserves a part of it for working hard during the pandemic and helping deliver these profits in the first place.

Will the management yield? Not yielding will mean subjecting these record profits in mortal danger. Yet, yielding too much may allow the other party to go for the jugular and make the management look weak.

The dynamics are keeping the shareholders on the tenterhooks as they wait with bated breath for some announcement that “All is well.”

Market Reaction
DE ended at $331.84, down 0.3%. Shares are up 24% this year.

Company Snapshot 📈

DE $331.84 -0.92 (0.28%)

Analyst Ratings (23 Analysts) BUY 57%  HOLD 30%  SELL 13%

Newsworthy 📰

Trouble: Five US lawmakers accuse Amazon of possibly lying to Congress following Reuters report (AMZN +1.11%)

Product: Apple doubles down on chip strategy with new premium-priced MacBooks (AAPL +1.18%)

Challenge: Alibaba unveils custom ARM-based server chip for cloud computing data centers (BABA -0.68%)

Later Today 🕒

  • Netflix Inc. Earnings (NFLX)
  • Johnson & Johnson Earnings (JNJ)
  • Proctor & Gamble Co. Earnings (PG)
  • Philip Morris Inc. Earnings (PM)
  • Intuitive Surgical Inc. Earnings (ISRG)
  • Canadian National Railway Co. Earnings (CN)
  • Bank of New York Mellon Earnings (BK)
  • Travelers Companies Inc. Earnings (TRV)
  • Kansas City Southern Earnings (KSU)
  • Dover Corp. Earnings (DOV)
  • Signature Bank Earnings (SBNY)
  • Omnicom Group Inc. Earnings (OMC)
  • Cree Inc. Earnings (WOLF)
  • Interactive Brokers Group Inc. Earnings (IBKR)
  • ManpowerGroup Inc. Earnings (MAN)

Today’s Market Terminology: Retracement

A retracement refers to the temporary reversal of an overarching trend in a stock’s price. Distinct from a reversal, retracements are short-term periods of movement against a trend, followed by a return to the previous trend

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