Deere & Co.'s Waterloo Foundry update is not only good for the Cedar Valley, it's a great move for the company, according to an industry analyst who is considered an expert on the Moline, Ill.-based company.
"It not only provides local opportunities but more control over their operations in what are critical components," said Eli Lustgarten, an analyst with Longbow Research who tracks Deere's moves closely. "My first reaction to this is, right now, business is quite good, and they're trying to raise the production schedule in the near term."
Waterloo is fortunate to have a foundry operation, because there are precious few, particularly in the U.S., Lustgarten said.
"Products coming out of foundries have been particularly difficult to source, not only locally but abroad," he said. "I'm not sure where they're getting a lot of their foundry products, but a lot of stuff is coming from overseas."
Building on a foundry operation in the Midwest will give Deere extra flexibility, Lustgarten said.
"If you have an extended supply chain, you have trouble adjusting production to any changes in demand," Lustgarten said. "I suspect this is another step to solidify and improve the supply chain and focus on producing key products, which every company is having more difficulty securing."
Outsourcing products was not a viable option, Lustgarten said.
"One of the things companies have recognized in the last couple of years is the need to solidify the supply chain," he said. "When they're outsourcing everywhere, some products are more difficult to source in a reliable high-quality manner."
Deere said the foundry modernization would not bring in any additional jobs. However, Steve Dust, CEO of the Greater Cedar Valley Alliance, said it could prompt allied industries to enter the Cedar Valley marketplace.
"Think of the spin-offs," Dust said Wednesday. "I'm thinking of people who have the knowledge, of people who are retiring from Deere who may be looking for new business opportunities and may attract new businesses."
Deere's expansion will earn the company tax credits under the Iowa Department of Economic Development's High Quality Jobs program.
State Sen. Bill Dotzler, D- Waterloo, a member of the Workforce Development Committee, said, "Most companies you deal with view what they do as very competitive, and if the state doesn't participate with their redevelopment, so to speak, chances are they could find another place to relocate that financially would be better for them."
It's just the way the system works, Dotzler said.
It's still a great situation for the Cedar Valley, regardless of the tax breaks, Dotzler added.
"Deere has been great for our community and, in the long run, anchoring Deere in Waterloo with their new foundry work, we'll benefit even with the state incentives involved," he said. "It's something we needed to do, and I'm glad we did it."
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