Deere & Company's sales began to plummet between 1979 and 1985, with tractor sales down 40 percent and combine sales down two-thirds of what they were. By 1985, Deere & Company was losing money on almost every tractor, combine, and planter manufactured. Deere reported an outrageous $28.5 million net loss for the first quarter of fiscal 1983. For the fiscal year 1985, Deere suffered a first quarter net loss of $28.2 million. 1986 proved punishing for Deere & Company with a net loss of $229.3 million. A great deal of this loss came from construction equipment sales, costing Deere $125 million in the fourth quarter of 1986. Also, 1986 losses were blamed on competition and poor relations with the United Auto Workers. In 1987 sales were still bleak with a net loss of $192.6 million in the first quarter alone. By comparing sales in 1980 at around $5.5 billion to the drop in 1985 at around $4.5 billion, it is easy to see that Deere & Company was suffering. In an attempt to turn this downward spiral in the company's favor, Deere & Company issued a 30 percent reduction in costs in 1985. Also in 1985 Deere raised farm equipment imports from eight percent to twenty percent.

    The high labor costs combined with the recession were really starting to take a toll on Deere & Company, and soon layoffs began escalating in the Waterloo, Iowa area. In October 1979, Deere & Company employed over 16,000 workers; however, with cutbacks in schedules, staff reductions, and wage losses the high employment began to diminish. Between 1980 and 1983, Deere & Company laid off 40 percent of hourly wage United States employees and 15 percent of salaried employees worldwide. During the years 1980 and 1985 there was a 30 percent reduction in the workforce of Deere & Company. In 1981 several thousand line employees were issued layoffs. The following year, 1982, salaried and managerial employees' bonuses were suspended. 680 workers were laid off in February 1982 at the manufacturing complex. The Waterloo manufacturing complex would also be closing down for a two-week period in March 1982.

    On November 1, 1982, 1,300 Deere employees were laid off indefinitely at three Waterloo plants. An additional 400 workers were placed on indefinite layoff on November 22, 1982. Another 3,800 employees were affected by a March 14 to 27, 1983 shutdown, as Waterloo needed time to rework the lines and reduce dealer inventories. On August 27, 1984, 642 of 6,300 wage employees, combined between three Waterloo factories, were laid off due to high interest rates, the 1983 drought, and poor overseas trade. In 1985 there was an overabundance of 4,000 tractors in stock at Waterloo, and the company needed to shutdown unnecessary tractor production. Deere & Company's chairman responded to a 1985 layoff affecting 480 workers in two Waterloo plants by saying, "We've done some things we hated to do, but we did them." Between March and June 1985, 600 salaried workers, including some from Waterloo, were laid off. The Waterloo plant laid off an additional 100 workers on April 29, 1985, for a six-month period, mainly affecting those working on the four-wheel-drive line. These layoffs were necessary, as farmers were unable to afford the expensive four-wheel-drive tractors. The Waterloo Component and Tractor Works laid off 480 workers on October 28, 1985, 430 from the Component Works and 50 from the Tractor Works. Deere spokesman Gordon Tjelmeland said of the layoffs, "It's just a result of some extreme pressure to improve the value of our product and the productivity of our plant. We're doing whatever we can to strengthen the company." In 1987 the workforce of Deere & Company was reduced by six percent, numbering around 700 employees. In July 1987 Deere & Company merged two of its Waterloo factories, the Component Works and the Tractor Works, eliminating 700 workers and creating John Deere Waterloo Works on May 1, 1987.