AGCO Puts Focus Back On North America

AGCO Corp, Duluth, GA, said it is bringing its focus back to the North American market, amid the global economic crisis. The company, ranking third in the U.S. farm equipment market, behind Deere and CNH, has only managed to scrape a profit in North America last year, the first since 2005, CNN
Money reports.

As a market leader in Europe and South America, lower commodity prices and falling farm incomes in those regions are putting pressure on AGCO executives to retain momentum in North America, the company said. AGCO had been selling larger numbers of lower horse-powered tractors to “recreational farmers” who don’t rely on farming as their primary income, before the reversal in commodity prices. But the small tractor market is now suffering as well.

AGCO credits its positive outlook to improved sales of their larger Challenger brand equipment, through an unusual alliance with dealers that primarily sell machinery produced by Caterpillar Inc. AGCO bought Challenger from Caterpillar in 2002 and still relies on the U.S. construction equipment company’s dealers to market the tractors and combines.

As demand for construction equipment has decreased, Caterpillar dealers with rural sales territories have ratcheted up their efforts to sell farm equipment. About three-quarters of Caterpillar’s North American dealers offer the Challenger brand equipment.

Also, with the credit market drying up, hurting industry sales in emerging sectors like Brazil and Russia, the company has created a joint venture with Rabobank of the Netherlands to provide U.S. customer financing.

AGCO reported $8.6 million in operating income from North America last year, just 1.2% of total income from all operations, as sales climbed 21% to $1.79 billion. The company also sells AGCO and Massey Ferguson branded equipment through its own network of dealers in North America but is still heavily reliant on importing stock from overseas plants.