Hitching its plow to a boom in commodity prices, Duluth-based AGCO is making a bid to expand its market share in North America.
The company recently announced plans to expand tractor production in America and earlier this week opened a training center near its headquarters to beef up training of its dealers and employees.
AGCO expects to add about 100 new jobs at its expanding factory in Jackson, Minn., but the growing company is already “bursting at the seams” at its 500-employee headquarters, said Bob Crain, who heads AGCO’s 3,500-employee North American operations.
The Fortune 500 company, which has more than 14,300 employees, is one of the world’s largest farm equipment manufacturers, selling $6.9 billion worth of tractors, combines and other farm machinery last year.
After dipping in 2009 in the aftermath of the financial market meltdown, AGCO’s sales are expected to again hit about $8.5 billion this year as strong global demand for corn, wheat and other produce has driven up commodity prices and farmers’ purchasing power.
While farm produce prices have slipped recently, raising some caution signs, “the commodities that [AGCO depends] on have been amazingly strong for a year or so,” said Standard & Poor’s analyst Michael Jaffe.
Corn prices, for instance, are still up roughly 90 percent over a year ago.
Likewise, U.S. farmers’ incomes rose about 30 percent last year, which should boost farm equipment sales, said Jaffe. He’s projecting that AGCO’s profits will rise about 65 percent this year, from $220 million in 2010.
Still, about 80 percent of AGCO’s sales are overseas and the company trails well behind industry giant Deere & Co. in North America.
AGCO officials said they are working on changing that and the recently announced moves are part of that strategy.
“We have our eye on doubling our market share” in North America over the next several years, said Crain. He said AGCO currently holds about 10 percent of the North American market, the world’s largest market for tractors and similar equipment.
The 21-year-old company has grown rapidly through some two dozen acquisitions that cobbled together several North American, European and other overseas brands, including Massey Ferguson, Challenger, Fendt and Valtra.
In January, AGCO announced that it was expanding production of its high-horsepower tractors in its Jackson factory by adding a brand made by its factory in France.
Monday, the company also opened a new training center near its Duluth headquarters.
AGCO believes the moves will help capture more customers by raising the profile of its products in the U.S. and improving training of its network of about 2,700 independent dealers. The move will add about 100 jobs at the 900-employee Minnesota plant.
Crain said AGCO has spent “tens of millions” on the factory expansion, which is expected to roll out the new tractors in the fourth quarter.
The production move will speed up response time on custom orders of large tractors, he said, and could help woo more buyers who would prefer to buy American-made tractors.
“We think it’s important to show our commitment to the North American farmer,” said Crain. “'Made in North America' does mean something.”
Likewise, the new training center’s role is critical to selling today’s $200,000-plus tractors, company officials said.
Such tractors use sophisticated computer systems and satellite tracking to automate steering, map crop yields and adjust how much fertilizer to apply.
“The expectations of customers have never been higher,” said Crain, because they “have millions and millions of dollars invested.”
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