There’s one thing that Richenhagen hasn’t changed at AGCO, and that he says he never will change.
AGCO is a pure-play agriculture company. Richenhagen ensures its tagline “Your agriculture company” is everywhere, and that all its machinery is made for farms, starting with the hobby farm market but with its focus intensifying as the size and sophistication of the farm goes up.
Richenhagen says the global financial meltdown is proving why being a pureplay ag company is exactly the right course. Unlike competitors, AGCO isn’t suffering from plunging sales of construction equipment, which can throw a wrench into everything from plant utilization to parts availability.
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Meanwhile, Richenhagen expects a marked reduction in the rate at which AGCO will buy other manufacturers and acquire their brands. It isn’t because of hard times. Indeed, he says AGCO has never been stronger, with a war chest of $600 million in cash reserves, and a debt to capital ratio under five per cent.
The reason, Richenhagen says, is that with a few exceptions, such as the European combine market, AGCO now thinks it has the capacity to need to compete worldwide. If the company were going to buy something now, it would have to be a major coup, Richenhagen says. “There are some family-owned companies that we are keeping a close eye on, but other than that, there really isn’t very much around.”
Richenhagen admits there’s another reason for the multi-brand strategy too. It makes it harder for competitors to figure out what AGCO is doing.
Richenhagen points to France, where John Deere is the number one tractor brand. However, if you add up AGCO sales from its four brands, AGCO is clearly the number one manufacturer.
“The John Deere person gets to go to their board and say they’re number one and they get to feel good about that,” Richenhagen says. “Well, good for them, but I would rather have the sales.” CG
into his office, which also means he can deal from a position of considerable strength. Even paint maker PPG, where he is on the board of directors, has changed, and now sees farm machinery as a better, more stable market than auto makers.
Investors also see huge new markets, including China, where AGCO is making aggressive moves, and Russia, where it is working with government and with bankers to make more farm credit available.
Richenhagen thinks 2009 is just the start of a global re-positioning of agriculture. It’s a re-positioning that is only partly due to the debt crisis, he says, and it’s also only partly due to Earth’s soaring population and the global need for more food.
Mainly, Richenhagen says, it’s because, year and after year, farmers have been making more productivity gains than any other economic sector. “Farmers are outperforming the world,” Richenhagen says. “You have to be bullish.”
