With the huge jump in research spending, other innovations are coming, says Bob Crain
The results are impressive. AGCO’s global sales are nudging $9 billion, up from $3.8 billion when Richenhagen signed on in 2004.Netearnings are setting records too, and the company is investing $200 million a year in research and development, up from $50 million.
Those last numbers are crucial, Richenhagen says. His strategy is for AGCO to win because it will have the best tractors and combines. No longer will it be a company that competes mainly on price.
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The new flagship AGCO tractors (including Massey Ferguson 8600 series and the Challenger MT600C series) bring a long list of innovations to the North American market, including the selective catalytic reduction (SCR) system being adopted globally by truck makers for emissions control.
More important, says Richenhagen, these are the first tractors to be created by the AGCO system from the ground up, instead of being inherited from companies that AGCO bought. Not only can they be judged as tractors, therefore, but also as a test of whether AGCO has what it takes to be number one.
With the huge jump in research spending, other innovations are coming, says Bob Crain, North American manager for the company. “Our pipeline is full.”
Yet AGCO will be cost competitive too, Richenhagen says. Crain points out that AGCO has invested $250 million in modernizing its Mississippi plant in the last 18 months. “That’s a quarter-billion,” Crain says. “It’s more than AGCO had spent in North America in its entire 19-year history.”
Richenhagen also says AGCO will keep prices in check through inventory control. Only half of its combines are pre-sold now, but with its BTO (built to order) program, that will climb to nearly 90 per cent within two years. Virtually all tractor lines will be over 80 per cent pre-sold by then too.
That cuts costs, it puts the newest possible equipment in farmers’ hands, and it puts dealers in a better negotiating position, Richenhagen says. No longer, he says, when farmers see a lot where a tractor has been sitting for a couple of months, will they be able to go to the dealer expecting a major price cut so he can get it off his lot.
