September 15, 2006 Vol. 13, Issue 5 • Equipment Sales Down • Lexion Changes Colors • Landini in Brazil AGCO Kicks Off its ‘Cornerstone Brands’ Strategy With 21 brands already under its cor- brands in less than 16 years, AGCO New Idea tractors. porate umbrella, AGCO, the Duluth, had inherited an agglomeration of an Cornerstone Brands. In an Ga.-based manufacturer of farm estimated 1,900 dealers across North exclusive interview with AEI, Bob machinery is ready to streamline the America. Some carried the AGCO trac- Crain,AGCO’s North American senior number of brands carried by its deal- tors and implements, while others vice president and general manager, ers in North America.This is part of a handled Massey Ferguson equipment. explained the new brand strategy.“We wide-ranging strategy to strengthen want a distribution network that’s tied brand recognition, improve distribu- to one of our cornerstone brands so tion channels and reduce costs, say it’s an ACGO dealer,a Massey dealer or company officials. “It’s time for us to a Challenger dealer. During its largest-ever dealer grow up and to build “But our product strategy is going meeting in St. Louis on August 16 and our identity, and that’s to continue to leverage the equity of 17, AGCO announced that it will names like Hesston and White-New build its dealer distribution network what we’re doing...” Idea and Gleaner combines and so on. around three “cornerstone brands” — So we really have a product strategy Massey Ferguson, AGCO and that will leverage the brand names Challenger. Some dealers have taken Still others carried only Hesston or typically associated with those prod- to calling them the ROY brands — Gleaner combines. Other dealers car- ucts, but we will also have a distribu- Red (Massey), Orange (AGCO) and ried only implements and machinery tion strategy anchored around the Yellow (Challenger). like Sunflower or Spra-Coupe. Still oth- three cornerstone brands.” With rapid acquisition of the 21 ers sold and marketed Fendt or White- Crain likens the new AGCO strat- Continued on page 2 CNH: Trouble at the Top? Another New Face at New Holland: Case IH Replaces Top Clarke Named VP N.A. Ag Business Executives Ferla and Sharp In another significant shift in its top leadership ranks, New In an after-hours announcement on September 13, CNH,Lake Holland has named David Clarke as its new vice president of Forest,Ill.,reported that it was replacing both its president of agricultural business in North America.The move was effec- the Case IH brand, Mario Ferla,and Jim Sharp,its president of tive as AEI went to press and the abruptness of Clarke’s parts and services for the entire CNH organization. appointment caught some New Holland dealers off guard. CNH appeared to be downplaying the changes in its Clarke, who reports directly to Marco Mazzú, global top leadership positions, saying the new appointments president of New Holland Agricultural Equipment, replaces were “designed to further strengthen its leadership team.” Dennis Recker, who will retire at the end of 2006 after Replacing Ferla, who had been with CNH for 5 years, more than 32 years of service. In his new position, Clarke as president of the Case IH brand is Randal (Randy) Wayne oversees the sales, marketing and support functions of New Baker, senior vice president for Logistics and Supply Chain Holland agricultural products in North America. since October 2005. In the interim, Baker will also retain his The move comes just 8 months after Bob Crain left previous logistics and supply chain responsibilities, accord- the position to join AGCO as its senior vice president and ing to the statement released by CNH. general manager. Crain had been with the company since The published statement also said that Rubin J. 1981. CNH also turned over the same position on the Case McDougal has been appointed chief financial officer effec- IH side earlier this summer. tive October 13, 2006.“McDougal brings to CNH a wealth Prior to beginning his career with New Holland as of experience encompassing finance, strategic planning Continued on page 3 Continued on page 3 The contents of this report represent our interpretation and analysis of information generally available to the public or released by responsible individuals in the subject companies, but is not guaranteed as to accuracy or completeness. It does not contain material provided to us in confidence by our clients. Individual companies reported on and analyzed by Lessiter Publications Inc., may be clients of this and other Lessiter Publications Inc. services. This information is not furnished in connection with a sale or offer to sell securities or in connection with the solicitation of an offer to buy securities. Continued from page 1 egy to that of its biggest competitor, and to build our identity, and that’s business with our shortline partners, if John Deere. what we’re doing.” that’s what they want to do. On the “If you look at them, you have a As part of the new strategy, the other hand, we want the dealers to be John Deere dealer but what are they company revamped its distributor aware that we want to talk to them doing with some of their implements structure across North America, divid- about how and when we can start and attachments? They’re marketing ing the territory into 9 districts. Each expanding our business products with their Frontier line.They’re not trying district manager now has responsibil- them.We do not intend to strong-arm to tell everyone that it’s a Frontier ity for sales, parts and service. The them.We just need to be clear that in dealer. It’s a John Deere dealer that company will also recognize through the long term we want them to be a carries Frontier implements. its dealers the difference between full-line partner of ACGO.” Crain says the main purpose of the large, commercial farmers and lifestyle When it comes to total AGCO new initiatives are to anchor AGCO’s farmers. dealer numbers in the future,Alistair business and the dealers’ business Existing Shortline Dealers. In McLelland, newly appointed vice around those three cornerstone trac- light of the new branding strategies president of sales, says, “Without a tors,while taking advantage of the equi- in place and the menagerie of dealers doubt, it will certainly be less than ty and value in these existing brands. where we’re at today. We probably “We’re going to have a Massey need a lesser number of dealer own- Ferguson dealer that carries Massey ers with more locations. Does that Ferguson-Hesston, Massey Ferguson “We can approach CNH, that mean 1,200 locations or 800 or tractors and Massey Ferguson-White in terms of size…” 900? We can’t answer that question equipment. The same goes for our right now. AGCO tractor dealers. So the corner- “To eliminate all of the in line stone is really the dealer more so than that make up the AGCO distribution competition that we have today the product.” network, Crain makes it clear that the through our acquisitions strategy, we Responding to industry criticism company will not disregard those will need to reduce the number of of its fragmented dealer network, Crain businesses that handle only shortline dealers,” says McLelland. “Those are says, ”We have more dealers than any- equipment, but will encourage them decisions that both the dealers, and one. Maybe more than we should have to expand their AGCO product lines. we, will need to make.” because of our acquisition strategy, “We’re making it very clear that Crain adds,“Our focus is not on which was a great strategy.But it left us we believe that we have a lot of excel- recruiting new dealers, with the pos- with Sunflower dealers and Hesston lent dealers out there that don’t carry sible exception of compact utility out- dealers that aren’t identified as ACGO cornerstone tractor contracts today,” lets. It is to evaluate who will be long- dealers.Well,its time for us to grow up says Crain.“We’re happy to keep doing term, high-potential dealers from our existing network while focusing our resources on helping them.” Deere Tractor Sales The Push to Grow. From a North American standpoint, Crain believes Outperforms Industry in August AGCO has a lot of room to grow from its current annual sales of $5.5 billion. Deere's dealer retail sales comparisons for large-horsepower tractors outper- Globally,the company already ranks as formed the industry in August, but Deere's combine sales lagged in a season- the second-largest ag equipment maker, ally important month. but with its construction equipment Deere reported a single-digit decline in utility and row-crop sales while sales figured in,CNH finishes in overall 4WD tractor sales were down less than the industry (industry 4WD sales sales behind Deere. were down 38%). Combine sales were down “a bit more” than the industry, Crain make it clear that the goal is according Baird analyst Robert McCarthy. to pass CNH in sales without getting Deere’s dealer inventories remained below those of the industry on a in the construction equipment busi- days-sales basis across all equipment types. This is consistent with Deere's ness.“I would say we’ll be getting sig- working capital reduction efforts and previously announced fourth-quarter ‘06 nificantly bigger. Much larger than production cuts. where we’re at today.” Deere reported on Aug. 15 that its earnings during the fiscal 2005-06 Does he think they can double third quarter ended July 31 rose 12.6% on a 7.6% increase in sales as the firm their annual sales at some point down benefited from raising prices.