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OCCASION This publication has been made available to the public on the occasion of the 50th anniversary of the United Nations Industrial Development Organisation. DISCLAIMER This document has been produced without formal United Nations editing. The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. Designations such as “developed”, “industrialized” and “developing” are intended for statistical convenience and do not necessarily express a judgment about the stage reached by a particular country or area in the development process. Mention of firm names or commercial products does not constitute an endorsement by UNIDO. FAIR USE POLICY Any part of this publication may be quoted and referenced for educational and research purposes without additional permission from UNIDO. However, those who make use of quoting and referencing this publication are requested to follow the Fair Use Policy of giving due credit to UNIDO. CONTACT Please contact [email protected] for further information concerning UNIDO publications. For more information about UNIDO, please visit us at www.unido.org UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna International Centre, P.O. Box 300, 1400 Vienna, Austria Tel: (+43-1) 26026-0 · www.unido.org · [email protected] *“ IM 1 .0 m £ m = = № !: m !: in l.l I II 18 I 1.6 i ^ i i MICROCOPY RESOLUTION TEST CHART NATIONAL BUREAU OF STANDARDS STANDARD REFERENCE MATERIAL tOlOa (ANSI and ISO TEST CHART No ?) Distr. LIMITED 'JNI DO/IS. 503 UNITED NATIONS 21 December 1984 INDUSTRIAL DEVELOPMENT ORGANIZATION ENGLISH THE PRESENT SITUATION OP THE AGRICULTURAL MACHINERY INDUSTRY IN NORTH AMERICA AND WESTERN EUROPE u Sectoral Working-Paper-Series No. 24 ¿vu.es fle^ckawt Sectoral Studies Branch Division for Industrial Studies V.84-94547 SECTORAL WORKING PAPERS In the course of the work on major sectoral studies carried out by the UNIDO Division for Industrial Studies, several working papers are produced by the secretariat and by outside experts. Selected papers that are believed to be of interest to a wider audience are presented in the Sectoral Working Papers series. These papers are more exploratory and tentative than the sectoral studies. They are therefore subject to revision and modification before being incorporated into the sectoral studies. This document has been reproduced without formal editing. The designations employed and the presentation of material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area of its authorities, or concerning the delimitation of ics frontiers or boundaries. Mention of company name and commercial products does not imply the endorsement of the United Nations Industrial Development Organization (UNIDO). This paper was prepared by Messrs. James Merchant and David Dornbusch for North America and Messrs. Pascal Bye and Jean-Jacques Chanaron for Western Europe. The views expressed do not necessarily reflect the views of the UNIDO secretariat. - 1 - Preface As a part of the ongoing study work on the agricultural machinery sector the Sectoral Studies Branch of UNIDO's Division for Industrial Studies has commissioned two papers giving a general overview of the present status of the North American and Western European Agricultural Machinery Industry and a short-term market outlook. The main findings of these papers will ultimately be integrated into major studies of the agricultural machinery sector. However, it was believed that it would be of interest to present in advance the integral text of these consultancy papers, which are of a topical nature. The paper on North America has been prepared by James Merchant and David Dombusch (Dombusch and Company). The paper on Western Europe has been prepared by Pascal Bye and Jeair-Jacques Chanaron (University of Grenoble, Prance). The two papers have been put together into one, by the UNIDO secretariat. The views expressed are those of the consultants and do not necessarily reflect the views of the UNIDO secretariat. Tables without explicit indication of source have been elaborated by the consultants. - iii - CONTENTS Paje 1. INTRODUCTION 1 2. GENERAL OVERVIEW OF THE NORTH AMERICAN AGRICULTURAL MACHINERY SECTOR 4 2.1 Agricultural machinery sector data 4 2.2 Structural changes in the North American agricultural machinery sector 5 2.3 International Trade 12 2.4 Short-term outlook 17 3. GENERAL OVERVIEW OP THE WESTERN EUROPEAN AGRICULTURAL MACHINERY SECTOR 21 3.1 Agricultural machinery sector data 21 3.2 International trade 24 3.3 Structural changes in the Western European agricultural machinery sector 25 3.4 Short-term outlook 30 4. CONCLUSIONS; EXOGENOUS FACTORS AND MANUFACTURERS RESPONSE 36 4.1 The North American agricultural machinery sector 36 4.2 The Western European agricultural machinery sector 38 IV Tables l & L L World-wide sales and profits, eight North American agricultural machinery producers 6 2 Annual change in sales and profitability, eight North American agricultural machinery producers 7 3 Manufacturers' and dealers' inventories, five North American agricultural machinery producers 9 4 World-wide employment, five North American agricultural machinery producers 10 5 Sector shipments and employment 11 6 Detailed breakdown of wheeled farm tractor shipments 13 7 Detailed breakdown of agricultural machinery shipments, United States agricultural machinery producers 14 8 International agricultural machinery trade, imports into the United States 13 9 International agricultural machinery trade, United States exports 16 10 Industry forecasts of United States agricultural machinery sales 18 11 Tractor registrations by zone 22 12 Penetration rate of the tractor market 26 13 Export rate of the tractor industry 26 14 Tractor data by country 27 Figure 1. Tractor registrations in the world 23 - V EXPLANATORY NOTES References to dollars ($) are co United States dollars, unless otherwise stated. A comma (,) is used to distinguish thousands and millions. A full stop (.) is used to indicate decimals. A slash between dates (e.g., 1980/81) indicates a crop year, financial year or academic year. Use of a hyphen between dates (e.g., 1960-1965) indicates the full period involved, including the beginning ar end years. Metric tons have been used throughout. The following forms have been used in tables; Three dots (...) indicate that data is not available or is not separately reported. A dash (-) indicates that the amount is nil or negligible. A blank indicates that the item is not applicable. Totals may not add up precisely because of rounding. 1. INTRODUCTION North American agricultural machinery producers experienced another year of declining sales in 1983. Despite the decrease in sales, however, the industry as a whole reduced its losses in earnings in 1983. Early 1984 data indicate that sales have increased slightly in 1984 over 1983, and that the industry's earnings are continuing to increase. Most manufacturers were forced to cut costs substantially during the past four years to weather the sales decline. Costs were trimmed by decreasing manufacturer, but not dealer inventories, reducing employment, closing factories, prolonging shutdowns, restructuring divisions and selling subsidiaries. Although International Harvester's condition is still precarious, most firms in the industry appear to be stronger financially than one year ago. Any improved sales volume could restore profitability to most firms. The 1980-1983 decline in agricultural machinery sales has been largely world-wide. International trade to and from the United States remains far below the 1979 level., although imports in 1983 gained 9 per cent over 1982. Low farm incomes resulting from low cooviodity prices are the primary reason for the world-wide drop in sales. Other reasons are also important in specific markets. Balance-of-payments difficulties in debtor nations have evoked nard currency restrictions that preclude machinery imports. High interest rates have made capital purchases relatively less appealing everywhere. The strength of the United States dollar disadvantages exports from United States factories, but improves profitability at subsidiary plants located outside the United States. The outlook during 1984 is for improved sales of agricultural machinery, as industry sources expect sales gains in North America, South Africa, Australia and Latin American nations without severe balance-of-payment problems. Sales declines are forecast for Europe, Latin American debtor nations and the Middle-Eact. The crisis on the European tractor and farm machinery market is part of a recession which has affected the whole of the world market since the mid-seventies. In Europe, the level of tractor sales has however been 2 stabilized since 1981 around 270,000 units, and thus still accounts for a third of world registrations, excluding the planned economies. This market therefore constitutes an important outlet for the major producers whose respective positions have changed considerably. The Italian constructors (Fiat and Same) have increased their penetration rate at the expense