IT HAS been almost two months since AGCO Senior Vice President and General Manager Bob Crain issued a letter to dealers that the AGCO brand name will be discontinued. The industry is still reeling about what it means for customers and dealers.
Under the new plan, the AGCO brand of orange tractors will eventually be transitioned out but will be produced through 2010, with retail sales continuing through 2011. As outlined in the letter, an aggressive customer retention campaign will be launched, targeting current owners to address their concerns (such as resale, dealer support and product support), reward past loyalty, and motivate consideration and purchase of Massey Ferguson equipment. Parts will continue to be supplied through AGCO Corporation dealers for a minimum of 10 years beyond the final production date of 2010. (Many parts from the 1950s continue to be supplied.)
In December Crain and his team met with AGCO dealers to further discuss the new branding strategy. A week before his first scheduled meeting, Crain talked with us about the implications of the switch.
FIN: Bring us up to date on what has transpired since sending the November 12 letter to dealers.
Bob Crain: In a nutshell, the letter announced the transition of the AGCO tractor brand, our orange tractors, over the next one-year-plus period of time. Since that time we've worked with five of our leading AGCO brand dealers to receive their input on our transition plans. We've made quite a few revisions to how things should best proceed. We are now in the process of contacting our customers to provide them more information on what the transition will look like. We plan to meet many of our dealers at five regional dealer meetings.
What has been the response from dealers so far?
As you would imagine, it has been an emotional response. In this industry, brands are a very emotional subject, not just with our dealers but also with our customers and our own employees. Colors are much associated with different companies in this industry. So it has been an emotional subject. What we've tried to do is communicate the reason and rationale for the change, which will have positive implications for the medium- and long-term success of our customers, dealers and our company. The letter spelled it out very simply. We are trying to narrow down and provide a much better focus for our resources, and rather than doing many things okay we will be focusing on fewer things but doing them very, very well. We want to make sure our dealers, our customers and our own employees understand that at the end of the day this decision is driven by being able to provide our dealers and customers with better, more productive products.
What was it that prompted the decision?
Every year we have strategic discussions that include the input of many people including outside recommendations regarding how we make ourselves a better company for our customers, dealers and shareholders. Our company is 20 years old. We've made tremendous strides in that small amount of time. And we continually need to ask ourselves how do we change for the better and improve as a company.
Why didn't the market support having a third brand? Is the market saturated?
I don't know if I'd use the word saturated. But without a doubt, the industry in North America, both dealers and our customers, continue to consolidate. Our competitors are dealing with one brand or two brands at the most. AGCO is an amalgamation of approximately 24 mergers and acquisitions over the past 20 years, and we have a finite amount of resources. It comes down to, where can we best spend those resources to provide our customers and dealers with the best, most productive product? From a medium- and long-term perspective, we felt that for us to ensure success, we needed to better focus our resources.
Why cut the AGCO brand in particular? Was it because it was the youngest?
The AGCO brand name on tractors is less than 20 years old, but most people trace the orange paint back to the Allis Chalmers brand. The AGCO tractor brand is sold predominately in the Midwest of the U.S. and small quantities in Canada. The resources required to support tractor brands are immense. So again, it came down to, how do we better utilize the finite resources we have to give the market the best product we can?
How will you position the remaining two brands?
Historically, the Massey Ferguson and AGCO tractor brands have been positioned toward more of the rural lifestyle and traditional farmer segment, whereas the Challenger brand has been more focused on the larger professional farming segment. There has been some overlap between the two important customer segments, but the customer bases they target are fairly distinctive.
So you will continue along those two tracks?
Yes, very much so. In the coming years, we will be transitioning our AGCO tractor dealers to predominately Massey Ferguson dealers but in some cases Challenger dealers.
It is also important for everyone to understand that this transition is only impacting the orange AGCO tractor brand. There is zero impact on Gleaner combines, Sunflower drills, White planters, or Hesston haying equipment.
Any new information that would be important for farmers to know?
We will start to communicate more details to our dealers with the transition plan, receiving input from our AGCO brand advisory panel.
In summary, change is never easy, but AGCO is a young, forward thinking company that has grown dramatically to become one of the largest agricultural companies in the world in a very short time. This change will allow us to provide our dealers and customers with the best, most productive product in the world.
Q&A with Bob Crain, AGCO senior vice president and general manager