Pictured Above: Bob Crain, Senior Vice President, AGCO
Bob Crain, senior vice president and general manager for AGCO North America, did not mince words when talking about the company’s new products.
“[With] all the new products that we recently launched, [including] commercial hay application, the 1000 series, now the combines, I think this going to give both our dealers and us, without a doubt, the best product line AGCO has ever had in its history,” he says. “It’s not even close — light years from where we have been.”
If it turns out customers feel the same way, perhaps it will help AGCO achieve its goal of increasing market share in North America.
Crain joined AGCO in 2006, and before that was vice president at Case New Holland. He has more than 20 years’ experience in the ag equipment business, having started with Ford’s tractor operations in 1981.
He sat down with Farm Equipment editors during the 2018 Farm Progress Show in Boone, Iowa, to discuss a wide range of topics, including the state of the ag economy, how ongoing trade disputes would impact both his company and the broader industry, equipment technology, challenges that lie ahead and much more.
Fittingly, not too far from where Crain was interviewed were 3 of AGCO’s brand-new Fendt-branded Ideal combines. The new combine was one of the biggest (if not the biggest) storyline to come out of the show, and in a way represents what AGCO hopes to accomplish for the North American market. It has a sleek design, was built from scratch, stresses newer technologies and it demands the attention of dealers and producers.
Needless to say, Crain has put together a bold vision of what’s ahead for the company.
Things Looking Up, But Tariffs Add Uncertainty
Crain points to some indicators that make him optimistic about the direction things are headed for AGCO.
“We've seen some good results the past 12 months. Our order bank is better than it was last year,” he says. “I think it's being driven by two things: We’ve introduced a significant amount of new products. Any time customers today see something that makes a dramatic bottom line input to their productivity, and they can see a true payback in that investment, that interest … is what's driving a lot of the sales. Plus, the natural replacement cycle; you can't underestimate that. There is a lot of old used equipment out there right now that's near the end of its productive lifespan.”
It’s true that much of the heightened demand in recent months is due to the fact many farmers have reached the point that they can no longer put off buying new pieces of machinery, as industry officials are quick to point out. Be that as it may, there is no doubt more optimism than just a couple of years ago, says Crain.
That’s not to say that there may be some impediments to progress — not just for AGCO, but the equipment industry as a whole, he says.
When asked to gauge the overall health of the industry, Crain admits, “I was much more optimistic 6 months ago than I am today because of the tariffs.” He says the ongoing trade tensions between the U.S. and other nations, especially China, offer the biggest question mark on an industry that’s otherwise poised for growth following years of weak sales of new equipment accompanied by excess used equipment on dealers’ lots.
Of course, Crain’s comments came a month before the announcement of the U.S.-Mexico-Canada Agreement (USMCA), a trade deal poised to replace NAFTA pending ratification by each country. Even though that trade deal removes existing trade barriers, including in the dairy industry, it leaves intact the steel and aluminum import tariffs the U.S. enacted in the spring.
On top of that, at the time of the publication of this story, China had also enacted retaliatory tariffs of its own against U.S. exports. This has caused commodity prices to take a dive.
“The different tariffs have put a damper on things,” says Crain. “It's having a significant impact on all of our input costs, and that certainly impacts us, it impacts our dealers, and more importantly, it impacts customers. How this thing turns out ... I wish I could fast forward to the end of the movie right now.”
He adds that even with the short-term uncertainty, everyone could ultimately benefit if the goal of freer trade between nations is ultimately accomplished.
“Really, it's a wait-and-see attitude that dealers and farmers have. For sure, they'd rather not have the tariffs. Interestingly, you talk to people, and [they say] if this is a short-term action, they'll bear some pain for a bigger pay-off at the end. For some, [they say] that's going to be better for all of us. I think right now, for the most part, some of the farmers are still agreeing with some of the actions that are out there.
“It's going to be interesting in November and December, after the harvest, when it's cold and snowy outside, if that optimism still is out there. That's the million-dollar question. If it were to bleed into January and February, what happens?”
The steel and aluminum tariffs have increased AGCO’s cost of doing business, just as any other manufacturer that relies on those materials.
“Even our U.S. suppliers, we’re seeing significant price increases from them,” says Crain. “This has been a prime opportunity for them to raise their prices and they have, by up to 30%. We’ve seen 30% increases on some types of steel.”
AGCO has been trying to absorb some of those cost increases internally, but some of those increases will need to be passed on to the end user.
“We're working very hard internally to mitigate as much of the cost as we can,” he says. “But, at the end of the day, it's going to be impossible to offset all that cost. More than likely, some portion of that — and we're in the process of coming to what that number is right now — but some piece of that is, unfortunately, going to need to get passed on. But, as I said, we're working hard to mitigate as much of it as we can.”
Finding the ‘iPhone’ of Ag Equipment
When asked what some of the biggest challenges for AGCO over the next 5 years are, the first thing Bob Crain, senior vice president of AGCO North America, mentioned was technology. More specifically: ensuring the new technology has a clear benefit to customers.
“That's a challenge for the entire industry. There's so much technology, and there's new technology being developed literally every single week,” says Crain. “But, how do you sort through that and pick out the stuff that's really important to our customers? As much time as we all spend talking to customers, visiting with customers, trying to solicit their input, it's tough to get that input from customers in terms of the important technology.”
Technological innovations don’t necessarily always come from consumer feedback, either. Crain remarks no one ever spelled out to Apple co-founder Steve Jobs the need for the iPhone. And through AGCO’s own product development and research processes, Crain hopes to find something just as revolutionary for the ag equipment world.
“That’s what I want. I want an iPhone,” he says. “But you have to sort through the pain points of farmers, and it’s a game of connect the dots of all the different pain points to come up with the right technology that truly adds value.”
Crain says new products, when equipped with the right kind of technology, “truly enable” a customer to see a return on their investment. “That’s the first question we ask at AGCO. We’ve got some very creative people, and they will come into the boardroom with the next great idea. The first question we always ask them is, ‘What's the return to the farmer? What does this truly add to the customer's bottom line?’
“For me, if you can’t answer that in about 6 seconds, you don’t understand it. Go back, give me something different.”
Crain says AGCO’s precision farming offerings have been a big asset for the company. “I think to some customers, it’s given us some additional credibility that we can take care of their every need. Not just their planting needs, but tractor needs, sprayer needs and other needs.”
Ideal Products Need Ideal Dealers
AGCO has plenty of new products to attract and wow customers. But of course, it also takes a strong dealer network to make sure people are actually buying this equipment. Crain believes AGCO’s dealer network has made strides in the right direction over the last several years.
According to AGCO, 31 of its dealers have 5 or more locations. These dealers account for 314 ag stores in all.
“I can tell you with 100% certainty, our distribution network today is better than it was one year ago. And it's significantly better than it was 10 years ago,” he says.
Crain lays out a few characteristics of what he sees as an ideal dealer network:
- The dealers are selling the AGCO brands that make sense for their customer segment
- They are well-capitalized
- They demonstrate excellent customer care and customer relations
- They’re seeing healthy returns on investments of their own
Depending on the circumstances, some areas could see essentially three separate networks carrying different AGCO brands.
“In a perfect world, [the dealer network] is Massey dealers, it’s Challenger dealers and it’s Fendt dealers,” he says. “In some instances, there will be three separate dealer networks. And in some instances, there might be situations where some brands are together.
“AGCO, as we all know, is a culmination of an assortment of brands, and some areas of the country, our distribution network is more complex than other parts of it, but we all want a strong dealer network with the ability to take care of our customers and also see an ROI for themselves.”
Describing the ‘Perfect’ AGCO Dealer
During a sit-down interview with Bob Crain of AGCO at the Farm Progress Show in Boone, Iowa, Farm Equipment asked him to describe the perfect AGCO dealer.
“First and foremost, you've got to enjoy it. This is a different business. Most of us grew up in this business, and you love it, love it, love it. A lot of us have opportunities to do something different, and we chose to do this because we love it.
“Second of all, our dealers need to have the capital to make the right investments in this business. Today, this business requires the right kind of capital.
“Last but not least, the customer support piece of it, which kind of goes with the capitalization. Can you support the customers in the right way? That's becoming more important every day.
“It's the passion and the energy for the business. I also think it's the capitalization to properly invest in the business. And third is the customer support piece of it.
“I could give you about 43 things, but those are the top three.”
As for the improvements the AGCO distribution network has made in the last decade, Crain credits efforts from both the dealers and the company itself. For example, they have worked at improving customer support, specifically with parts. “If you look at some of the measurables that are out there in the industry, our system fill for parts is equal to, if not better, than anybody in this industry,” he says. “And that's a dramatic improvement from 2 years ago, 5 years ago and 10 years ago.”
At the same time, dealers have been able to improve their over-the-counter parts and over-the-counter fill rate to their customers, he adds. “Just from a customer and parts standpoint, I think that’s one example of how our distribution network and AGCO jointly, we’ve made great strides.”
Increasing NA Market Share Heads up List of Needed Improvements
For all the improvements Crain points out AGCO and its dealers have made, he adds there is certainly more work to be done. Although AGCO boasts a significant share of the market in other parts of the globe, Crain says he’d like to see that grow more in the U.S. and Canada.
He says AGCO has a 42% tractor market share in Brazil and a 20% or greater market share in Western Europe. Now the focus is on growing in North America. “I think we’ve got a lot of opportunity as a team to continue to grow our business.”
In helping accomplish that objective, Crain says the company will offer more financial incentives to dealers. “Market share is a discussion that we have quite often, especially with our field personnel and our dealers. We will continue to move toward more financial incentives … where there is a financial payoff for our dealers to grow their business.”
These incentives could be related to product sales or to specific market share targets for different customer segments, says Crain. “Like everybody, there are certain product segments and customer segments that we do very well in compared to others. The areas where we need growth is where we’ll target those financial incentives to grow market share.”
Crain adds, “I don’t think there is any part of North America that we’re not looking at.”
‘Crawl, Walk Run’ in Rolling out Ideal Combine
The new products that have recently launched, including the 1000 series and the new Ideal combines, have given dealers plenty of things to show off. Crain says this comes out to be “the best product line AGCO has ever had in its history.”
He adds, “We’ve got more tools in our toolbox than we’ve ever had before.”
The next big push is, of course, the Ideal combine. Crain says the company is confident it has a leading combine in terms of performance, along with “best-in-class” support packages to offer customers. Now it’s up to AGCO and the carefully selected Ideal dealers to make it happen.
And the company has a specific plan to ease the Ideal combine into the market. Crain calls it as a “crawl, walk, run” approach.
“For the harvest season of 2018 it’s truly a crawl position,” he says. “We will be appointing only 11 dealers. And then, beginning in the fourth quarter, we will be appointing quite a few more dealers for the season ’19.”
For the coming season, AGCO will take the “walk” approach by introducing what he says will be a medium number of combines. “We’ll be appointing more Fendt Ideal dealers during that time. And then by 2020, we will have an objective of having a full array of Fendt Ideal dealers, and our production will be at full production.”
Crain says this approach may be used with other lines in the future.
“We will be learning a lot from this. There's a purpose for Fendt Ideal; it has one of the best customer reputations of any of the brands that we sell worldwide. Certainly, the leading-edge technology, productivity, the resale and the simplicity that’s associated with Fendt, and probably more importantly, the customer support behind Fendt is truly world-class. It truly is something that we have to make sure that we respect, and we deliver upon that Fendt experience. That's why we're taking this ‘crawl, walk, run’ approach. And it's not just with our dealers, it's with us too. We want to make sure that we are going to execute this Fendt experience perfectly.”