U.S. farm machinery maker Agco Corp. (AGCO) said Tuesday it will open two new manufacturing plants in China next year, even as it cuts overall production in the face of declining global demand for its tractors and other products.
The plants, which will be located in the eastern province of Jiangsu and the northeastern province of Heilongjiang, will produce tractors and other equipment both for export and for the Chinese market, the company said in a statement.
one of the world's largest farm equipment markets and offers tremendous growth opportunities for Agco," Hubertus Muhlhauser, Agco senior vice president and general manager of Eastern Europe and Asia, said in the statement.
"Agco's plans foresee future investments in our China operations approaching $100 million," Muhlhauser said in the statement, which gave no time frame for when the company's China investments will reach that level. It was not clear if the figure included the investment in the two plants.
Agco's investment in China comes as the company is sharply cutting its overall production. In the three months to September 30, Agco cut production by 31% from a year earlier to reduce equipment inventories. The company has also cut its work force by 25% since the start of 2009.
Last month, the Duluth, Georgia-based company reported third-quarter net income of $11.1 million, down sharply from $99 million a year earlier. Falling prices of agricultural goods mean that farmers have less to spend on new equipment.
In the January-September period, just 3.2% of the company's $4.78 billion in revenue came from Asia, with the bulk--$2.76 billion--coming from Europe, the Middle East and Africa.