AGCO Corp. (AGCO), the maker of Massey Ferguson and Challenger farm equipment, will invest $300 million to $350 million over several years to design and manufacture tractors in China, Chairman and Chief Executive Officer Martin Richenhagen said.
The investment will include engineering expenses and building a factory to assemble tractors with up to 125 horsepower and components such as axles and engines, Richenhagen said in a telephone interview yesterday from the company’s Duluth, Ga., headquarters. Components may be exported for tractor assembly in other countries, he said.
Construction of the factory may begin in October and it may start production by the end of 2012, Richenhagen said. The company is acquiring land for the project and Richenhagen declined to disclose the location. AGCO’s board will vote on the project later this year.
“It’s a huge market,” Richenhagen said. “We will have a pretty good payback from lower costs.”
Agricultural equipment makers including AGCO and Moline, Illinois-based Deere & Co. are investing in developing nations as farms in China and India mechanize to help meet rising food demand. AGCO in April announced plans to acquire an 80% stake in Shandong Dafeng Machinery Co. to add corn, grain, rice and soybean harvesting machines to its portfolio of products for the Chinese market.
AGCO fell $3.18, or 6.4 percent, to $46.35 at 4:15 p.m. on the New York Stock Exchange after the company said it expects earnings for the third quarter will be unchanged from the same period last year. Second-quarter net income more than doubled to $133.7 million, or $1.36 a share, from $62.9 million, or 66 cents, a year earlier, the company said in a statement yesterday.
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