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Friendly competition

In January, German farm equipment company Claas invited a handful of North American ag journalists to a press conference and tour of its combine plant in Harsewinkel, Germany. Usually, this would mean a new product introduction was in the works. But that wasn't the case this time. After a series of meetings through translators, it appeared that Claas representatives just wanted to talk and share their vision for the company's future.

Until recently, Claas had a 50-50 partnership with Caterpillar to sell its Lexion combines in North America. About 27 North American Cat dealers sell the combines alongside the Cat Challenger rubber-belted track tractors. Looking at a Cat dealer lot, you'd hardly guess that Caterpillar Corporation is no longer in the ag machinery business. Caterpillar sold the Challenger line to AGCO and its half of the combine business back to Claas. Now Cat dealers sell AGCO Challengers alongside Claas combines.

Combine competition

AGCO has proceeded to leverage its newly acquired Challenger brand, painting some of its Massey Ferguson products yellow. That includes wheeled tractors, hay equipment and combines. Suddenly, independent Cat dealers have a full range of yellow farm equipment to sell. It seems a win/win deal between AGCO and the Cat dealers.

However, the situation for Claas is less than ideal. Amidst a sea of yellow, the Claas Lexion combines are the only farm machines not owned by AGCO on participating Caterpillar lots. This isn't the first time Claas and AGCO have crossed paths in the competitive combine business. Claas manufactured Massey Ferguson combines in the mid 1980s. These were sold as the 80, 98 and 108 Dominator in Europe and as the Massey 8450 and 8460 in the U.S. But Claas involvement ended when AGCO bought Massey Ferguson.

Farmer choice

Jim Walker, an American and vice president of Claas sales and marketing in Omaha, downplays the rivalry. “This is a good thing for the farmer,” he says. “Cat dealers are continuing to evolve into the agriculture equipment business. They need a full range of products to be competitive. AGCO has their Challenger combines, and on the next level up in productivity we have the Lexion combines. Cat dealer customers have a choice on their level of investment.”

Before he took on the Lexion challenge, Walker was involved in bringing the Claas Jaguar forage harvester to the U.S. market. It was a big success, with the sophisticated Jaguar dominating its category in many hay-growing regions. “Now Jaguar dealers in North America are starting to saturate their markets,” Walker says. “We need to identify the next level of growth in that area.”

He says a new line of mid-sized tractors from Claas would help keep Claas business growing. In Europe, too, everyone from Claas dealers to the ag media has been asking Claas which tractor company it might buy.

Quest for a tractor

Now in his 70s, Helmut Claas remains board chairman and patriarch of Claas International. He spoke at our press conference without an interpreter. “We were very disappointed when Caterpillar decided to step out of its agricultural business, including its 50% partnership with us in the Lexion combines,” Claas said.

“Part of our agreement with Caterpillar was that Claas would have first right of refusal to buy Challenger. It was a difficult decision to turn down such a quality machine, but we realized the acquisition didn't make sense for us, particularly when success of rubber-belted tractors in Europe has been limited. Dealers here don't like to carry them.”

Claas and several other company managers spent some time explaining differences between Europe and the North American Corn Belt. One big advantage of tracks is that they can get into the field early for corn. European farmers, who grow mostly wheat, don't need to get into their fields in early spring.

“Moreover,” Claas continued, “as a specialist in harvesting equipment, we realized Claas had little experience with tractors, especially such a complex machine as the Challenger. And the Challenger is a very expensive tractor.”

It's easy to see why Claas didn't want another expensive tractor on his hands. His company already builds a machine called the Xerion — an articulated, 190-hp, 4-wd tractor-transporter with 4-wheel steering and a cab that can be moved from front to back, depending on tasks ranging from tillage to mowing to slurry injection.

Perhaps Claas winces at the thought of expensive tractors for another reason. In the mid 1990s, AGCO purchased the high-end, German-built Fendt tractor, bringing to a close generations of partnership between Fendt and Claas dealers in Europe. In addition to tractors, suddenly Fendt dealers started selling combines, silage harvesters and balers from the AGCO line, all branded in Fendt colors.

“We might be interested in buying another tractor company, or part of one,” Claas hinted. “We like the combination of tractors and baling equipment that McCormick has, for example. Or buying a component of CNH might be a consideration, depending on what Fiat does. And in France, Renault has stated that they would like to divest their agricultural division. Nothing is certain, but companies always talk.”

Less than a week after Claas's guarded comments, the official word came that his company would buy controlling interest in Renault's agricultural division for an undisclosed sum. Renault sold 9,343 tractors last year and posted an 18% share of the French market. Renault's agriculture division currently does not operate abroad, but Claas could change that in the future.

Apparently Claas wasn't the only suitor to Renault. Before confirming its exclusive agreement with Claas, Renault cited AGCO as a potential buyer.

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