'European scene": new machines, new technology.

Challenger steals the show at Summer events

In June, AGCO used a British venue for the European launch for the newest brand to be added to its portfolio. Challenger currently includes the signature tracked units as well as clones of MF 4300, 6200 and 8200 series tractors, all of which are known as MT tractors and finished with the new logo and livery.

Other machines tipped for inclusion into the Challenger brand includes Hesston large square balers, Gleaner rotary combine harvesters, as well as smaller combines from AGCO's Dronningborg plant in Denmark.

One thing is certain; the rubber-tracked Challenger MT 700 series (See Table 1) has arrived, and the bigger MT 800, which includes a massive 500hp version, could be premiered at this year's Royal Smithfield Show, in London.

Features of the four-model MT 700 series include the use of Caterpillar's six-cylinder 8.8-litres C-9 engine, and the all-new Caterpillar built 16/4 speed transmission. In fact, some 60% of the components in these latest tractors come from Caterpillar.

The concern confidently expects to place some 70 units on UK farms within the next 12 months, and a further 7080 in Italy (70 TM700s and 10 MT800s). In Italy, the plan is to increase this to 100 units in the second year.

According to AGCO's Steve Beasley, the concern is confident that it can expand on these numbers. "We will be going out to get more market share," he said. Indeed, we are told that it cannot be ruled out that the Challenger brand might be introduced in the areas where the MF and Fendt presence is not as strong as it could be.

Whatever the outcome, top AGCO management is very clear when it comes to the Fendt brand. These tractors will stay green, and there are no plans to finish then with the Challenger logo and livery. It is clear that the separate brand policy operated by AGCO is to be continued. However, if the board really wishes to continue down this path then it has a number of difficult decisions to take. One concerns the Hesston large square baler. Currently offered through MF dealers, it will also be available to certain markets in the Challenger brand. In addition, Fendt does not yet have a baler. Could it be that the same baler might eventually be offered in Challenger, MF and Fendt logo and livery? The board faces similar tough decisions with combines.

Whatever the outcome, there is no doubt about it, the MT 700 and 800 ranges take AGCO in a new direction, providing the concern with access to large corporate farms for the first time. Once they have penetrated the farm gate, surely the next stage must be to offer a complete range of equipment to go behind these powerful machines?

According to Mr Seaver, the addition of the Challenger brand should help to boost current AGCO sales revenues of US$2.5 billion. "It provides AGCO with new opportunities," he said, "and should allow us to build a US$1 billion business within the next 3-4 years."

It this is true then it can only be a matter of time before the concern knocks CNH from the number two position in terms of farm machinery sales, and second only to John Deere. If these plans can be realised, then the price AGCO paid for the Dekalb factory plus a further US$200 million for five years of R&D, will have been a wise investment indeed.

We now jump forward to August, when German tractor maker Fendt unveiled a host of new products at its annual Field Day. Staged at a venue close to the attractive city of Wurzburg, in Southern Germany, the company estimates that around 25,000 farmers, dealers and contractors travelled from all areas of Germany, to see the latest developments.

They were not disappointed as they witnessed the launch of Fendt's biggest tractor to date. Called the 930 Vario, this is the firm's very first 300hp+ tractor. Other news includes additions to the 818 Vario tractor launched exactly a year ago, and new Farmer 200 V and P series specialist tractors. In addition, visitors also saw a couple of new Fendt combines, and round and square balers, confirming AGCO's commitment to make it a full line company at the top end of the market.

It might have been a Fendt event, but AGCO Corporation chairman, president and chief executive officer Robert Ratliff also took time out from his busy schedule to cross the Atlantic and check out the latest developments.

We managed to track him down to talk about future developments concerning not only Fendt, but also Challenger and MF.

At the last Fendt Field Day, exactly one year ago, Ratliff made two very interesting comments. The first was that if the situation did not improve them he would close MF's Coventry plant. The second was that he was thinking about bringing knock down kits of Hesston square balers, windrowers, and even self-propelled forage harvesters to Europe, and assemble them at Ag-Chem Europe's plant in Holland.

Of course, the fate of the Coventry facility has been well publicised. However, it is interesting to note that the AgChem move did not take place.

"We took a good hard look at the possibilities, but decided against it," he said. "The deal with Gallignani means that we can source round balers from Italy, and we shall continue to import the Hesston square balers."

And whilst Fendt might be the jewel in the crown of the Agco stable, it is clear that Ratliff is very proud of the Challenger acquisition, especially when you consider that AGCO only paid US$20 million for a product that cost Caterpillar US$250 million to produce.

"We thought this was a good price," he said, "which was down to good negotiations!"

It was indeed a good price, in fact you could call it a bargain when you consider that the Challenger brand is forecast to boost AGCO revenues by as much as US$750 million a year by 2004.

This is an increase over the previous figure of US$400 million only a couple of months ago, and is due to the fact that AGCO has managed to sign up 55 of the 64 Caterpillar dealers in North America.

This compares to only 28 that previously handled the tracked tractor only. More importantly, these 55 dealers will sell the whole Challenger brand, which includes wheeled tractors from 50 to 260bp, a compact tractor line, and round and square balers, mower conditioners, self-propelled windrowers and combines.

Surely, it can only be a matter of time before other products will be added to the new brand. Some of these could include implements, which is something that Ratliff admits that AGCO does need.

After all, the Challenger tracked tractor might have got AGCO past the front gate of the big corporate farms for the very first time, but these buyers are not just interested in pulling power alone. They are looking for a complete cultivation system.

"It is true that we need implements to go behind tracked Challenger tractors," he confirmed. "We are currently talking to a number of implement manufacturers. However, it cannot be ruled out that we shall acquire an implement maker at some point."

It remains to be seen which option the company will choose. At the time of going to press, AGCO was rumoured to be involved in takeover talks with Kongskilde.

Continuing on the Challenger theme, AGCO has also signed up Caterpillar dealers in Australia, Mexico, Brazil, Eastern Europe and Central Asia.

In fact, by the end of this year, somewhere in the region of 75 to 100 Caterpillar dealers will have been signed up to handle the brand worldwide.

However, whilst it might be a fairly easy task to sell the Challenger brand to Caterpillar dealers, Western Europe is a different story.

Here, Ratliff admits that establishing the brand is likely to be an uphill struggle. Here, as expected, all Caterpillar dealers have declined to take on the Challenger brand, which means that AGCO will offer selected lines to current Fendt and MF dealers.

However, it remains to be seen just how many of these will take up the offer. It has already been confirmed that there are no plans to bring Fendt combines and balers to the UK, for example. This could pave the way for Fendt dealers to take on Challenger equipment.

However, whilst it is likely to be quite easy for AGCO to find ME and Fendt dealers willing to take on Challenger tracked tractors it remains to be seen just how many will want Challenger wheeled tractors.

Fendt dealers are likely to show more interest than ME ones, as it could provide them with a lower spec non-Vario tractor.

From a MF dealer's point of view, it really depends on the level of differentiation between current 6200 and 8200 models.

"The Challenger brand will be made up of different products, all of which will be differentiated from other products we supply."

On an MF note, it is rumoured that there is a prototype of an ME Vario tractor. A photograph has even been produced. However, there has never been any official comment.

Ratliff teased journalists by saying that we shall have to wait and see how the competition fares.

"If the CVT-type transmission continues to increase in popularity then it is only logical that we include the Vario in other brands in the future. (Within the next 12 months)."

One journalist asked if next year's SIMA show in Paris, France, was a possible launch pad?

"This is within the next 12 months, so it is possible! We have the technology. It is easy for us to include Vario technology in both ME and Challenger wheeled tractors. However, in the meantime, the Vario remains with Fendt tractors."

This is an important point, and one, which he stressed again, before the end of the interview.

"AGCO has the technology to do anything it wants to if a market develops for a particular product."

Finally, Ratliff is never afraid to speak his mind, and in my opinion, his most interesting comment was that there are still too many European tractor and machine makers.

"The US consolidation process cannot go much further," he added. "However, Europe still has a long way to go. There are certainly too many tractor suppliers. Some of these need to look very hard at their future business plans."

He does not rule out the possibility that Agco might be in line to acquire some of these tractor and equipment businesses.

"However, it is worth adding that most of our acquisitions to date have concerned companies that have approached us. It is quite possible that nothing will happen during the next 12 months. It is also possible that we could be approached by three or four businesses."

Fendt satisfied with results

Managing director Fendt-Sales Hermann Merschroth was also at the event. On a business note, despite the difficult economic conditions, he is satisfied with the results for last year, particularly in the US.

He admits that Fendt is a relative newcomer to the US market, and here it is worth noting that the company continues to sell around 200 tractors a year.

"We are on the right path here," he said, "and the launch of the new 930 Vario will help us to increase this figure."

Another fact that will enable the firm to sell more tractors to the US is the axle width and of being able to reduce it. Row crop work is important in many area of the US, and Fendt is currently hard at work looking to develop its Vario tractors for this market.

Finally, Ratliff commented that not all potential purchasers of 300hp+ tractors want tracks.

"For these customers, we are toying with the idea of replacing the tracks with wheels on MT models, and developing an articulation point. This could be an interesting concept."

Table I

Model  HP @     HP @     Price
       2100rpm  1800rpm  (Euro)

MT735  235      251      199,270
MT745  255      275      209,800
MT755  290      318      219,400
MT765  306      347      231,380

Footnote - These prices are around 13% more expensive than the previous
Challenger models, and a 6% increase on comparable John Deere 8020
series models.