MachineryLink

OMAHA (DTN/The Progressive Farmer) -- I don't know about you, but if my 100th birthday should somehow roll around, I don't expect to use the occasion to conquer new worlds. But that is what CLAAS, the Germany farm machinery manufacturer is doing.

Last week I had a chance to interview CLAAS of America president Leif Magnusson at the company's combine factory in Omaha. Because of the company's centennial anniversary this year, "We have a story to tell," he said.

The story is actually a marketing message that tells farmers that the Lexion brand of combines and all that hay and forage equipment bearing the CLAAS name have an impressive history behind them. The end goal, of course, is to gain marketshare for a company that has long had a presence in North America but has yet to become a household brand name.

In Western Europe, CLAAS is the market leader in forage harvesters and combines and is a major force in tractors and hay equipment. Last year it had 3.4 billion Euros in worldwide sales including Eastern Europe, Latin America, Asia and North America, which its annual report lists as part of "other countries."

CLAAS is "clearly" in an expansion mode, Magnusson said. "Our foothold and strength is really in Europe. But there is only so much growth we can get there because we are already the market leader. If we want to grow, we will have to do it in markets outside Western Europe."

As a result, CLAAS in recent years has heavily invested in Russia and Eastern Europe. It now has sales offices in Southeast Asia and China. It owns a combine factory in India, which produces smaller machines, "perfect for the mechanization phase we are seeing in India," Magnusson said. CLAAS also has a major sales operation in Argentina, from which it runs offices in a dozen Latin American countries.

The big prize, though, is North America. "Being one of the leading manufacturers in the world, it is very important that we have a strong presence in North America," Magnusson said. "So we are making a lot of investments here in distribution and manufacturing."

CLAAS is also adding new products designed specifically for North America. The Quadrant 3300 large square baler, for example, produces bales much larger than those used in Europe but ideal for commercial haying here.

Ultimately, Lexion combines are the product CLAAS would most like to make serious inroads in the North American market. "If you want to be a player in the Midwest, you have to have a machine that can handle corn and soybeans," Magnusson said. That meant making some significant changes to the Western European version of the Lexion, which was primarily a small grains harvester.

That is what CLAAS did when it introduced the re-created Lexion brand arrived here in 1997 as part of a short-lived joint venture with Caterpillar. CLAAS had high hopes its technologically advanced machines would roll over the domestic competition. A couple of factors hurt those hopes. First, American farmers are famously brand loyal and they already had some great homegrown brands from which to choose. Second, technology comes at a high price, and Lexion found itself near the top of the price charts.

"This has been a long haul," Magnusson said. "We don't have the brand recognition we want yet. Many people still association us with Caterpillar."

That association has been problematic. The joint venture soon dissolved as Caterpillar exited the ag field. Many of its dealers, however, opted to continue to carry the Lexion and other CLAAS product lines.

Caterpillar is known for its quality products and exceptional on-site service. But its dealers, who remain the main distribution vehicles for CLAAS of America, are also known more as sellers of construction equipment. Would they remain committed to agriculture?

"There was a time when our dealers were more construction oriented," Magnusson admitted. "But those who have stuck with us made a conscious decision to stay with ag. They have made that commitment."

In subsequent years, Cat/Lexion dealers have bought more stores in rural locations to give them a "much bigger footprint," Magnusson said. Ironically, farm equipment dealers of competitors now "are consolidating and becoming more like us." So the dealer/brand issue should not be a problem, he said.

As for the price issue, "What is price?" Magnusson asked. "We have a premium product. We have a quality product."

He related a story about a visit to a skeptical central Illinois farmer. A local Lexion dealer convinced the farmer to run side-by-side comparisons of his current combine and a Lexion. At the end of the trial, they compared numbers. Fuel consumption was lower with the Lexion, productivity (number of acres per hour) was higher and grain loss was less. "So I would argue that we are not expensive, we are cost effective," Magnusson concluded.

Word is getting out, Magnusson said. "Since I came on board in 2008, we have seen our [combine] business grow by about 20% a year."

Granted, an increase in marketshare for Lexion is priority number one for CLAAS of America, does the company plan to bring tractors to the new world? CLAAS bought tractor technology from Renault in 2003 but so far has not tested the North American market. In part, that is true because a European tractor and an American tractor can be different animals. "Before we do [sell tractors here], we need to make sure we have the specifications for this market," Magnusson says. Specifications mean everything from PTO hook ups to lighting packages to engine size.

My last question to Magnusson was one that good taste might have prevented but journalist curiosity mandated. CLAAS has been mentioned as a possible buyout target for Kubota, which has made clear its ambition to be a full spectrum farm equipment company. Will CLAAS become a Kubota brand? "CLAAS is not for sale," Magnusson said. "It has been a family-run company [for 100 years] and it will remain a family-run company."

(CZ)

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