Despite the collapse of Russia’s economy last year, which took its booming ag industry with it, farm equipment manufacturers are hustling to stake their claim in this enormous, and largely behind-the-times, market.
CNH Global, parent company of Case IH and New Holland farm and construction machinery, is the latest ag machinery maker to announce plans to gains a foothold in the Confederation of Independent States (CIS). In the past year, farm equipment makers AGCO and Deere & Co. announced plans to expand their presence in the Russian Federation.
On October 7, CNH agreed to a pact with Kamaz, Russia’s largest producer of trucks and diesel engines. The deal calls for the two industrial giants to form an industrial and commercial alliance to produce and sell CNH’s branded combines, tractors, implements and specific construction equipment in Russia.
Manufacturing operations will be located in Naberezhnye Chelny, Tatarstan, the historical headquarters of Kamaz and are planned to start up in 2010.
In addition to the manufacturing agreement, CNH and KAMAZ will integrate their networks in order to distribute in the Russian Federation both local and imported agricultural and construction equipment.
According to press reports, the commercial joint venture will benefit from Kamaz’s dealer network in Russia and from CNH’s strong product, brand recognition and distribution presence in the Russian market, leveraging its global resources and organization.
In addition to the international heads of CNH and Kamaz, also on hand during the formal signing of the agreement were Sergio Marchionne, CEO of the Fiat Group, parent company of CNH Global, and Vladimir Putin, prime minister of the Russian Federation, who is regarded as its most powerful politician.
AGCO & CTP. Last October, AGCO, the world’s third largest manufacturer of farm equipment, signed a joint venture with Concern Tractor Plants (CTP), a leading Russian industrial machinery builder, to assemble diesel engines in Russia.
“This joint venture agreement is another very significant step in the growth strategy of our global engine business,” Martin Richenhagen, AGCO chairman, president and CEO, said while announcing the company would invest $9 million in the joint venture over the next 3 years.
AGCO and CTP both have a 50% ownership in the joint venture, which would assemble and distribute the full range of AGCO SISU Power engines throughout Russia and CIS. The joint venture will become the key engine supplier for all major CTP plants manufacturing both industrial and agricultural machinery between 50- and 350-horsepower, while also selling engines to third party customers mainly in the CIS countries.
Deere on Its Own
As usual, Deere & Co. will go it alone in expanding its Russian presence. In August, the company’s board of directors approved an investment plan to establish a manufacturing and parts center in Russia. The project is to be located near Moscow, in close proximity to the Domodedovo International Airport.
Deere reported that the new site would have the capability to manufacture a broad range of John Deere products, including tractors and harvesting equipment, as well as construction and forestry products. At the same time, Deere will consolidate several depots into one site to improve parts and after-sales service to customers.
“Our strategic investments reflect Deere’s confidence in the potential of the Russian market. Russia will be a major contributor to meeting the world’s future needs for food and forestry products,” said Samuel R. Allen, president and chief executive officer.
Allen said the announcement is the first step to achieve the vision for Russia that Deere announced in July 2009 at the U.S.-Russia Business Summit. It indicated the company’s intention to significantly expand its presence in the country, which Deere views as an important growth market for agriculture, forestry and construction equipment.