John Deere is an iconic American company. And yet if the maker of farming and construction equipment relied on the US market, especially during the recession, it would have been in a lot of trouble. As it is, the company saw a big drop in sales--45% for construction equipment, and more than 15% for farming equipment since 2007. But with earnings of $873 million and sales of $23 billion in 2009, the company has managed to stay in the black.
Kathleen Kingsbury of Time reports on how Deere has survived the recession, and she points to two key factors. 1) Bob Lane, CEO until June, 2009, and his const-cutting moves, and 2) recognizing that global markets are the key now for the company. With the shift to large agribusiness, the demand for John Deere dealerships in the US has waned considerably...
Another factor in Deere's shrinking U.S. presence is that its biggest opportunities will be overseas: 60% of its current business is in North America, 40% in the rest of the world. Allen knows that ratio will change drastically. "Emerging markets hold the most potential," Buckingham Research Group analyst Joel Tiss says. "It makes no sense to open a new dealership in Dubuque, Iowa, anymore when they could put it in Santiago, Chile, where they can do 10 times the volume." Sales in South America are expected to rise as much as 15% in 2010.
Likewise, Russia and Eastern Europe offer potential. Russia has arable land and an aging Soviet fleet of farm equipment, and the government has put a priority on being self-sufficient in food and agriculture. The recession has made financing hard to come by in the region, but "Deere is planting the seeds for when the markets normalize," says Lawrence De Maria, an analyst at the New York brokerage firm Sterne Agee. Still, De Maria adds, "it's sticking with assembly factories for now so that if they had to pick up and leave, it wouldn't kill the shareholders."
So while John Deere may be, as Kingsbury writes " as American as apple pie," the company's focus is now worldwide. Read the full article here