<<It would seem that Ag equipment is far more a shopping than a convenience good..If the dealer offers a must-see mix of product, the farmer will travel a bit to shop and compare,>> That's not the point. Once the farmer buys that tractor, he's going to need parts and service. The farmer wants a dealer close-by, and one he is sure is going to have the commitment required to service that product, not be distracted by larger-ticket construction customers. This is a problem for CAT - it has to be, otherwise there are no barriers to entry in this industry.
Agco's products are technologically behind the competition, and even where they are competitive technologically, they cannot charge the same price as a Deere for the same equipment. Even-up, the farmer wants Deere. I think Case is closing in on Deere in this respect. In my view, Agco is just not in the game. If CAT is going to acquire its way into this business, they are not necessarily going to try to save a few bucks buying an inferior company, especially when Case could be had for $2 1/2 billion or even less. They will buy Case or New Holland (which does not have the U.S. presence, but is #1 in many markets around the world.) New Holland's weakness is its highest horsepower models. So there is a product fit too.
We may be barking up the wrong tree here, because it is not CAT's style to make large acquisitions. Their ag strategy to date has been to build it from the ground up.
JJC |
