"The key to long-term success will be asset turns and parts and service."
- Doug Griffin, vice president, marketing North America

The Year Ahead. With our international manufacturing and marketing base, we're facing the double-edged sword of the weak U.S. dollar. It's helping with our exports, which are extremely strong, but importing anything from South America or Europe, where we manufacture some of our equipment, is a tough seed to swallow right now. This continues to concern us.

The last two months of 2007 has been like nothing many of us have seen before in our careers. With the extremely strong forecasts for net farm income throughout '08, the coming year looks as if we'll see business continue to strengthen. We are concerned about the hobby farm market and compact tractors. It will be slower in 2008.

Planning for the Next 5 Years. If I had a dealership, what I'd be focusing on is what am I good at and what can I do better than anyone else. It's going to be more difficult to be a generalist in this business because the farm market is quickly segmenting into two different areas. One is the rural lifestyle segment and the other is the professional farmer. While it's not impossible, serving both of these markets out of one dealership will get more difficult.

I'd be asking myself, "What's happening in 'my' marketplace: Am I getting more ag producers or rural lifestyle? Do I serve that professional producer better than anyone else? Or do I serve the rural lifestyle customer better than anyone else?

Managing Expenses. Too often we try to cover expenses by pursuing higher margins. The current North American distribution model is too asset-heavy. Dealers will see a lot of encouragement from manufacturers to lower inventory and improve turns. Margins on the bigger equipment probably aren't going to get any better than your return on equity, but ROA will get better when a dealer improves his turns.

Improving Profitability. The opportunity to improve profitability will come through service labor and parts sales. There are more tractor brands than ever competing for customers; many are coming from low-cost producers like China, India and Korea. So, in terms of wholegoods, margins won't get any better than they are today. The key will be to improve asset turns and increase sales of parts and service.

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