By Bob Tita, DOW JONES NEWSWIRES
CNH Global N.V. (CNH) plans to build a factory in Argentina to assemble farm tractors and harvesting combines, as the company moves to shore up its farm machinery business in South America.
The plant in Cordoba, Argentina, will produce specialty tractors and large combines, machinery that CNH isn't currently assembling in South America. CNH, an Illinois-based component of Italy's Fiat Industrial Group, said its investment in the plant will top $100 million, roughly a quarter of company's capital expenditure budget for 2011. The 255,000 square-foot plant, which will be company's first plant in Argentina, will employ about 600 people. Production of Case IH and New Holland-branded farm machinery in Cordoba is expected to begin in the fourth quarter.
The CNH plant will be located near an existing Fiat Industrial engine plant in Cordoba that will provide engines for the farm equipment.
"This investment is key to our growth strategy in Latin America," said Sergio Marchionne, chairman of Fiat Industrial (FI.MI, FNDSF), in a written statement. "It will provide more efficient access for Latin American customers to products that are currently imported."
CNH, which also builds construction equipment, already has four assembly plants in Brazil. Argentina and Brazil are major producers of grain for the global commodity market. CNH, the world's second-largest manufacturer of farm equipment by sales, and rivals Deere & Co. (DE) and AGCO Corp. (AGCO) all have been targeting South America for expanded sales. Deere (DE) the world's largest farm equipment company based on sales, has recently expanded its product lines in the region. AGCO, the maker of Massey Ferguson-branded equipment, is the market leader in tractors in Brazil.
In remarks to reporters two weeks ago, AGCO's Chairman and Chief Executive Martin Richenhagen accused Deere of using heavy price discounting in South America to gain market share.
"It seems to be a real market-share grab down there and much more competitive than in North America where Deere dominates the market," said Adam Fleck, an analyst for Morningstar Inc.
During CNH's quarterly conference call with analysts last week, company executives reported softening sales of farm equipment in South America following a prolonged stretch of elevated demand that was aided by government-sponsored loan programs for farmers to purchase equipment.
By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com
