Deere & Co.

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Deere & Co.

founded: 1836

Contact Information:

headquarters: 1 deere pl. moline, il 61265-8098 phone: (309)765-8000 fax: (309)765-5772 url: http://www.deere.com

OVERVIEW

Despite some tough sledding during the recession of the early 1990s and a period of low farm prices, Deere remains the world's largest manufacturer of farm equipment. The company has also remained a top manufacturer of industrial and lawn-care machinery. Equipment produced by the company includes tractors, harvesters, sprayers, and crop-maintenance machinery. It also manufactures construction equipment, diesel engines, chain saws, snow-blowers, and lawn trimmers. Deere & Co. has also added financial services to its growing list of operations, offering insurance and leasing to its customers worldwide.

Founded in 1836 by John Deere, the company has come a long way from its origins in a blacksmith shop in a tiny Illinois village to become a huge diversified corporation reaching most of the world's major markets. Sales from its worldwide operations totaled $12.6 billion in 1997 and produced net earnings of $960 million.

The company's involvement in overseas markets, begun when it launched its first foreign operation in Canada in 1931, has grown substantially. In 1996, 25 percent of the company's total revenue was derived from overseas operations. With operations and sales in most regions of the world, Deere is better able to weather a sale slump in one area by concentrating its selling efforts in other regions not affected by the slump.

Throughout its long history Deere & Co. has placed a high priority on giving something back to the communities in which it operates. Through its John Deere Foundation, the company has contributed substantially to such causes as human services, community development, education, and cultural enrichment. Such contributions in 1997 exceeded $11 million.

COMPANY FINANCES

Deere & Co. posted net earnings of $960 million on revenue of $12.6 billion in 1997, compared with $817 million on revenue of $11.1 billion in 1996. Per-share earnings of $3.78 in 1997 were up substantially from $3.14 in 1996. Per-share earnings in 1995 and 1994 were $2.71 and $2.33, respectively. By far the biggest share of Deere's sales came from farm equipment, which generated 56 percent of total revenue. Sales of construction equipment accounted for 18 percent of total revenue, followed by 14 percent from sales of commercial and consumer equipment, 6 percent from credit operations, and 6 percent from insurance and health care.

ANALYSTS' OPINIONS

Many analysts have been impressed with Deere's rebound since its struggles in the early 1990s. With its global presence expanding and worldwide opportunities emerging, many experts remain hopeful. However, some point out that the company has not completely emerged from danger. Analysts contend that Deere's markets are slow-growing in nature. Some also anticipate fierce competition with companies like Case.

Other controversies surrounding Deere, which have concerned analysts, have included contract talks between the company and the United Auto Workers (UAW) in the late 1990s. Although it was known for its unusually good employee relations, the company faced tough talks, raising fears of a strike. Eventually, Deere and the union were able to hammer out an agreement, but analysts say the UAW still has concerns about some issues, including the company's tendency to outsource much of its work, which could threaten current employees with the loss of their jobs. Deere, however, believes its employee relations have remained positive.

HISTORY

In 1896 John Deere opened a blacksmith shop in Grand Detour, Illinois. Soon after, Deere began searching for a way to plow black Midwestern soil, since the plows used at the time caused the soil to stick to the blades. In 1837 he designed a circular saw that moved so fast it was called "the whistling plow." By 1838 he had sold only 3, but by 1842 he was making 1,300 per year.

Charles Deere (John's son) came aboard in 1853, starting a long-running custom of family management. Looking to expand, Charles Deere established a distribution system to dealerships and broadened product lines. In fact, in the 1900s the company bought other agricultural equipment manufacturers and produced internal combustion engines for its harvesting equipment and tractors.

Deere & Co. launched its first foreign operations in Canada in 1931. After 1958, when the company surpassed International Harvester, Deere & Co. was the biggest agricultural equipment manufacturer in the United States; it became the largest in the world by 1963. Eventually, overseas business grew to include Mexico, Argentina, France, and Spain.

The industry was hit hard in 1986 and 1987, causing Deere's financial losses to reach $328 million. Nonetheless, it was the only company in the industry to maintain its ownership and not shut down factories during the financial strain of the 1980s. Shifting gears, Deere CEO Robert Hanson (the first company head not related to the family) invested more than $2 billion in research and development segments. By doing so, Deere & Company was able to produce its largest-ever new product line in 1989.

In the early 1990s Deere began expanding its lawn care equipment business to include Europe. By 1991 it had purchased a large interest in SABO Maschinenfabrik, a German producer of commercial lawn mowers. Deere & Co. also obtained distribution rights to Zetor tractors and Brno diesel engines from the Czech Republic, with the plan to sell them in Latin America and the Far East.

Expansion also occurred on Deere's home front. With an all-new tractor line introduced in 1994, Deere aimed to stay a jump or two ahead of the competition. The company purchased Homelite in 1994, thereby expanding its lines to include other hand-held outdoor power equipment.

Early in 1998 Deere reached a joint venture agreement with Springfield Remanufacturing Corporation of Springfield, Missouri. Under the agreement, a new organization will be formed to remanufacture diesel engines for Deere's agricultural and construction equipment divisions. The limited-liability joint venture, which will be named ReGen Technologies LLC, will also remanufacture engine-related components. ReGen Technologies was expected to begin operations before the end of 1998 in a newly constructed manufacturing facility in Springfield.

STRATEGY

Deere & Co. has based much of its business practices on the strategy of pursuing genuine value through constant improvement and profitable growth. Within these strategic goals, Deere has aimed for all of its businesses to emerge as leaders in their respective markets, while performing above customers' expectations. Deere also has sought out new markets for its exports from the United States, which led to the introduction of new products. Finally, Deere has expanded its financial services subsidiary, John Deere Credit, to include foreign markets for the first time in the company's history.

INFLUENCES

To enhance manufacturing and production, in 1993 the company used its hourly workers to make sales presentations and help market the company's products. This unique approach appears to have been beneficial, since profits have been on the rise since 1994. Deere adopted its approach as a result of a recession that took its toll on the company in the early 1990s. Also, competition from big companies like Caterpillar Inc. and declining farm incomes were reflected in Deere's $20-million loss in 1991. The company's CEO, Hans Becherer, sought to diversify into the financial services arena by offering the company's health maintenance programs to nonemployees. His move resulted in a 43-percent increase in this operation's profits in 1995.

CURRENT TRENDS

In recent years, encouraged by the dynamic growth in many of the world's economies, Deere & Co. has taken an increasingly global outlook, utilizing foreign acquisitions and licensing agreements to expand its worldwide network of businesses. In 1997 Deere acquired the assets of Maschinenfabrik Kemper GmbH, a German farm equipment manufacturer. This purchase has allowed Deere to expand its headers used with forage harvesters. Kemper, a major European manufacturer of farm machinery, continues to develop and manufacture its other products.

Licensing agreements have also allowed Deere to extend its name globally. Signing a deal with the Florsheim Company of Chicago in late 1996, Deere & Company agreed to allow Florsheim to use the Deere name on quality outdoor footwear and work boots. The company also planned to launch women's and children's footwear lines.

Finally, the company has added sponsorship of the PGA Tour and the Quad City Classic to its lineup of recent ventures. An agreement was signed in 1997 designating Deere as the title sponsor of the Quad City Classic for the period of 1998-2006. The PGA Tour was appointed to design, build, and operate a new Tournament Players Club golf course, named TPC at Deere Run, marking the home of the Quad City Classic. Deere also was designated as the Official Golf Course Equipment Supplier of the PGA Tour. With this title, the company assumed responsibility for supplying golf and turf equipment, construction supplies, and utility transportation.

PRODUCTS

As the world's largest manufacturer of farm equipment, Deere & Co. has a product line that, despite the company's ventures into other sectors, is still heavily weighted toward agricultural equipment. Its major tractor lines range from the 5000 TEN series and the 6000 TEN series through the 7000 TEN and 8000/8000T series to the 9000 series. Deere also offers CTS and Maximizer model combines, the PRO-Series cotton picker and the 7455 cotton stripper, a wide variety of baling equipment, sprayers, planting and seeding equipment, and tillers.

Deere & Co. also manufactures and markets a wide variety of construction equipment, including backhoes, excavators, motor graders, landscape loaders, scrapers, forklifts, skidders, crawler dozers, and crawler loaders. The company's John Deere Lawn & Garden division offers a full range of home-scale equipment for the maintenance of private lawns and gardens.

FAST FACTS: About Deere & Co.

Ownership: Deere & Co. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: DE

Officers: Hans W. Becherer, Chmn. & CEO, 62, $2,200,000; Joseph W. England, Sr. VP, Worldwide Parts & Corporate Administration, $740,000; John K. Lawson, Sr. VP, Engineering, Technology, & Human Resources, $690,000; Bernard L. Hardiek, Pres., Worldwide Agricultural Division, $840,000

Employees: 34,000

Chief Competitors: Deere & Co., a major diversified corporation with extensive operations in agricultural, construction, and commercial equipment as well as such financial services as credit and insurance, faces stiff competition in all the sectors in which it operates. Some of its major competitors include: Aetna; Black & Decker; Blue Cross; Case; Caterpillar; CIGNA; FMC; Ford; General Electric; Honda; Hyundai; Ingersoll-Rand; Kubota; Mitsubishi; Navistar; New Holland; Prudential; Toro; and Volvo.

CORPORATE CITIZENSHIP

Deere & Co. has a long tradition of using its resources to benefit society, stretching back to the company's founding in 1836. Through the years the company has supported a wide variety of worthwhile nonprofit causes through direct corporate gifts and through the contribution of the time and talents of people and organizations associated with Deere & Co.

The company works through the John Deere Foundation to deliver its philanthropic support to those in need. According to company literature, the objective of the foundation is "to enhance the ability of the communities we serve to meet their growing needs and to provide the company with an established forward-looking program of charitable giving." In 1997 the company and its employees, through payrolls deductions, contributed more than $11 million to help support a variety of worthy causes. Among the areas addressed by Deere contributions were human services, community development, education, and cultural enrichment.

GLOBAL PRESENCE

Deere & Co. has made continuing efforts to expand its global presence selling agricultural equipment in more than 110 countries. In 1996 its overseas sales were responsible for one-fourth of the company's combined equipment sales. The company has been able to make greater inroads in a number of foreign markets with the easing of trade barriers. This has allowed Deere to manufacture tractors in Brazil—the biggest Latin American market. Deere also opened an office in Beijing and continues to seek production and marketing of agricultural equipment there. All in all, a rise in worldwide farm incomes coupled with flourishing economic climates in North America have contributed to the company's global expansion.

Consistent with its strategic goals, Deere & Company has been anxious to capitalize on growing economies around the world that have a higher demand for agricultural goods. The company recently expanded its international sales to include the Ukraine and Kazakh-stan. These growing economies have also produced strong markets for industrial and construction equipment. Many of these nations are also looking for diesel engines with clean emissions and economic fuel consumption.

The popularity of golf in parts of Asia has resulted in increased sales of golf and turf equipment in that region. The rise in demand for golf course maintenance equipment has boosted Deere's financial assistance programs, particularly John Deere Credit, which has expanded to include Canada, Mexico, and the United Kingdom.

For Deere & Co., 1996 was a financially rewarding year for overseas operations. Sales leaped to $2.7 billion, an increase of over $500 million from the previous year. The company has cited sales increases in Europe, Australia, and Argentina as contributing factors for such growth. Deere also experienced a 30-percent increase of exports in the first quarter of 1997 due to healthy agricultural economies in Europe, Australia, and South Africa. It also signed a deal with the former Soviet republic of Ukraine to sell 1,049 combines—the biggest business deal in Deere's history. With overseas sales on the rise, Deere & Co. also increased its share of ownership in its Mexican and Brazilian businesses.

CHRONOLOGY: Key Dates for Deere & Co.

1836:: Founded by John Deere
1837:: John Deere develops the circular plow blade
1853:: Charles Deere begins to run the company
1868:: Company is incorporated as Deere & Company
1874:: The Gilpin Sulky Plow, which could plow three acres in 12 hours, is introduced
1898:: The Deere Gang Plow, which could plow six acres in 12 hours, is introduced
1907:: Charles Deere dies and William Butterworth succeeds him as president
1911:: Acquires Van Brunt Manufacturing Company
1918:: Waterloo Gasloline Engine Company, a tractor maker in Iowa, is bought
1928:: Charles Deere Wiman, John Deere's great-grandson, becomes president
1931:: Begins its first foreign operation in Canada
1963:: Becomes the largest agricultural equipment manufacturer in the world
1969:: Company begins running John Deere parts and service centers through the 3,700 independent dealers
1972:: The John Deere bicycle is introduced to take advantage of the rapidly expanding market
1976:: A six-week strike reduces inventory when demand for equipment remained strong
1982:: Acquires Central National Life Insurance Company and expands into leasing operations
1986:: Wins an $11 million military contract to develop an implement for repairing bomb-damaged runways
1994:: Purchases Homelite
1996:: Begins licensing agreement with Florsheim
1998:: Begins joint venture with Springfield Remanufacturing Corp.

In late April 1998 Deere CEO Hans Becherer and Turkmenistan President Saparmurat Niyazov signed an agreement to establish long-term cooperation. The agreement calls for Deere to be the principal supplier of agricultural equipment to Turkmenistan, a former republic of the Soviet Union.

EMPLOYMENT

Deere & Co. offers a broad range of job opportunities in both technical and nontechnical disciplines. The company's steady growth ensures a continuing demand for qualified personnel to fill openings in both Deere's core equipment businesses and its subsidiary financial services operations.

SOURCES OF INFORMATION

Bibliography

becherer, hans w. "letter to stockholders." 1996 annual report. moline, il: deere & company, 1997. available at http://www.deere.com.

"deere announces 9-year pga tour agreement." deere & co. press release, 2 april 1997. available at http://www.deere.com.

"deere & co. and springfield remanufacturing corporation announce joint venture." deere & company press release, 15 january 1998. available at http://www.deere.com/news/regen.htm.

"deere & company." hoover's online, 10 may 1998. available at http://www.hoovers.com.

deere & company home page, 10 may 1998. available at http://www.deere.com.

"deere signs agreement with turkmenistan." deere & company press release, 27 april 1998. available at http://www.deere.com/news/turksign.htm.

"deere to acquire german farm machinery company." deere & co. press release, 28 february 1997. available at http://www.deere.com.

elstrom, peter. "heavy equipment gets into gear." business week, 5 august 1996. available at http://bwarchive.business-week.

"john deere licenses florsheim to market footwear line." deere & co. press release, 8 april 1996. available at http://www.deere.com.

kelly, kevin. "deere's surprising harvest in health care." business week, 11 july 1994. available at http://bwarchive.business-week.

———. "the new soul of john deere." business week, 31 january 1994. available at http://bwarchive.businessweek.

———. "why the talks at deere hit bedrock." business week, 31 october 1994. available at http://bwarchive.businessweek.

magnusson, paul. "how badly will the dollar whack the u.s.?" business week, 5 may 1997.