Inside the AGCO factory complex in Hesston, giant machines and workers cut raw metal into parts, fit them into larger components, and weld them together to form combines, haying vehicles and planters.
The plant may be more than 50 years old, but it is undergoing a small revolution of sorts.
Agco, the smallest of the big three global farm machinery makers, is remaking its factories and the products they make in an effort to boost marketshare in North America, its weakest market.
The company has trimmed its stable of brands to focus its marketing message. In North America, that means mainly Massey Ferguson and Challenger, after this winter's phase-out of the AGCO brand. In addition, it makes Gleaner combines and White planters.
It is also a year into instituting a new production system to boost productivity and lower costs — a system that, so far, hasn't been well-received by the workers on the shop floor in Hesston.
Those changes follow the painful impact of the recession on the Hesston plant. Demand for agricultural machinery fell off in late 2008, and the company laid off at least 150 workers. It now employs just more than 800 at the plant.
The company expects North American demand to be down 5 percent in 2010 but said that work at the plant has stabilized because it also makes machinery for export. Other regions of the globe, especially South America, are seeing double- digit growth.
Once the plant has absorbed the changes, director of operations Bill Kaltenberg said, the company expects to reap the rewards.
"We've got some pretty aggressive plans to grow marketshare," he said.
1 company, 26 brands
AGCO was born in 1990 in a management buyout of Deutz-Allis, a successor to the old Allis Chalmers farm machinery business. Agco grew mainly through 30 acquisitions of smaller agricultural machinery companies and divisions around the world.
It has become, CEO Martin Richenhagen said in an investor conference earlier this month, the largest maker of agricultural machinery in the world. It's main competitors, Deere & Co. and CNH Global, are larger because they also sell construction, forestry, landscaping and golf course maintenance equipment.
Over that time, Richenhagen said, it has had 26 brands and discarded most. Its biggest strength lies in Europe, but it's the acquisitions' early footholds in South America, India and China that are paying big dividends now as those regions have blossomed.
Under Richenhagen, AGCO has gotten serious about consolidating its many and varied operations into a unified global company.
That has meant picking its most influential brands and dealers, and shedding the rest. It is instituting a globalized production system that puts all plants around the world on the same footing. It is also trimming the number of suppliers and seeking more suppliers in China and Eastern Europe.
The company has just three manufacturing plants in the U.S. — including the one in Hesston and the Sunflower tiller equipment plant in Beloit — and three assembly plants. It also has a manufacturing plant in Mexico.
AGCO Production System
Agco has introduced a lean manufacturing production system that is shaking up the factories' old ways of doing things.
Out of 138 machines in one of the Hesston plant's buildings, 123 were moved, Kaltenberg said. Much of this was done over the two months the plant was shut down at the end of last year.
The company has re-engineered production flow to make it simpler and more efficient. Parts receive a bar code and are tracked from station to station. The entire plant is now linked by computer. The floor has been repainted and new signs clearly mark parts of the plant.
"You will be able to see it visually," Kaltenberg said of the production system. "It will be clean, organized, with a nice visual flow."
In one instance, delivering material on forklifts has been replaced by workers retrieving parts from a supermarket of parts and bringing them to the line on carts. This, the company says, reduces missing parts and speeds production.
Workers gather each morning for a few minutes to discuss ways to improve production or safety.
The plant features new robot welders and laser cutters. Kaltenberg said the company spent $7 million on robot welders and lasers last year. Overall, Kaltenberg said the company spent $10 million in 2009 on plant improvements. More will be spent this year.
As South America and other markets have grown, Hesston has stepped in to take up the slack. Since January, the company has been running on overtime and recalled 30 to 40 workers, Kaltenberg said.
But the workers have grumbled about the changes.
This spring, the company asked the workers to reopen their contract a year early to take some pay and benefit cuts. Workers said the company told them it needed to lower plant costs to become more competitive and that it would install a large paint facility there if workers cooperated — but if they didn't, the paint facility would go to Brazil.
Worker sentiment was so strong against the company's proposal that union leaders didn't even hold a vote. There were some nerves afterward, acknowledged union president Kevin Rimbey, but workers feel the company wants the workers to absorb all of the cost reduction.
"They're constantly telling us 'We have to build the products, but we don't have to build it in Hesston,' " Rimbey said. "I'm not saying it doesn't worry me. But if we give up everything they want us to, I might as well go work somewhere else."
Lawrence De Maria, an analyst at Sterne Agee Group, said the new efforts should help the company marketshare.
The company has less than 10 percent of the market in North America, which is dominated by Deere, so any significant improvements in focusing the brand, streamlining and building the dealer network, and building the productivity should help.
"But there's no silver bullet solution," De Maria said. "There is no way to go from 10 to 20 percent overnight."
The small guys are largely gone, gobbled up by the three, and only giants remain in North America, he said.
Richenhagen told analysts that the company recently looked into acquiring Case's U.S. agricultural operations, which were rumored to be available. But they were not for sale.
Barring such a seismic change in the landscape, De Maria said, the three will continue to slug it out in North America for the foreseeable future.
"It's a tough slog to grow," he said, "especially in the strongly competitive environment."