Interview with Deryk Johannes, CEO, LS Tractor USA

“We’re headquartered in Battleboro, N.C. and we are a wholly owned subsidiary of LS Mtron, a South Korean machinery and electronic components manufacturing division of the $16 billion LS Group. We were known as LG prior to a 2004 spinoff.

“LS tractors have been sold in the North American market under a number of different brand names since 1998. In 2009 the company established its North American subsidiary to establish its own network of dealers. We’ve recruited over 100 dealers in our first 7 months here.

“We make 5 series of tractors to accommodate a full range of needs, from hobby farmers to medium-sized farming operations.”

Growth Depends on Dealers

“Some other manufacturers have been looking to Tractor Supply Co. or other retailers, but we’re not. The reason is that our rural lifestyle customer ranges from a first-time buyer to the experienced, knowledgeable customer.

“As this pie gets smaller, it’s going to be exceptional customer satisfaction that makes the difference. That comes with the personal touch. Therefore, you need dealers who understand the customer and have the passion to sell to them.

“The profile we’re looking for is dealers who have a great reputation in their community, who are service oriented, and who can give personalized service. Personal touch is extremely important.

We are depending on our dealers for LS to grow. Our philosophy is clear, dealers are part of our family, and if you talk to some them they will tell you this. If our dealers succeed, we will succeed.

“We also listen to our dealers. That’s the key. They know their customers, and the feedback we get from dealers is what counts. As we go along, we will make the changes necessary to satisfy the customers.”

Top 5 by 2012

“We’re spread out with dealers in 24-25 states in the Southeast, Northeast and West Coast. We want to be a top 5 brand in North America in the next 5 years. That’s our target. Part of our strategy is dealer recruitment. We have an extremely good product, and we have excellent service, so dealers are the key.

“We’ve had a lot of interest in dealers coming on board because they want to be associated with us. Many of them have told interested dealers that LS doesn’t just talk the talk. They actually practice what they preach.

“The ease of doing business with us is one of our strong points. We have simple, easy programs. We give dealers enough space instead of stacking them on top of each other. And we deliver tractors within 5 working days. That helps the dealers manage their inventory and cater to customers. And it’s the low cost of joining the LS family which is also attractive.

“Dealers also know their business better than anybody else, so we don’t go in there and lecture them on what needs to be done. We get in there and support them, in terms of growing their business, offering special programs and whatever else they need. We work with General Electric for dealer floorplanning, and on the retail side with AgriCredit, and we have a good relationship with both of them.

“The way we did business between 2001 and 2007, when the market was growing, is different than the way we need to do business today with our dealers. As long as the market was growing dealers could carry a high inventory. In a market that has been declining, one cannot afford to hold high inventories.

“How you manage your business when you have limited inventory, and how you replenish the inventory, is the challenge, and that’s where we come in with our differentiator. We say fine, don’t keep too much stock. We will replenish it in 5 working days. That way, they manage their inventories, they’re not over-leveraged, and they’re comfortable with doing business with us.”

Deryk Johannes, CEO, LS Tractor USA

Love of the Land

“I’ve spent a lot of time in India, China and Europe, but nowhere in the world is the love of the land, and the passion for the rural lifestyle the same as it is in North America. Nowhere.

“The tractor is the connection between their love of the land and the customer. That is the connection which we hope to make. This is their love, their therapy, their relaxation.

“When they sit on a tractor and bush hog, all their cares go away. That’s the psyche. So how do we make this experience more fulfilling and satisfying for the customer?”

Face Time with Dealers

“This year we’ll have dealer meetings with dealerships in the South, Midwest, East and Southeast. I personally feel that all these locations are different. Each state is a different country. The customers are different.

“When you get these dealers together talking about how to sell to the customer, it makes a huge difference. The way you sell to a customer in the Southeast is different than how to sell on the West Coast.

“It was an eye opener when I first came here 10 years ago. All I did in my first year was to travel the country and listen. I said, ‘The guy from Kentucky is a lot different than Georgia.’ This is an exciting of business because we’re dealing with different types of customers.

“Take a look at the first-time buyer. He has to be handled in a different fashion. He doesn’t know a diesel from a gas tractor. Yet he’s too proud to admit that he doesn’t know how to drive a tractor. So how do you take him through all the paces without making him feel he lacks in something? That’s what personalized service brings.

“Service is also extremely important. It’s one of the key factors in terms of retaining your customers. There are always things required on a product that require fine tuning, and they have to be done quickly. We’ll be doing service schools this fall in certain areas, so clusters of dealers can come in and get training.”

A Positive Outlook

“I think there’s going to be a shakeout among manufacturers. The key is how you’re going to do business. Those who deliver excellent customer satisfaction are going to be the ones that survive. Those who control their costs and manage their inventories are going to survive.

“We’ve had healthy growth in the last year, and I see an exciting period in the next year and a half. The market has been down, but when it does come back, you’re going to have all these potential customers there waiting to jump into the rural lifestyle.

“Given the type of products that we have, the new products that we’re going to bring into the market, and our whole approach to business, we’re confident we’ll do well in the next 12-18 months.

“We’re getting a 97-horsepower, power shuttle tractor soon, and in the near future we’ll have cabs on some of our smaller compact tractors. There’s a need for that in Northeast region, where they want more cab models in the smaller tractors.

“I just had the CEO of LS Mtron Korea here, and he was pretty happy with how things are going. He understands the market is difficult. He asked me to tell our dealers we’re committed to the North American market, and we’re here to stay.”