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Ag Manufacturing Coming to America

January 7, 2013
US production facility
Faster delivery times and lower costs are among the reasons that Dutch-based Lely has invested in its first U.S. production facility. Its robotic milker plant in Pella, Iowa, will assemble up to 10 machines each week.  
 
 

By Jim Dickrell and Ben Potter

Global ag companies bring manufacturing to the U.S.

One occurrence would be considered an anomaly. Two would be an anecdote. But four just might signify a trend—especially if they occur within six months.

  • In March, Dutch-based Lely, the world leader in robotic milkers, held a grand opening of its new Pella, Iowa, assembly plant.
  • In April, Mitas, a Czech tire manufacturer, opened a production facility in Charles City, Iowa.
  • In June, AGCO unveiled its completely retooled and expanded tractor assembly plant in Jackson, Minn., which will eventually produce 18 models that had previously been built in Beauvais, France.
  • In September, German equipment manufacturer Geringhoff announced plans for a $200 million plant to build corn headers and other ag equipment in St. Cloud, Minn.


All four companies cited closeness to market as a reason for moving manufacturing to the U.S. America’s booming ag economy is another reason to be near the action. Shortline manufacturers have moved more production in the past 12 months to the U.S. as well.

Mitas

Mitas, a tire company based in the Czech Republic, opened a plant in Charles City, Iowa.


Major milk market. "North America is the single biggest market for robotic milkers in the world," says Chad Heiser, Lely’s director of operations in Iowa.

Lely cites faster delivery times and lower costs as reasons for moving assembly from Rotterdam, Holland, to Iowa. The new 40,000-sq.-ft. plant and office complex is located on the sprawling campus of Vermeer Corporation, manufacturer of agricultural and industrial equipment. Lely leases the facility from Vermeer.

Lely hopes to assemble a couple robotic milkers per day, perhaps 10 per week, at the Pella facility. The facility is closer to the company’s U.S. customers by five weeks (four weeks on the water and another week through U.S. Customs) than its current assembly facilities in the Netherlands.

"By early 2013, we hope to have all of our local sourcing of parts nailed down," Heiser says.

Trans-Atlantic freight savings, U.S.-sourced parts and elimination of international currency fluctuations should all provide savings, says Alexander van der Lely, CEO of the Lely Group, based in Holland.

"Hopefully, we can reduce the price of the robots. But before we do, we need to see what the actual savings are," he adds.

Making tracks. Czech Republic–based tire company Mitas is also expanding manufacturing to the U.S.

agco

AGCO will produce all of its 140 to 290 PTO hp tractors
in Jackson, Minn.


"The relationship between our countries is reaching a new phase," says Czech Republic ambassador Petr Gandalovic. "Opening the plant and creating a significant number of jobs represents a stronger and longer lasting bond than any volume of imports."

The company also had practical reasons to operate from Charles City, Iowa. The city’s proximity to original equipment manufacturers such as John Deere, CNH, Unverferth, Kubota and local farmer customers made it a smart strategic location. There is also an historical relevance: Charles Hart and Charles Parr coined the word "tractor" (by combining "traction" and "power") in this very town in 1907.

"We have the past of Charles City with the production of Oliver tractors and now the tractor tire plant that Mitas has chosen to locate here," says Iowa Gov. Terry Branstad. "You’re getting a highly skilled work force and a state and community committed to providing a hospitable environment to employees and new arrivals, and it is a great logistical location as well."

Neil Rayson, vice president of sales and marketing, says dealers and distributors already have nationwide access to Mitas tires, but the plant should accelerate the speed of availability.

The company hopes to see full production capacity of 13,500 metric tons of tires per year by 2013, three years ahead of its original schedule. Mitas purchased the former Winnebago facility in 2010, altered the existing layout and installed machinery. Pilot production began in April 2012, with additional curing presses to be installed through 2013. By then, the Charles City plant will manufacture a range of tires up to 54" and 1,200 mm width for the U.S. market.

Less water time. For AGCO, producing all of its 140 to 290 PTO hp tractors for the North  American market in the U.S. cuts 30 to 45 days of "water time"—time spent crossing the Atlantic Ocean, says Bob Crain, senior vice president and general manager for AGCO North America.

manufacturing plant

In the first offshore venture for Geringhoff, a St. Cloud, Minn., manufacturing plant will focus on harvesting products that are
sold in the U.S.


Many components are still being produced offshore. But AGCO hopes to soon source most  components in the U.S. "We’ll spend our first year locating suppliers, and within two years have a lot of the components produced here," says Martin Richenhagen, AGCO chairman and CEO.

The Minnesota expansion is part of AGCO’s global growth strategy. In 2012, it poured $350 million into plant expansions and another $300 million into research and development. Key to the growth strategy is to locally source its products, Richenhagen says. Not only does this reduce shipping time and cross-border logistics, it reduces exchange rate and currency risk. Engineering closer to the farm also enables better responsiveness to local needs.

For example, North American wheel spacings, electronics and precision farming applications differ from European or Asian needs. "By localizing manufacturing, our engineers learn firsthand what wants and needs local growers have," Crain says.

First steps. The Geringhoff plant in Minnesota is the company’s first offshore venture in its 132-year history. "It’s a big day for us," said CEO Daniel Hansmeier when making the announcement.

The facility will focus on manufacturing Geringhoff corn header products sold in North America. Hansmeier also made reference to harvesting products being developed specifically for North American markets. Geringhoff will continue to source about a third of its parts from Germany. But the remainder will be fabricated in the Midwest, so proximity to metal fabricators, advanced plastics, hydraulic and electronic components was key.

The available labor supply for welding, engineering, information technology and systems analysis was another reason for the Minnesota location, Hansmeier says.

For more information, including videos, on each company and their production operations in the U.S., visit www.FarmJournal.com/U.S._manufacturing

You can e-mail Ben Potter at bpotter@farmjournal.com.

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FEATURED IN: Farm Journal - January 2013

 
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