Agco And China’s First Tractor In Heated Negotiations 26/02/2008

The worlds third largest tractor manufacturer AGCO, has been in negotiations for an acquisition with Chinas First Tractor for nearly two years. Feeling the frustration of their inability to finalize a deal, chief executive of AGCO Martin Richenhagen vented his frustrations with First Tractor. The deal to allow AGCO to take a majority stake in First Tractor, a state controlled company has been blocked by Bejing. First Tractor is China’s biggest tractor manufacturer in a country that imports more tractors than India, Western Europe and the US combined. Chinas potential as the worlds leading $50 billion a year agricultural machine business are certainly the big draw for AGCO.

Richenhagen voiced his frustration saying that Chinas inability to come to an agreement was to do with their insistence that AGCO share the decision making with government representatives. This division of 50-50 between company holders and the government is a normal procedure in China so the government can find foreign investors for local companies. Richenhagen said that this is not viable for AGCO and that this hides the truth about China as a growing economic superpower when their engineering standards for tractor innovations are poor and the legislation to define how companies operate are based on feelings or political fashion rather than written laws. Currently most of the tractors that China uses do not have gearbox transmissions instead using primitive belt-drive systems powered by tiny engines with the farmer guiding the machines themselves similar to push lawnmowers.

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