Deere & Company announced Oct. 3 that it plans to build two new factories in Brazil to meet growing market demand for its construction equipment products in Brazil and other South American countries.

Deere to add construction equipment factories in Brazil

Deere & Company announced Oct. 3 that it plans to build two new factories in Brazil to meet growing market demand for its construction equipment products in Brazil and other South American countries. The total investment is approximately $180 million with Deere investing approximately $124 million of the total.

“Brazil is one of the world’s fastest-growing markets for construction equipment,” said Samuel R. Allen, chairman and chief executive officer of Deere & Company. “Today’s announcement represents another step in our strategy to serve construction equipment customers in key markets around the world.”

Deere plans to build both factories in Indaiatuba, Sao Paulo. One factory will be solely owned by Deere to manufacture backhoe loaders and four-wheel-drive loaders, while Deere will partner with Hitachi Construction Machinery Co., Ltd. on a second factory to manufacture excavators.

Michael Mack, president of Deere’s Worldwide Construction & Forestry Division, said, “There are significant opportunities to serve customers with Deere construction equipment in this region of the world. We believe Deere can gain momentum by leveraging the considerable assets and capabilities that Deere has already established in the region.

“Over the long term, Brazil has sustained a positive business environment. In addition, the country wants to significantly enhance its infrastructure. This provides us confidence that we can expand our construction equipment business through these investments.”

According to Michijiro Kikawa, president, chief executive officer and director of Hitachi Construction Machinery Co., Ltd., “Ever since our formal joint venture partnership began in 1988, Hitachi has worked exclusively with John Deere in the Americas to establish a leading presence in the very important hydraulic excavator market. This new joint venture is focused specifically on Brazil and allows both Hitachi and John Deere to expand their strong relationship into this exciting long-term growth opportunity.”

The product line manufactured in Brazil will be supplemented with imports from other factories, Deere said, and the company plans to also establish a distribution network to sell and service the equipment similar to the well-respected dealer organization for John Deere agricultural equipment in Brazil.

Deere already has a strong presence in Brazil serving the agricultural and forestry equipment markets with three manufacturing facilities, a parts distribution center for South America, a bank operated by John Deere Financial Services, and a facility for John Deere Water, which is one of the world’s largest irrigation companies.

Deere expects equipment built in the new manufacturing facilities to meet the level of domestic content required of the Special Agency of Industrial Financing. The workforce at the factories could exceed 600 employees depending on market demand for products. Additional indirect jobs will also be added by suppliers and other companies that provide services to the factories.

“John Deere is investing more than $3 million (U.S.) each day in research and development of new products and services,” Mack said. “This investment results in Deere offering productivity-enhancing technology to customers. Our new factories provide us an opportunity to bring this technology to customers in Brazil.”

Construction of the factories is expected to begin in early 2012 with product manufacturing to start in late 2013. Deere and Hitachi already have a joint venture in the United States to manufacture excavators. In addition, the two companies have a marketing agreement in the Americas. Deere & Company had sales and revenues of approximately US$26 billion in its 2010 fiscal year.