Wirtgen addition expected to give Deere construction business 83 percent boost for 2018
The pairing of John Deere and the Wirtgen Group in 2017 is expected to result in a massive uptick of the company's revenue for 2018, proving the strength of the massive acquisition and resulting in a far more global reach for Deere as a whole.
While Deere has a solid market share in North America , Russia, Africa and some other regions, Wirtgen has a much more broad reach around the world; the combination is expected to mean a wider range of product made available to clients globally, though a combination of dealerships is unlikely, according to new Wirtgen CEO Domenic G. Ruccolo.
"The Wirtgen Group is far more global than the Construction Division of John Deere," Ruccolo stated on the Intermat Construction and Infrastructure blog recently. "Wirtgen's company-owned subsidiaries are a strength because they efficiently leverage the group's brands."
Deere is expecting its construction and forestry division to experience a stunning 83 percent increase in sales worldwide for 2018, the company stated in its second quarter financial statement. Wirtgen is expected to add about 56 percent to the division's sales for the year. In just the first six months of 2018, the division has already experienced an increase of 73 percent; Wirtgen added 44 percent to the bottom line for the six month period.
The $5.2 billion acquisition in December of 2017 has already paid dividends for Deere, and that's likely to continue as the company determines how best to leverage the Wirtgen brands, products and worldwide reach going forward. Combining efforts in research and development - telematics and machine control are key areas that may benefit both parties - as well as encouraging clients of one company to work with the other are ways in which that may happen, Ruccolo noted.
"We share a lot of clients around the world," Ruccolo said. That provides an opportunity to share a wider product offering; while there's no crossover between the products manufactured by Deere and Wirtgen, their customers use machines of both types for their work: roadbuilding contractors, for example, use both earthmoving and roadbuilding equipment, while earthmoving contractors often require crushing and screening equipment, and so forth.
Distribution networks are unlikely to be combined, Ruccolo noted, because of the different structures used by both Deere and Wirtgen - Deere uses its own network, while Wirtgen is sold through independent distributors and direct-selling subsidiaries.
A persistent question is whether Deere will make a greater push into the European market moving forward. Ruccolo said that remains to be seen.
"We will continue to globalize the earthmoving business. Everybody refers to Europe, but Europe is 30 countries, with different languages," he told the Intermat construction blog. "The key for any OEM is to develop a strong distribution network, and that's the most complicated part. There is no plan, no announcement. Obviously, we have crossed a new line with Wirtgen. I don't know if it will be the first of many or not."
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