John Deere, Hitachi end 33-year joint venture on US equipment production

Hitachi and John Deere excavators at the CONEXPO 2020.

US manufacturer John Deere and South Korea’s Hitachi Construction Machinery are dissolving their multi-decade joint venture to manufacture and sell Hitachi construction equipment in the Americas under the Deere brand.

In a $US275-million ($385 million) deal announced by the two firms on August 19, John Deere will acquire three existing Deere-Hitachi factories in the Americas and secure licensing agreements for intellectual property necessary for continued production of the machines.

Hitachi-designed equipment in firms’ joint venture – which includes a range of medium and large hydraulic excavators – will continue to be produced by John Deere through at least 2022 and will be supported and serviced through its existing network.

John Deere’s marketing arrangement for Hitachi-branded construction excavators and mining equipment in the Americas will end; Hitachi will assume distribution and support for these products. Terms of the deal take effect in February.

“This joint venture has been successful and has served us well over the years,” John Stone, John Deere Construction & Forestry worldwide president, told investors and analysts during the company’s third-quarter earnings call on Aug. 20. “Our new strategy will allow us to leverage our own technology and designs, specifically focused on the markets that matter most to us.”

Hitachi Construction Machinery has been looking to expand its direct presence in the Americas, noting in its Aug. 19 announcement that it plans to add more than 60 locations. The company will begin selling its own heavy equipment into the North American market in spring 2022, although all production will be done in South Korea for the near future.

“HCM [US unit Hitachi Construction Machinery Americas] has been improving and investing in business strategies since 2017 to prepare for the creation of HCMA,” Alan Quinn, president of HCMA said in the press statement. “This includes many ‘value chain’ initiatives to bolster parts and service, rental, used equipment, remanufactured parts and financing.”

John Deere and Hitachi’s collaboration dates to the 1960s, with the two manufacturers signing their first OEM supply agreement in 1983. In 1988 they formed the Deere-Hitachi joint venture to produce Hitachi-designed hydraulic excavators. Under that arrangement, Hitachi excavators were fabricated, assembled and sold entirely within the Americas.

John Deere sees a lot more in the deal than just absorbing the existing product lines.

This shift comes at a time when John Deere is seeing strong demand for construction equipment in the Americas. The company’s construction and forestry division reported an operating profit of $US463 million ($649 million) year-over-year in the third quarter. Looking forward, it predicts North American equipment sales will increase 15 per cent to 20 per cent and compact equipment sales expected will rise 20 per cent to 25 per cent, with both forecasts unchanged from its fiscal guidance earlier in the year.