John Deere CEO Looks Back at 2001

MOLINE, ILL. - The year 2001 presented a range of challenges for all businesses, and even the largest manufacturers in the world found they weren't immune to the problems of the past 12 months.

John Deere found that out when the company lost $64 million in 2001, and CEO Robert Lane said the company is preparing another challenging year in 2002. "Although we're hopeful worldwide economies will regain their footing later in 2002, Deere is bracing for difficult conditions and expects financial performance to remain under pressure," Lane noted in a letter to company shareholders.

John Deere ended last year with net sales and revenue of $13.3 billion, which was up slightly from $13.1 billion in 2000. The key difference was a profit of $486 million in 2000 compared with last year's losses. But in today's uncertain environment, people look to individuals like Bob Lane for direction and, hopefully, a little optimism.

"The company has taken a number of decisive actions aimed at building a business as great as our products and achieving a dramatic increase in shareholder value," Lane noted, targeting the sale of the Homelite hand-held consumer products division and an 8 percent reduction in U.S. salaried workforce as two key initiatives.

While John Deere's performance in the challenging agricultural markets actually resulted in a 6 percent gain, the commercial and consumer equipment division made its big move with the acquisition of McGinnis Farms and Century Rain Aid to create John Deere Landscapes.

Lane only put part of the blame for John Deere's 2001 performance on the economy's shoulders, instead laying responsibility internally. "Truly, the John Deere Experience, which we aspire to take to even higher levels for customers and employees, has come up short for investors," he observed. "Although John Deere is a fabulous enterprise in so many ways, our results have lagged due to the fact that, as a company, we are asset-heavy and margin-lean."

In addition to a number of strategies aimed at cutting costs, observers can expect to see John Deere emphasize new areas of sales to its customers, just as John Deere Landscapes does by selling nursery product and irrigation supplies to landscape contractors. "While over three-fourths of John Deere revenues come from equipment sales, equipment purchases account for only a few cents of every dollar spent on the average farmsite, worksite or homesite," explained Lane. "In such an environment, Deere sees a prime opportunity to supplement its equipment offerings with new and expanded services, including financial and global-agricultural services.

"One of the best examples to date of this 'solutions' approach is the John Deere Landscapes operations," Lane continued, predicting more than $400 million in sales for the new division.