We will always be open to talks with Tafe: Massey Ferguson's Luis Felli

He talks about the issues with TAFE and the future roadmap in one of the company's first interviews since the 'tractor war' began

The legal dispute between Chennai-based Tractors and Farm Equipment (TAFE) and AGCO, the world’s third-largest farm equipment manufacturer, over the Massey Ferguson brand began after AGCO announced the termination of its agreements with TAFE in April this year. In one of the company’s first interviews since the “tractor war” began, Luis Felli, senior vice-president and general manager of Massey Ferguson (Global), speaks to Shine Jacob in a video talk about the issues with TAFE and the road map. Edited excerpts:

 

How do you look at the controversy from the Massey Ferguson side, as a subsidiary of AGCO? 

 

This is the context today: It is a global brand, growing fast, having invested in technologies, with all the support from AGCO.

 

On the other hand, India’s overall market is huge with over 900,000 tractors sold per year. Between 2021 and 2023, Massey’s top line grew 90 per cent. However, we did not grow that much in India.

 

We have faced several difficulties with the supply we need for the global market from TAFE, including the supply of parts. We have been experiencing issues with quality materials and late supplies, and sometimes we order one tractor and receive another. We don’t have a fair market share, and we are unable to ensure that our technology is reaching farmers all over India. The only reason we decided to serve notice to TAFE this April, terminating our contract, is for the farmers.

 

When TAFE is the single-largest shareholder in AGCO and AGCO holds a significant share in TAFE, why are you not considering an out-of-court settlement or talks?

 

We are open to talks with TAFE, and would like to settle matters in meetings. When we gave the notice, we had shared proposals for mutually agreed transition agreements. TAFE claimed in court it owned the Massey Ferguson brand.  

 

All matters related to shareholding are board matters, while commercial matters are separate. We have been trying to resolve the commercial aspects for years but have not succeeded. We could not get what we needed from TAFE in terms of commercial aspects—pricing, quality, and the introduction of new technologies in India.

 

Why did the AGCO notice come all of a sudden, without considering relations with TAFE from the 1960s? 

 

We had been talking to them for many years. To our surprise, what we had requested in 2016 — to provide Stage V tractors to achieve European markets — TAFE is now handling on its own Stage V tractors. Our chief executive officer, our supply chain people, and I had been talking to them regarding our concerns.

 

It took us so long to take any action because of this long relationship. We had to respect that and give them a chance. We came to a point where there was no way we could continue this and had to take a position.

 

Service to over 3 million consumers and the availability of parts will also be an issue. How will you address this?

 

We have been working on an alternative strategy, through which, when we end the relationship, we will have a solution to continue serving Indian farmers. We are confident there will not be a disruption in farmer service. 

 

We have a strategy in place to ensure that we will be able to supply tractors and service farmers when TAFE is no longer involved. There is a large distribution network of parts (over 50 component suppliers) from other companies in India, and there are different ways we could meet the needs of farmers. We terminated the agreement with TAFE, as our exclusive supplier of parts, about four years ago.

 

Since you have suppliers in place, will you be looking at manufacturing in India?

 

We have been increasing our workforce in India and are expanding our supply chain by adding engineering and digital capabilities. We have not yet made a decision on manufacturing. If we decide to proceed, we are prepared.

 

Was this step taken because of an ongoing tussle between the AGCO management and TAFE, as the Indian company was seeking a board restructuring and strategic transformation?

 

Shareholder matters are related to the board while commercial matters are separate. All these issues arose after we served our notice to TAFE. Before that, there were no issues.

 

Your notice was in April but TAFE had raised some issues much earlier, in 2021, regarding management. Compared to peers, you market value has come down, according to a TAFE letter. What is your take on this? 

 

There was a discussion a while ago when we had a change of chief executive officer (CEO). It was during this change that the discussion came up. Eric (Eric Hansotia) is doing a fantastic job as CEO. He is the mastermind behind transforming AGCO from a product-centric company to a farmer-centric one, leading a cultural change. All we have done in precision farming is because of him, being a global leader in that. AGCO delivered the best results ever last year. Now, in a downturn, every company is getting impacted. As the market comes back, we will continue to grow.

 

You have a flexi-fuel model. Are you looking at alternative fuels in India?

 

We didn’t launch in Massey yet, but we have electric tractors getting commercialised in Europe. We have developments on hydrogen fuel and biodiesel. We have ethanol and biogas tractors too in the final stages of development. We are looking at products that are affordable for farmers. In hydrogen, it is tougher. India for us has great potential.