AGCO to close Coldwater factory

AGCO Corporation announced that it would close its manufacturing facilities in Coldwater, Ohio and Lockney, Texas. This decision comes at a time when reduced demand for agricultural equipment continues to negatively impact the industry with lower production levels, reduced price realization and unfavorable currency exchange. In order to remain competitive, AGCO has determined that it is necessary to rationalize production facilities for greater efficiency and lower product cost.

The Coldwater factory, which has been closed since October 1, 1999, will not resume production and will be closed permanently. Details of the plan to close the operation were outlined today to approximately 100 remaining employees during a group meeting at the Coldwater facility. The Company anticipates that the facility will be completely vacated by April 1, 2000.

The Company will incur nonrecurring expenses of $25 to $30 million related to the closure of the Coldwater and Lockney facilities. These nonrecurring expenses are primarily for employee termination payments, write down of certain assets and costs related to closing and exiting the facilities. Of this amount, approximately $20 to $25 million will be recorded in the fourth quarter of 1999 with the remainder of the nonrecurring expenses being recorded as they are incurred during 2000. In addition, the Company will also incur a one-time charge of approximately $5 million in the fourth quarter of 1999 associated with the write down of certain inventory values for discontinued products directly related to the facility closures. The Company anticipates annual cost savings of approximately $10 to $15 million as a result of the facility closures and expects to realize all of these savings in 2000.

Products currently produced at the Coldwater facility will be relocated to AGCO facilities in North America and Europe. Specifically, planters, hay tools and spreaders will be relocated to the HFI (Hay and Forage Industries) operation in Hesston, Kansas. Also, in an effort to further reduce costs, AGCO's Massey Ferguson, AGCOAllis and White brands of high horsepower tractors will be integrated with common platform tractor production currently in place at its Beauvais, France facility. In addition, AGCO's Farmhand brand of loaders will be produced for AGCO by the Soo Tractor Company located in Sioux City, Iowa. Additional product relocations from Coldwater will be announced in the first quarter.

The Company also announced that it would cease production at its Lockney, Texas plant. The facility has been closed periodically during 1999. Current production of AGCO's Tye brand of seed drills and cultivation products will be relocated to the HFI facility in Hesston, Kansas. This process is expected to be finalized by the second quarter.

"The current global decline in industry demand for agricultural equipment, continued consolidation of manufacturing entities and increasing production costs, make it necessary for AGCO to seek solutions that will allow the Company to improve its viability during the industry downturn," stated Robert J. Ratliff, Executive Chairman of AGCO Corporation. He further stated, "Current inventory levels make it possible to consolidate production during the first quarter of 2000 without the loss of sales, and we expect that production of the effected products at their new source locations will be ready in time for seasonal demands."

"This decision was not taken lightly. Regardless of the business conditions that necessitated this unfortunate decision, we deeply regret the impact this action will have on our associates and their families. The employees at Coldwater and Lockney have always been known for delivering high-quality work. The plants and its employees have made a significant contribution to AGCO's success," Mr. Ratliff continued.

AGCO expects that the closing of the Coldwater and Lockney factories and the relocation of various manufacturing responsibilities will maintain production capacity and reduce production costs. In addition, the efficiency generated by the increased utilization of AGCO's other facilities will aid the Company in avoiding higher product costs during the prolonged industry downturn and provide measures to achieve lower product costs, which will position the Company well when the industry recovers. "The resulting benefits of this action will reward the Company with a more competitive group of products and the reassurance of AGCO's long-term commitment to its brands. These operating cost savings, together with the Company's horizontal

production strategy will enable AGCO to remain profitable in adverse market conditions," concluded Mr. Ratliff.

The Company currently owns the Coldwater facility. Once the closing is complete, AGCO intends to actively market the available space of 1,490,000 square feet in an effort to ensure its productive use in the community. The Coldwater operation was acquired in December 1993 as part of the White-New Idea acquisition to produce hay tools and implements. Prior to shutdown the Company employed approximately 450 employees.

The Lockney facility, currently leased by AGCO, was obtained in March 1995 as part of the AgEquipment acquisition, which included the Farmhand, Glencoe and Tye brands. The Lockney facility staffed approximately 55 employees prior to shutdown.