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AGCO Takes Action To Prepare For Steeper Farm Industry Decline:
1998 Earnings reduction expected as a result of slower demand; production and cost adjustments accelerated to position the company for 1999

AGCO Corporation (NYSE: AG), a major worldwide designer, manufacturer and distributor of agricultural equipment, today announced that it has initiated aggressive production adjustments and cost cutting measures to balance inventories and operating expenses in response to revised lower second half 1998 and 1999 industry demand forecasts.

In the third and fourth quarter of 1998 total tractor and combine unit production will be reduced by an additional 8% from those reductions previously announced. These cutbacks will adjust dealer and Company inventory to recent changes in demand and position the Company for lower industry levels in 1999.

Operating expense is being reduced by over $15 million in the fourth quarter through personnel reductions and the curtailment of various operations. An additional $50 million in further expense reductions is planned for 1999, to support operating income targets.

"Agricultural equipment sales continue to be impacted negatively by weak commodity prices and excess global surpluses of commodities. These have resulted in lower farm income in several regions throughout the world," stated Robert J Ratliff, AGCO's Chairman and Chief Executive Officer.

"In particular, there has been a sharper decline in the North American market, compared to the first half of 1998, than we anticipated in July. Company retail sales in the third quarter in North America have declined approximately 10% from prior year sales. Currently we are forecasting 1999 industry sales to be 15-20% below 1998 levels in North America. In addition, the economic turmoil in several Latin American countries has created an uncertain demand for agricultural equipment products in the near future, and we are conservative in our forecast of 1999 industry demand in these countries."

As a result of the current forecast of reduced retail demand for equipment in North and South America in the second half of 1998, and reduced production schedules to maintain balanced dealer and Company inventory, the Company anticipates that sales in these areas will be below prior estimates. This is expected to have a negative effect on prior earnings estimates for the year. The Company now estimates that 1998 earnings could be 40-45% below comparable 1997 results excluding non-recurring charges.

"The significant adjustments to production and operating expenses that are being made at AGCO will position the Company for strength in 1999," Mr Ratliff stated.

"Our current actions demonstrate AGCO's fundamental capability to flex with changes in industry demand and maintain reasonable profitability. We continue to believe that the long-term industry fundamentals are solid and reflect a continuing need for agricultural productivity through technologically advanced equipment and processes."

AGCO Corporation, headquartered in Duluth, Georgia, is a global designer, manufacturer and distributor of agricultural equipment and related replacement parts. AGCO products are distributed in 140 countries. AGCO offers a full product line including tractors, combines, hay tools, sprayers, forage equipment and implements through more than 8,500 independent dealers and distributors around the world. AGCO’s products are distributed under the brand names AGCO®Allis, Massey Ferguson®, Hesston®, White, GLEANER®, New Idea®, AGCOSTAR®, Black Machine, Landini, Tye®, Farmhand®, Glencoe®, Deutz (South America), IDEAL, Fendt, Spra-Coupe® and Willmar®. AGCO provides retail financing worldwide through its Agricredit joint venture. In 1997 AGCO had sales of $3.2 billion.

Safe Harbor Statement

Statements which are not historical facts are subject to risks which could cause actual results to differ materially. The Company bases its outlook on key operating, economic and agricultural data which are subject to change including: farm cash income, worldwide demand for agricultural products, commodity prices, grain stock levels, weather, crop production, farmer debt levels, existing government programs and farm-related legislation. Additionally, the Company's financial results are sensitive to movement in interest rates and foreign currencies, as well as general economic conditions, pricing and product actions taken by competitors, production disruptions and changes in environmental, international trade and other laws which impact the way in which it conducts its business.

Judith Czelusniak, Vice President Corporate Relations (770) 813-6044
Michele Howard, Director Corporate Finance (770) 813-6082


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CWN / Business / AGCO / Press Releases / 7 Oct 98

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