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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Caterpillar, Deere Gear Up For Another Kind Of Tractor Pull Leading Manufacturers Compete For Market For Tracked Tractors

Toni Clarke Bloomberg Business News

John Barrett, a Texas cotton and sorghum farmer, tends to wax evangelical about the rubber-tracked Challenger tractor he bought from Caterpillar Inc.

Unlike traditional tractors with tires, he says, his Challenger glides over soggy soil without getting stuck, thanks to the traction from its body-length flexible tracks. It also has more pulling power relative to its horsepower and reduces soil compaction, Barrett says.

“Time is money in farming, and when we’ve had a rainy spring, if you can get into the field and start planting with your Challenger, those days can mean the difference between profit and loss,” said Barrett, who farms 3,500 acres north of Corpus Christi.

Such testimonials have Caterpillar feeling like a farmer with a bumper crop coming on. The company best known for earthmoving machinery has been the sole manufacturer of rubber-tracked tractors, and is counting on them to make it a serious competitor in agricultural equipment.

But it appears the company won’t have the field to itself much longer. Rivals Deere & Co., the world’s largest agricultural equipment maker, and Case Corp. both are laying plans to introduce their own tracked tractor lines by next summer.

Caterpillar is none too happy about the imitators, especially the mighty Deere, whose far-flung dealer network controls about half of the U.S. farm tractor market.

Last week, Peoria, Ill.-based Caterpillar filed a federal lawsuit against Deere charging it with infringing upon a Caterpillar patent it received for its rubber-tracked tractor in 1994.

“This is war,” said Howard Hicks, vice president of marketing at Holt Co., a Caterpillar dealership in San Antonio.

At stake is an estimated $5 billion worldwide market for tractors of 150 horsepower or more. Caterpillar believes an increasing share of that market will shift to tracked vehicles over the next decade, even though the Challenger can cost as much as $150,000, or 25 percent more than a comparable tired tractor.

“The whole industry is going to realize that there are huge advantages to this technology in terms of compaction, traction and flotation,” said Richard Benson, Caterpillar’s vice president of diversified products. “If there wasn’t something of a cost disadvantage, the whole world would be on tracks today.”

Deere disagrees. It says traditional tractors with tires will remain the dominant market and that the tracked versions will appeal only to a limited niche market.

“Both tires and tracks have their respective advantages and limitations,” said Terry Mosier, marketing manager at Deere’s tractor manufacturing plant in Waterloo, Iowa.

Deere takes issue with Caterpillar’s claim that the tracks reduce soil compaction, which prevents nutrients from getting to crop roots.

“A study by Ohio State University and all of our internal studies show that if you use the proper sized radial tire and the correct inflation pressure, you do at least no worse than a track and in many cases produce less compaction,” said Jack Wiley, principal engineer at Moline, Ill.-based Deere’s technical center.

Still, there’s been enough demand from customers to spur Deere into producing its own tracked vehicle - one which looks almost identical to Caterpillar’s and feels about the same to drive. If customers insist on a tracked tractor, let it be John Deere green rather than Caterpillar yellow, Deere officials say.

Caterpillar declined to disclose its current market share. It concedes, though, that of the country’s 1.9 million farmers, only about 100,000 operate farms big enough - 1,500 acres or more - to justify investing in a Challenger or similar vehicle. In Europe, average farm size is less than 100 acres, so the potential for sales there is also small.

Still, “I would think that tracks will get a certain percentage of the market, probably 25 to 30% eventually,” Caterpillar dealer Hicks said.

Analysts so far don’t consider the tracked tractors a serious threat to Deere.

“If Deere was successfully sued, no one’s going to change their earnings estimates,” said Jonathan Braatz, an analyst at Fahnestock & Co.

The story could be different for Caterpillar, which doesn’t make tractors with tires and whose budding tractor business could be squashed if Deere comes out with a competitive product.

“There’s more at stake for Caterpillar than anyone else in all of this,” said Bill Masterson, a spokesman for Milwaukee-based Case Corp., which also plans to introduce a tracked tractor next spring. “They’re looking to enter this market and this is their entre.” Caterpillar hasn’t sued Case, Masterson said.

The tractor battle comes as the market for agricultural machinery is expanding due to record high commodity prices, increased exports and increased planted acreage.

“For the last 50 years or so we haven’t been a particularly significant supplier of machines to the agricultural industry, although we have continued to sell the steel-tracked tractor sparingly,” said Jeff Hawkinson, a Caterpillar spokesman.

But that’s changing. In February, the company formed a separate agricultural division to oversee the manufacture and marketing of the Challengers, and dealers began hiring sales people dedicated to agricultural equipment.

“We wanted to send a message to our dealers and customers that we’re serious about this agricultural thing,” said Benson. “We’re in this business to stay.”