Good morning. My name is Tami Zakaria. I'm the head of U.S. Machinery, Engineering, and Construction Equity Research at JP Morgan. Welcome to this fireside chat with AGCO Corporation's team. I'm delighted to welcome Chairman and CEO, Eric Hansotia, and SVP and CFO, Damon Audia. I will start off with some prepared questions, but we will take questions from the audience in the last 10 or 15 minutes of the presentation, and those who are listening to the webcast, you can also submit questions virtually, and I will read them out. Before I begin, for those needing an introduction, AGCO is one of the largest manufacturers of agriculture equipment globally. It recently formed a joint venture aimed at precision ag products and services with Trimble. So we will talk about these more, so let's get started.
Hi, Eric and Damon. Welcome.
Thank you, Tami. Good to be here, and thanks for all the participants today.
Great. So given that, in this room we have a lot of tech and media-focused investors, can you start by giving us a brief intro to the company and the top strategies you're focused on coming off of a record sales and profitability year in 2023?
Yeah, very good. So maybe just to start at the beginning, you know, let's talk about the industry, and then we can talk about our company within the industry. The main problem that farmers are faced with is that they've got a lot of pressure on them to increase the amount of grain they produce, we call that yield, while using far less inputs. Why more yield? We're going from 8 billion people to 10 billion people over the next couple decades. As economies mature, they add more meat into their diet. That's a multiplier on the demand for grain. And then the third one is more use of biofuels: ethanol, sustainable aviation fuel, other things like that. All three of these are engines for needing more grain out of the world, and yet there's no more land.
And so the farmers have to be more productive, and at the same time, society's saying: "I don't want you to use so much fertilizer, pesticide, herbicide, and things like that, and diesel fuel." So the only way to solve that equation is through technology and being more precise on every piece of land that they operate, to be able to be more efficient. And so that's the heart of really our investments. Our strategy is around what we call precision agriculture. So we've raised our engineering budget by 60% over the last few years. We've bought six tech companies. We just closed on the deal that Tami talked about, the largest agtech deal in the history of our industry, where we formed this joint venture with Trimble, to form what we call PTx Trimble, Precision Technologies Multiplied.
We're bringing all that together to be able to rapidly automate features on the machine, so that the machine can sense its environment and take over the complicated task for the farmer, essentially go into autopilot for that, that complicated thing. Manage the depth of the planter, manage the spacing of the planter, seeing weeds and differentiating those from the plant and spraying only the weeds. Those are all tools that we're coming to the market. We do so in a differentiated way in that not only do we put those on our own machines, our brands of Valtra and Massey Ferguson and Fendt, but we've got this whole technology business, that's focused on retrofit. And essentially, that's where we put a technology module onto a farmer's existing machine.
It may be a 5-year-old planter or an 8-year-old sprayer, and ours is very different than anybody else's in we serve every brand out there. So our technologies are for the mixed fleet, and that's a core focus. One of the other strategies is something that we call FarmerCore. So a big chunk of what we're doing is on precision ag and serving all farmers. Another differentiator is on what we call FarmerCore. It's a distribution strategy, and essentially, our industry has had 100 years of brick-and-mortar model, where the farmer has to come into the store to research the machine, buy the machine, get their parts, do their service, all of it.
Well, like many brick-and-mortar industries, the customer finally says, "I want something more convenient." And so we've designed a way to flip that 180 degrees, where instead of having the farmer come to the business, the business goes to the farmer. And so we use connected machines, remote monitoring, and then we buy these really nice service trucks with our dealer, the dealer buys them, and we do all of the work on the farm. So it's digital tools, service trucks, and an on-farm first mindset that results in essentially the business coming to the farmer, and the experience is, instead of going to the mall, the experience is much more like Amazon. So those are just a few things to kind of set up the discussion for today.
Perfect. That's very helpful, Eric. So we will go into precision ag, in more depth because I think it's probably the next frontier for the industry. But I do wanna spend some time on some, some of the things you've done great over the last few years. One is Fendt. Fendt has seen, spectacular growth in North and South America over the last five years. As, as the ag end markets are slowing now, after the peak we've seen, how is your strategy shifting to help the Fendt brand grow even in a down cycle?
Yeah, just again, to maybe set the stage, Fendt is our very premium brand, so the marketplace would say that's the best of the best of anything in the marketplace. It's for the most demanding farmer with the newest technology, the highest quality, the best support from the dealer network. Historically, say five or 10 years ago, it was fundamentally a tractor business in Europe. Well, we wanted, a nd the reason for that is that those tractors were designed in such a way that they didn't fit the farming practices in North and South America. The tread spacing of the, spacing of the wheels didn't fit down 30-inch rows that farmers do in North America, s o we had to fundamentally, about five years ago or more, a little bit more, we, we said, "you know what? We're gonna change our strategy.
We're gonna make this a global business, and we're gonna make it full line." And what that means is, instead of just tractors, we're gonna serve the farmer all the way around the cropping cycle, from planting, to spraying, to harvesting, and tractors. So we redesigned all our tractors to be not only suited for Europe, but also suited for everywhere around the world. We've launched a brand-new, ground-up planter program. We did the same thing with the combine, clean sheet of paper combine, and redesigned our sprayers to fit with the Fendt platform. So now we've got the best-in-the-world tractors, the best-in-the-world planters, combine, and sprayer, all earning the right to carry the Fendt badge, full line of equipment that we're taking globally. Now, when we come into a market, dealers are super excited to be able to carry this line.
It's like, "well, hey, I'd love to carry the best of the best." So we are very cautiously, step by step, allowing one store at a time. So a dealer may have 10, 15, 25 stores. We only turn on one store at a time once they've met those very stringent requirements of being a Fendt dealer. We've gone from about three or four years ago, we were at 40% of the industry coverage. Now we're at about 75% or 80% of the industry is covered, on our way to about 90%, 95% over the next couple of years. But we've got a lot of penetration yet to happen, a lot of market share to grow. We've been growing steadily.
When you combine North and South America, we were about $350 million in sales back in 2020. Last year, we were about $1.4 billion.
Perfect. Do you have any plans to grow it to a certain number over the next, you know, three, five, seven years?
Yeah, the growth rate is overachieved our targets. We're two years ahead of our plan when we started the program. So we're very pleased with what we've done so far. We expect at least another doubling going forward. For example, like in North America, we're roughly 10% large ag market share. We aim to get to 20% in short order. And our trajectory and growth plans, we have high confidence that that'll happen.
Perfect. I don't wanna miss the other two brands, Massey Ferguson and Valtra. Tell us about those two. Did those grow in line with the industry over the last few years? The reason I ask that, maybe sometimes some of your competitors say that your Fendt growth, Fendt brand growth came at the expense of your own Valtra and Massey Ferguson brands. So how would you respond to that?
Well, we reset our strategy back in 2020, rolled out in 2021. As a precursor to the overall strategy redesign, we did a brand refresh and said, "let's get super clear on what position in the market each brand plays." Massey Ferguson became the global, straightforward, and dependable brand, and Fendt clearly was gonna be our premium brand. They're playing very different positions in the market, competing for different customers with different products, different value propositions at a different price point. So they fundamentally go after a different, different customer. If you look at that was the intent and the plan and what we've been executing to. If you look at the result, when you add all three of our brands together, we've grown, clearly.
Fendt has grown the most, but, but Massey and Valtra have also grown, just a little bit less. If you compare that to our competitors, you can see what's been happening here. You look at the growth rate over those three years, and AGCO's clearly taking share.
Perfect. So let's talk about the newly formed JV, joint venture, PTx Trimble. What are the distinct brands that make up this JV? What types of products and services does this JV have for farmers right now?
Yeah, I'll start with this, kind of the mindset. First of all, we have a very different perspective on our technology business. So I talked about technology that feeds our machinery business, what goes in our tractors, and combines, and sprayers. That's somewhat common to our competitors. But in parallel to that, we've got this whole retrofit technology business, where we'll sell a technology module direct to a farmer, where they upgrade their existing machine. So they could take a Brand X 5-year-old planter or a brand Y 8-year-old sprayer and put this technology module onto it that now has sensors and onboard compute, and it now has the ability to do a new feature automatically, put something in autopilot that was complicated for the farmer. We do this for all brands of equipment through deep, deep into the life of the machine.
Some of our competitors have seen our success, seen how much traction it's getting, and they're saying, "yeah, we're doing retrofit, too." But the little bit that they're doing is on their own brand of equipment for a couple of years back through their machinery channel, the same channel that's trying to sell a brand-new combine or sprayer. We have a completely independent channel, parallel and separate from our machinery business. Our machinery channel has very large dealers. We want them to grow to scale, have multiple dealers, whereas our tech business is much more agronomy-focused and tech-focused. Those folks go out to the farm and assess a problem that the farmer doesn't even realize that they have and then put the technology on it. So that's kinda what we're trying to achieve and how we've structured it. Separate channel.
Trimble was the only company that had the same DNA. They also served the mixed fleet. They had a few different brands: Trimble, Müller, Bilberry, all kind of now melting together under this PTx business. AGCO had several businesses that we had: Precision Planting. We bought six tech companies over the last while, Appareo, Headsight, and then we also contributed JCA. All of those businesses are coming together. We thought, this is the time now, critical scale, we want to bring that together, simplify it, and it's all called PTx, Precision Technologies Multiplied. The multiplication factor we can have on the productivity and the profitability of the farm by bringing this technology to the farm.
Perfect. Before I move on to my next question, just a reminder to those who are listening online, you can submit questions via the website, webcast link, and I'll pose it to Eric and Damon to answer. So, Eric, my next question: how does PTx Trimble position you long term? Let's think long term. So long term, how does it position you versus your competitors? What are some of the synergies or dyssynergies that you expect along the way?
Well, the answer is we are and will continue to grow the lead in being the industry leader in selling precision technology to the mixed fleet. We wake up thinking differently than anybody else in the industry does. So that's clear. Now, what are some of the pieces? If you look at what has to come together, our last few years' focus has been automating these features on the machine, like I talked about. Taking a complicated task, creating sensors and onboard compute, and having the machine do that task for the farmer. One by one, we've been automating task after task because ultimately, there's a lot of discussion about autonomous machines. Well, there's not a lot of value for the operator until you've automated all the things the operator had been doing.
So that's why our focus in the short term had been, let's automate all these things that the operator's been doing. That provides value to the farmer today. They can do a complicated thing way better, more, really more effectively. So that's what Precision Planting focus has been. JCA was a leader in autonomous machines. They've been serving multiple companies on autonomous, and Trimble is an absolute leader in guidance. They do other things as well, but that's their core. Well, now you've got all three of these things on, in the same camp. Great at guidance, which is the core of autonomy, great at leveraging that into autonomous solutions, and automating all the features so that the farmer gets the most value out of it.
Doing all of that with the mixed fleet mindset, not only on the machine that we sell to our through our brands, but the mindset of selling to almost 200 OEMs. You know, some of our competitors sell to one or two OEMs. We sell to almost 200, which is essentially anybody who's anybody in the marketplace buys our technology. And then thirdly, selling directly to the farmer in the mixed fleet. So it's a different setup, setting up through a different channel with a different mindset, with a different outcome, and that's the industry leadership position in precision ag for mixed fleet.
Great. So I remember, I think a couple of years ago, you had put out a target that you want to launch fully autonomous crop care solution by 2030. I think one of your larger competitors also has the 2030 target for fully autonomous crop care solution. So is that still the target? That's question one. And question two, with JCA, Trimble, Precision Planting, you have different things, like, who are great at different aspects of precision ag overall. But do you see any gaps in the portfolio? And would you have to sort of go out in the market and, you know, fill those gaps to enable a fully autonomous crop care solution by 2030?
Well, the target we set was actually prior to the JV with Trimble. So all that's done is actually build our confidence that we can get there more effectively. We'll be in the market at the end of this year. Last year already, last summer, we had a field tech days. We showed our autonomous machines running to investors and the media. We'll be doing that again this summer, at the end of June. We'll be already bringing to the market an autonomous retrofit kit. Again, you can think of taking your existing tractor, putting this kit on it, and taking that tractor of today and making it autonomous. We think that's the way that the market will adopt this type of feature, as opposed to buying an autonomous machine from the factory. That's the way guidance happened back in the early 2000s.
It was a retrofit approach. So we're still targeting 2030 for solutions all the way around the cropping cycle. Having said that, our main investment is automating features. We think every farmer can take advantage of that. Some farmers will probably go the next step and leverage autonomous machines, but we think that's probably still going to be a niche that will grow over time. But all farmers can leverage the automating of features that we're embarked on right now.
Perfect. So let's talk about some numbers. I think you've said you wanna double precision ag revenues to $2 billion by 2028. I'm curious, what kind of investments, be it in, on, in dealer network or, or, R&D, or any, in any other areas that you need to do to make that reality?
We feel we're tooled up. We've got the whole Trimble dealer network and the Precision Planting dealer network to serve the retrofit market. Really, now our focus is we have plenty of folks there. We don't have to create it. We have to now make the best of it. Leveraging, selling our precision planting technology through Trimble dealers, selling Trimble technology through Precision Planting dealers, and so on. So we've just got to make the most of what we already have. It's not really investing in creating new. Similarly, on technology, we've got a huge stable now of engineers. Between all those tech companies we bought, Precision Planting and now this JV, we've got great talent, but we've still got our AGCO Ventures, which is scanning the marketplace for small companies, maybe startups or mid-cycle, and inviting them in when that makes sense.
So we feel like we're positioned well. We've got, we've got enough on the plate. It's now about digesting it and making it perform really, really well. We've spent the last six months between announcement of the deal and closure of the deal, waiting for regulatory approval, working with a consultant and doing really detailed integration planning. 23 work streams, lots of fingerprints on it, heavily owned, ready to execute on day one, such that when we closed, the whole team is running hard, running on innovation, running on managing the channel, running on continuing to escalate or elevate our game with our OEM partners.
Perfect. So along the same line, I think you've also said you want to double EBITDA of Precision Ag by 2028. What would be the building blocks of that? And from a margin perspective, do you expect Precision Ag margins to get better from where it is today?
Precision Ag is a high-margin, high-growth business today. Over the last 5 years, our tech portfolio has grown, you know, around 20%, CAGR. It's been having margins roughly double the average of our company. So it's already a high-margin, high-growth business. We don't necessarily need it to grow higher in margins. We just now wanna feed it and feed the innovation pipeline, get the distribution channel performing well, and really just scale what we have. So, yeah, 'cause the other side of it is that we wanna stay very affordable for the farmer. Our whole intent when we take these retrofit solutions out, is that when they buy one of these tech modules, that they get a payback on the farm.
Our target is one year, maximum two, so that the benefit they get in higher grain output or lower input costs pay for the technology module quickly. So we don't wanna change our pricing strategy too much. We'd rather keep giving a really great deal for the farmer, but grow faster.
Perfect. So, for us to understand better, can you talk about some new products that you have launched or will be launching over the next few years that would leverage all these Precision Ag technologies and, you know, would be more, s o, so that we can actually, like, get a sense of what, what to expect and what's to come?
Yeah, I'll talk about some that maybe are interesting to the audience. One is we've automated the entire soil sampling process. So for the last 100 years, you've had to manually go out, do it, take a probe, put it in a bag, send that off to a lab. 28 manual steps that happen between when you're in the field to when you get it back. You get it back weeks later, it's very expensive, and it's not very accurate. So that means that, why does that matter? That's what the farmers use to make their fertilizer purchases and their prescriptions that go down, as well as a lot of times, their seed strategies. Those are the two biggest costs for the farmer, and only about half the fertilizer the farmer puts down gets absorbed by the plant. So there's this huge waste sitting there.
We've automated the whole soil sampling process, where we've created our whole automated lab. Probe goes in, geo-stamps the sample, goes into the lab, automatically processes the sample, gives a super accurate, low-cost sample that's that allows farmers to get much more precision. Second one will be the autonomous solution of retrofitting onto a tractor, making an automated grain cart. We showed that last year already. When the combine's in the crop, instead of coming out of the crop, they can summon the tractor. Nobody's in the tractor. It comes around to the combine, locks in, so the two are running in parallel. The combine unloads on the go. When their bin is empty, it says, "Release." The tractor drives away, goes off to the side of the field, and unloads, all without an operator in the cab. That's another one.
Third one would be targeted spraying. We'll be launching that this fall, where artificial intelligence library identifies the difference between a weed and the crop, like a corn plant or a soybean plant, identifies what kind of weed it is, then summons the right kind of chemical, depending on how big the plant is, the right amount of chemical, sprays only the weed. You can save 70% of the chemical. That versus what farmers do today, all farmers spray the entire field, regardless of where the weeds are or where they aren't. So those are just a few examples, but there's dozens and dozens of projects that the teams are working on to automate everything that the operator is doing and do so in an, in a, in a kind of a autopilot way.
Perfect. I know AGCO is big on retrofit. One of your bigger competitors has been stepping up efforts in retrofit. They recently announced the launch of a kit at a very affordable price. So big picture, how do you, how does your retrofit approach differ from competition out there?
This is really important. I think there's the same word meaning two very different things when the two companies use it. It couldn't be more of an apple and an orange. When we say retrofit, we mean a technology module that can go on to any brand of equipment that's in the market, deep into the age of the equipment, and it's serviced by an entirely different dealer channel, that all they do is retrofit. They're agronomy-based and technology-based. The competitor is creating technology kits that only go on their own brand of equipment, only back a couple of years, and they're selling it through their machinery dealer. Well, when I'm a when I'm on that.
If I'm an employee of that dealership, I can sell a $1 million combine, I can sell a $650,000 sprayer, I can sell a $400,000 planter, or I can sell a $40,000 technology kit. What am I gonna lean to? And so the market has never had much luck in trying to sell this concept through a machinery dealer. It just goes counter to the incentives. That's why we've got a whole separate channel with separate people trained with a different focus, and that's all they do every day, is go to the farm, look at the crop, pull it up, look at the root ball with the farmer, and say, "here's the problem you've got. Let's go right to the, literally, the root of the issue," and say, "you've got a depth control issue.
You've got a spacing issue. You've got a fertilizer management issue. Now let's talk about what we could do to change that." So fundamentally different.
Got it. So we have about 10 minutes. I'll open it up to the audience, but before that, I do wanna ask one more question. The 12% mid-cycle EBIT margin target for the company that you spoke of, before you had the Trimble joint venture, post the transaction, should we think about the mid-cycle margin target differently?
Yeah, so, we'll certainly are excited about this topic. Last year when Damon and I and Greg were in New York, we talked about how we had cleared 10%. We set our sights at 12% by 2026 at mid-cycle. Last year, we overachieved 12%, but the market was a little bit hot. It was maybe 105% of mid-cycle. We are absolutely committed to the 12% at mid-cycle, and our portfolio changes during 2024. We're bringing in the JV, high tech, high growth business, high margin, and we're under strategic review of potentially exiting our Grain & Protein business, lower margin, lower growth. Once all that settles out this year, when we come back in December, we'll definitely be able to land on a specific number with you.
But we have high confidence in what we said, and it probably will go north of there.
Perfect. I think we have a question here. I do have a question online, too. I'll read it out later.
Okay, good.
I probably have more than one.
All right.
There seems to be a whole bunch of positive benefits that can happen when you attach yourself into the across an entire fleet of equipment in on a farm. One potentially being that you could pull through on somebody else's equipment once you start harvesting data on the old equipment. Are you seeing any instances where people are saying, "once I have your devices on my equipment," that they go on the next upgrade cycle of their equipment, that they're going, "I wanna get this data all in one place from one set of systems," and is that happening now?
Yeah, absolutely. So our retrofit channel, we're very careful not to. We wanna be brand agnostic in that channel. So there's no AGCO on the business card, no AGCO on the hat, nothing like that. It's, we're here to just serve the farmer. That's why the channel is separate. But once that farmer gets comfortable with that technology, and they're saying, "wow, I love what this planter does for me, and I upgraded my seven-year-old planter, but now my next cycle around, I'm ready to buy a whole new one. I'd like to buy this technology from the factory." And so then they call AGCO, and they buy our new Momentum planter that's got it all turnkey from the factory with all the stuff that they had, that they bought retrofit last time.
Do you have some sense of that's happening 10%, 20% of the time on the-
Uh-
On the non-AGCO brands?
Don't have a great number on that. Lots of anecdotal stories that it's happening more and more frequently, especially as our technology is now getting more widespread. You know, when we bought Precision Planting, our tech business was, you know, between that and our Fuse, it was maybe a $200 million business, and now it's $750 million. So from 2017 to now, it's grown significantly. So our penetration is getting deeper. But I don't have an exact number for you.
Okay. If I can ask a few more, I don't know if anybody. It's also starting to be a mental model in some respects that a tractor or some sort of, you know, combine or something could be, you know, almost like the equivalent of a razor blade and a handle, where the blade is the data now.
Right.
Is there almost as much value that you're trying to pursue on the data side of this business now, as opposed to just in the equipment side of the business?
Yeah, we've got. It's an interesting question, and value shows up in two ways. Value to be created is certainly high. Let me, the reason why a distinction is the subscription model hasn't really taken on the farm yet. So although this data is coming off the farm, it's adding value, we can create insights from it, farmers aren't so much paying for that yet, and we don't know that they will. They don't like subscriptions. They like to be able to buy it. When they have a good year, they don't like paying taxes, so they wanna buy a machine and all the stuff that goes with it, finance it, and have it done. Then in the lower year, they wanna minimize their ongoing fixed costs. So that's why I kinda bifurcated the answer a little bit.
Value from a subscription has been moderate. Most is bundled in with the machine either the technology package or the whatever, but we're getting more and more insights out of the data that we can drive value for the farmer.
I think we have one more behind you.
Thank you. Could you just talk about kind of the cycle right now and where you see us? And I think there's been some stories of, you know, over inventory at dealers, maybe not yours, but kind of across the U.S. and maybe beyond. So just where you, k ind of maybe what inning we're in there?
Yeah. We use this model, it's called a Shareholder Value Creation Model. Essentially, that's a term that just means on the vertical axis is profitability, so, IFO or return on net assets, and the horizontal axis is volume, industry volume. In the middle is the average of the last 10 years of the industry, so that would be 100%. To the right of that would be a strong year, when the market's hot. To the left of that would be market's cool. The last couple years were hot markets, so we were over 110. Last year, we were around 105, 104 of mid-cycle of the 10-year average. So people were buying more than normal. In every cycle, there's one big kind of reset year where it adjusts a lot.
This is the year we're in, so it's going from 104, 105, down to 93-95. You know, we'll see where the year ends up, but it's at least a 10-point swing, maybe 12-point swing, of the average, of the industry. So we expect that's what's gonna happen this year. Usually after that, it doesn't take another, y ou know, there's one big year of the change. It may stay there a year, maybe two, but then we expect, it'll come back up, so, a nd, and crop prices over the last 90 days have already come back up. So it's, the big resets happened. Now, going forward, it's a little less predictable, but we don't, we don't expect a big move after this reset year. It, not a big move down, at least.
Really quickly, could you comment on why you guys were interested in kind of the JV instead of just AGCO?
Yeah. There's two or three reasons. One is, the way Trimble had operated is that they had engineers throughout their business that were coming up with new innovations. Could've shown up in mining, could've been in construction or transportation, then that idea would be shared across the verticals. We want to be able to retain that. Number two, Trimble saw the upside of this opportunity. They wanted to be part of it. And number three, because this is a people business, we're not buying a big factory with machines in it, we thought it would help with risk mitigation of retaining the talent. We've kept all the people, all the engineers and salespeople, and the culture fit is really great. So right now, we feel like it's a good model for us.
We have control over product, channel, and leadership, but it's a nice sharing with, with Trimble.
Any more questions in the room?
The last upcycle, you guys have had quite a nice pricing tailwind, I think the industry as a whole. Could you maybe talk to your views or, or strategy on how this is gonna look going forward? Maybe briefly touch on, you know, going through the down cycle, but more importantly, you know, when you guys are back at mid-cycle, how should we think about pricing strategy?
Well, all the way through, even when there was a lot of inflation in the market, we always were able to cover all cost up with price up. So we were price-cost positive all the way through, and we still are. And that's the way the industry has historically performed. The last time there was a big cycle move, the industry was able to build all of the demand that was there, and so it was a very high peak that then came down more dramatically. This time, there was a lot of demand in the market over the last three years, but we and all of our competitors, the whole industry, couldn't supply it because of COVID. So we said at the time, "boy, this is a major hassle, and it's unfortunate we're not able to meet all this demand, but maybe it's healthy.
Maybe it's gonna clip this peak and push it out, and we believe that that's absolutely what's happening. It's made this cycle where there wasn't nearly, y ou know, all, even during those hot years, the average age of the fleet is just back to average. It had gotten old. Usually, when you have hot years, it gets young. It gets below average in terms of average age of the fleet. Now, it's just really back to average. So I think we're in a healthy position. One of the kind of comments somebody made was about inventory in the North American market. I didn't click. In all markets, we feel we're pretty much at target. We've got a couple spots where we're still a little bit low, like Fendt in Europe.
A couple spots we're a little bit high, small horsepower or low horsepower in North America. But overall, big picture, we're about where we wanna be. We're underproducing retail demand because the market is cooling, to make sure that we don't have the channel, get beyond where we want it to be. And I think the industry in general is doing that and behaving in a pretty, disciplined and proactive way. So I think that, that gives us confidence that pricing will be, you know, managed in an appropriate way by the industry.
I think we're out of time.
Okay.
Thank you, everyone, for joining, and thank you, Eric.