Here’s how John Deere and Hitachi partnered on excavator production

John Deere and Hitachi celebrate a 30-year North American excavator alliance

The first John Deere 200LC excavator to roll off the production line now welcomes guests to the Kernersville, North Carolina factory where it was created.

The machine is also the first excavator built by the Deere-Hitachi Construction Machinery Corporation, a joint venture that is celebrating its 30th year. (Deere-Hitachi staff are still trying to locate the first Hitachi machine built in Kernersville).

“Most joint ventures on average last six or seven years, so this has been a very positive thing for both companies,” said Jonathan Chase, president of Deere-Hitachi Construction Machinery Corporation.

The partnership between Deere and Hitachi dates back to the 1960s, when both companies were looking for new avenues to increase distribution. Deere was looking for distribution for its agricultural machinery in Asia, while Hitachi wanted to expand its excavator presence in North America. Both companies agreed to assist with distribution in their home markets.

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By 1983, the arrangement grew into a more structured alignment for excavators. They agreed to source the machines from Japan, and sell the excavators under the John Deere brand in the United States. However, the agreement didn’t fully meet the companies’ needs.

“They said ‘this isn’t being all that effective and efficient because of logistics costs, and the fact there were other requirements from the North American market’,” Chase said.

The Kernersville excavator factory would open its doors five years later, and the Deere-Hitachi Construction Machinery Corporation was created.

“In the beginning, it was really just the booms and arms that were fabricated here, all the rest of the machines were in Japan,” Chase said. “That went well, but we said we need to do more. There’s more integration we can do and we can lower costs.”

The North American partnership would continue to evolve, with Deere-Hitachi eventually sourcing the required components and completing all necessary fabrication and assembly in North Carolina.  Building the machines in North America, now allows the company to quickly respond to domestic orders as well as easily incorporate features required for the 13 to 47 tonne excavator market.

The joint venture is split 50/50 between Hitachi and John Deere.

Chase explained they’re able to “learn a lot” from their parent companies.

“Deere brings strong customer support, dealer channels, parts distribution and understanding of the needs of the North American customer,” Chase said. “Hitachi brings the global excavator leadership, scale globally and expertise within hydraulics.”

As well, Deere-Hitachi tackles more than the manufacturing of machines.

“We also are the financial importer of all of these products,” Chase said. “Even the mining equipment will flow through Deere-Hitachi.”

Furthermore, Hitachi, John Deere and Deere-Hitachi all contribute to the engineering of the machines.

“They all work together to take the global design and bring it to the North American market,” Chase said.

The factory

Today, the factory has grown to more than 92,900 square metres and employs more than 800 people. The staff includes 240 welders, as well as 32 robotic welders that complete about 65 per cent of the welding work. On average, the factory will cut more than 2.7 million kg of steel a month.

However, welders are becoming difficult to find.

“In the same way you can’t find operators, we’re in the same boat with welders,” said Tony Smits, human resource manager for Deere-Hitachi.

To ensure stability in the work force, Deere-Hitachi has partnered with eight nearby community colleges to advance welding skills in the region.  To assist the schools, Deere-Hitachi ships its scrap steel to the colleges.

“They cut it up and ship it back to us,” Smits said. “That way they get experience on thick plate steel. There’s a good stream of welders coming in now.”

New employees at the factory must complete several weeks of training before working independently, including one week of classroom training, two weeks in the weld lab and one month on the factory floor with a seasoned staff member.

“It’s righty-tighty, lefty-loosy. It’s those things we used to take for granted. But today, not everyone has those skills,” Chase said.

An excavator takes about eight days to build and every unit leaves the factory with a birth certificate.

Deere-Hitachi has also expanded their partnership outside of Kernersville. In 1998, they bought out another company to create Deere-Hitachi Specialty Products in Langley, B.C., which produces purpose-built forestry machines.  This created an industry first for manufacturing purpose-built forestry excavators, with a focus on 26 to 46 tonne forestry swing machines.

Four years after that, the partnership lead to another collaboration around sales and marketing.

“Instead of both companies marketing excavators, they combined together to manage the channel side and sales and marketing,” Chase said.

As well, the two companies formed another joint venture in 2011 to provide machinery to the Latin American market. Serving Latin and Central America, Deere-Hitachi Brazil produces 13- to 35-metric ton excavator models.

John Deere and Hitachi also recently opened a new 10,683 square metre regional parts distribution center in Miami for the Latin American market.

“Our real model in all of this is we’re partnered to give choice to the customer,” Chase said.

“Be it choice in certain product features between the brands or the dealer you’re comfortable doing business with.”

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