news NEW: Denial from Zetor! Zetor sells real estate, rents it back, production moves to India or not?

Zetor has sold the factory to a real estate company, rents it back on a 25 year contract. Production of engines and transmissions will move to India.

Yes, youve read that right: i saw such news last month, but i didnt share it untill i saw it again.

This can mean two things: A. Zetor will continue to build engines and transmissions, just the casting and machining will be done at VST and Brno keeps assembling final products, so they are in control of their final product, just like Cummins and ZF produce in China. This would mean Zetor could compete with in-house designed tractors.

or B. Brno will only be a sales office with the complete product coming from India, with Indian quality control, which will mean a death sentence for the brand...

Útlum Zetoru v Brně. Společnost prodává pozemky a přesouvá výrobu do Indie

Výrobce traktorů Zetor utlumuje výrobu v Brně. Pozemky, na kterých haly sídlí, prodal developerské společnosti a je v nich už jen v nájmu. Stávající haly nový vlastník z větší části zbourá a postaví nové, bude v nich ale jiná výroba nebo sklady. Výroba Zetoru se přesouvá do Indie.

ct24-ceskatelevize-cz.translate.goog

 

[Joachim]

Its a shame, I am so sad about this.

 

[Renze]

HTC signed the death sentence by cancelling the Maxterra in 2009.

When dealers couldnt sell farms their main tractor and saw other dealers get foothold at their customers, also offering the farms other tractors in the size of Zetor but sometimes even better priced, they knew they had to drop Zetor or die with it.

Dealers abandoning ship accelerated the drop in sales, so now we are at the stage where production has dropped so low that theres no profit to invest in R&D

The Maxterra with a Zetor engine would have sold in 2009. Dealers would have stayed, so they would have kept selling Proxima and Forterra.

Its a failure of corporate strategy that led to here.
I have felt stronger emotions about this in the past, but now, i cant even be sad. I am more like, surprised that HTC really was this stupid to make my prediction come true...

Selling real estate in order to get cashflow, and renting it back, means Zetor will be sold to VST within the decade and headquarters moved to India. Its over, boys...

 

[Renze]

To be honest, Zetor dies in Western Europe the same way as ZTS 20 years before: The sales network eroded once they were no longer actively sold through Brno, shrinking them to the point of dropping over.

HTC once owned Povaszke Strojarne, the plant that produced the UR2 transmissions. They sold it.

If they had bought the intellectual property of ZTS back in 2002, scrapped all four cylinders, scrapped the UR4 and started selling the 124-144-16445 (latest ZTS attempt because UR2 was too weak in the axle and UR4 too expensive for the limited improvements it offered: it was a UR2 with UR4 rear axle) to their dealers, they would have had plenty of time to modernise the transmission with 4 powershift steps, 750rpm PTO etcetera. Even if it didnt make them money per unit sold, it would have enabled their dealers to stay in business selling Proxima and Forterra that DID make them money... apparently they never thought this far in Bratislava...

Anyways, it went wrong from the start. So many chances they have let pass, or market momentum they have let slide. Right now, their entire organisation ground down to a halt, and weve been saying it for years, that you cant maintain a brand on only 4 cylinder tractors...

 

[Renze]

Just to explain why this move means that Zetor is done as an independent manufacturer:

The only risk free investment in the world is real estate that you use yourself: It keeps its value even in times of inflation. In production or engineering one has to take risks to gain a profit: He who takes the risk makes the profit.

What Zetor did by selling its real estate, is selling the collateral required for loans for any future investments. In other words, Proxima and Forterra production will move to India where VST will be king of the market with 140hp tractors nobody else has locally.

Then Brno will assemble tractors from German and Italian components for Western markets because without collateral, they can no longer get credit for any future developments.
But the dealers that would need to make the difference when a customer chooses between a genuine Deutz Fahr and a red Deutz from Brno at allmost the same price, are long gone so they wont sell any.

Eventually, keeping Brno open makes no sense anymore and HTC will sell the entire organisation and trade name to VST, so the brand Zetor will become like a Solis tractor in the West.

HTC just rides along as long as the boat will float. When it sinks they sell the scrap to VST.

 

[Joachim]

Obviously the rumor mill and media reports in advance (but also we here) were probably wrong about Zetor 's plans for the near future and India.
So now Zetor Tractors a.s. and in person board member Róbert Harman on 11. October 2023 in a clarifying memo to partners and customersand made things clear:

Summary of the memo (original available):

• Zetor definitely does not end in Brno (CZ)
• Zetor is not moving production to India, but is building new production there for a new series of tractors for the markets there (the Indian tractor market is now the largest in the world)
• The plant in Brno is undergoing restructuring
• From 2024, the factory in Brno is to switch to the production of new tractor models of higher quality and higher added value (M2023+ aka new Forterra series) and with this the aim is to strengthen/improve its position on the more demanding markets
• Since the new models will have neither Zetor engines nor Zetor gearboxes, the production of our own engines and gearboxes in Brno will be reduced.

I would say it was time for a clear statement from Zetor, this is now available and it sets some things straight.

What do I personally think about it?
Well, I'm happy that the scary rumors were less true than feared and that Zetor is still holding on to its Brno location. Nevertheless, I see some optimism in this, which will have to be reflected in Zetor's finances over the next 1-2 years before we can be completely happy. I really hope so and would also like the new model(s) to be well received on the market and also become more attractive in terms of price.

In sum, a positive turnaround in the news so far.[/B]

 

[Renze]

Phew... when i saw this in the media, i thought this cant be right, it must be a misunderstanding... Then i saw it again last week on another Czech website so it had to be true...

Fortunately this isnt true, because i dont think any company would survive such rigorous change of operation.
India is great at mass producing, but to produce to Western standards overnight, especially in small batches, would be a huge, huge leap, borderline impossible...

And indeed, the next two years we must wait and see whether Zetor can put up a competitive tractor with Deutz engine and ZF transmission, for a price that beats a similar equipped New Holland. If they can make that happen, they can turn things around...

 

[Renze]

Now denial also through Agroportal24h.cz

Zetor se nepřesouvá do Indie. V Brně se naopak chystá výroba nové generace traktorů

Česká televize nedávno zveřejnila zprávu, že se výroba Zetoru přesouvá do Indie. Zpráva se rychle rozšířila po sociálních sítích a zklamala mnoho příznivců traktorů této legendární značky. Róbert Harman, výkonný ředitel společnosti, v nejnovějším prohlášení vše uvádí na správnou míru.

www-agroportal24h-cz.translate.goog

 

[Joachim]

Following a news report from a Czech news outlet, a story has emerged that Zetor will move its entire production to India and has sold the production facilities. This is emphatically incorrect. The production of Stage V Zetor Tractors for the Western market will continue to take place in Brno, Zetor's home city. Since 1946, Zetor has produced here and will continue to do so. We are currently working hard to prepare production for the new generation of Zetor Tractors that will be introduced this year and next year. For example, a new generation of Zetor Forterra will be launched next year and the first Zetor Proxima Stage V models are currently rolling off the production line. Today we received the first Zetor Proxima Stage V in Goor.

Source: Zetor Benelux Facebook

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... the story around this theme goes wilder and wilder.
I personaly hope thats true what Zetor says last days - but why so late comes the dementi, months after source news from CZ News Portal?

 

[jcataclism]

Sincerely hope that's true as well, but honestly I don't bite it.
At least down here in Brazil there was never any company which has actually carried on after such changes. Usually they HAVE to say and publish that, so to calm down investors and not struggle so much to keep the cash flowing. Mostly because what might really matter is to show the branch all around and say "hey, look, we ARE here, alive and kicking!", to keep the value up - even if several investors know that's not true for long.

And I certainly don't have a good enough English vocabulary to describe a little better what I mean.

 

[Renze]

At least down here in Brazil there was never any company which has actually carried on after such changes. Usually they HAVE to say and publish that, so to calm down investors and not struggle so much to keep the cash flowing. Mostly because what might really matter is to show the branch all around and say "hey, look, we ARE here, alive and kicking!", to keep the value up - even if several investors know that's not true for long.

First of all, which version is true ? The version CeskeTelevize wrote, or what Harmann sent to its dealers ? Zetor used to have hotels, football fields, etcetera on the premises. A Dutch couple bought a large tract of land to start a camping site, the Dutch TV followed them. So Zetor indeed sold a lot of real estate for which they had no use, and sold off anything thats not core business, or isnt business at all.

So yes, every time Zetor modernises some production facilities, the new lines become more compact than the old ones and are regrouped around the main office, so they can sell the real estate furthest away. And they are expanding business in India.

Also, Zetor is investing in a new cab after 25 years (the old cab was first introduced on the 1997 Super series) you dont do that when you are afraid that you go broke.

Outsourcing high energy work such as metal casting isnt a bad idea, because European green politicians actively promote the steel industry to leave for India or China with their carbon tax.
Gearbox castings need 6 months to weather before you can machine them anyways, they might as well spend that aging time on a ship... then after two months at sea, you can magnetically test them for defects before stacking them in the rain and sun to weather on. Due to the aging/weathering required, it is also the least risky step to outsource from a supply line point of view because there is plenty of time to reject a batch without causing supply issues.

Just, having 2700 tractors a year, in four series and maybe 20 models with a dozen options, meaning 150 varieties, with technology 50 years beyond their familiarity, built in India, is sure going to bankrupt you on the warranty claims.
I really doubt mr. Harmann really said that, because every idiot knows its crazy impossible.
Sonalika is trying to penetrate the European and American market, but they have been a long time underway, and yet they still have to prove themself to professional users: So far i only see Solis tractors 20 to 40hp with a horse arena drag or a pasture drag, here in the Netherlands: VST is building similar to what Sonalika sells here: Simple Mitsubishi licenses, they are 50 years of technological development away from building a European spec farm tractor with all the electronics. Oh, and Sonalika is using a Carraro 12/12 gearbox in their 90hp model, thats hardly comparable to producing entire Forterras in India...

I mean, John Deere wanted to buy Zetor because Czechia was a low cost country... they have factories around the globe, with their premium models being made in high cost (and high skill technicians) countries like USA and Germany, while each country produces the level of technology that local customers are buying. Mexican tractors are sold in the US as economy models, Indian tractors are sold in the US as hobby tractors.

So, it wouldnt hurt if Zetor had metal casting outsourced to India, maybe even old UR1 transmissions that VST would make for the local market which Zetor could put in future Major models. I dont worry about compoments made in India: We dont know where John Deere casts the transmissions for the 6R series made in Germany, either !

However, the selling of all real estate and renting it back, is the part that worries me. I used to work for a company that went bankrupt in 2002 after the management sold the real estate to themself privately. They found out the consequence of their action when the bank didnt want to lend them any money if they didnt have any collateral for the loan, when they wanted to finance production at VOP Sternberk in the Czech Republic...

 

[Renze]

If we look at Zetors' sales program for emerging markets, which is Sonalika tractors built in India, we see the following:



The 2040 and 2050 models can be replaced by the VST-built 4511 and 5011 models. They are based (I believe) on Ford technology with 8/2 crash boxes. Since this performance class is completely taken over by compact tractors in our western world and no wealthy estate owner accepts a crash box, the VST-Zetor 4511 and 5011 are not at all interesting for us western buyers, and it doesn't really matter that they have no Zetor DNA at all.

The 60 to 75 hp Zetor Global models in India use a 12/12 synchro transmission from Carraro India.

If Zetor reworks the old 5011 gearbox (with 65mm rear axle, the Proxima has 70mm) to get full synchromesh, 12/12 gears and 540/750 PTO, and that with the 7201 engine with 3.6 liter displacement and 58 and 66 hp as well as 75 hp with a turbo, these skid units in Brno can be equipped with the Koja cabin, a Carraro front axle and, if necessary, a DOC in order to meet Western emissions laws in the 50-75 hp performance class.

Years ago, Zetor North America also sold HMT Zetors licensed in India as Zebra in the US.

In return, Brno can supply VST with Proxima CL skid units of 85 to 110 HP. This segment of the Indian market is not that big yet, so the Czech price level will likely work in the Indian market.

Whether VST would then like to replace its existing models with a 3-cylinder 5201 engine and the 10/2 sliding gear version of the 5011 transmission to achieve unification benefits or continue to produce these (Ford-based?) models is up to them . .

 

[jcataclism]

If Zetor reworks the old 5011 gearbox (with 65mm rear axle, the Proxima has 70mm) to get full synchromesh, 12/12 gears and 540/750 PTO, and that with the 7201 engine with 3.6 liter displacement and 58 and 66 hp as well as 75 hp with a turbo, these skid units in Brno can be equipped with the Koja cabin, a Carraro front axle and, if necessary, a DOC in order to meet Western emissions laws in the 50-75 hp performance class.

That, indeed, would be something really nice to see!

 

[Renze]

That, indeed, would be something really nice to see!

Yes, production in India for Western markets isnt bad: John Deere also produces in Pune, India for local markets, which are sold as low budget tractors in the West.

Just, the Indians cant build a Proxima GP or HS, the technology is too unfamiliar for them. They could build the transaxles for the CL though, in the future. Then they can also build and assemble rear axle units, to which Brno adds the powershift and powershuttle transmission.

When you look at Pauny in Argentina, they still sell a Cummins 6BT with a 10/2 transmission as base model. So there will be demand in many developing countries for a Forterra based economy tractor, if India can make them cheap enough.

I dont know what causes the huge price of the HSX, is the powershuttle just too expensive? That can be solved by deleting it.

Either way, its much too early to throw away the Forterra entirely, stripped versions of it can serve developing markets worldwide, and mass production of its mechanical components in India will make them cheaper so that they become cost attractive again here.

India just isnt up to producing and assembling hydraulic and electronic components, Brno will need to do that.

 

[Renze]

Interesting fact: In 2024, TREM Stage V emission norm will take effect in the Indian market. It is near identical to EU Stage V which means that VST-ZETOR will face the same challenges as in the Western market... Which means they need the current Stage V Forterra engines in India next year. The emission value is the same for both the 75-100hp class as well as 100-175hp and 175-750hp classes so they need a Stage V engine in the power of Proxima and Forterra, and a three cylinder variant in the 50-75hp class, with DOC/DPF just without SCR.

Off course they dont need this in many developing markets, but VST would definately want to partake in their home market, which requires the same engines as in Europe and America...

The Trem Stage V has been postponed numerous times because the Indian industry wasnt ready, but within the next few years its going to happen anyway... Solis is ready because they sell Stage 5 Common Rail engines to Western markets..

All this, makes it even more remarkable that Zetor is going with Stage 5 Deutz engines in the Proxima right at the time they need a Stage 5 engine for their Indian adventure...