Good morning. My name is Britney, and I will be your conference operator. At this time, I would like to welcome everyone to the AGCO Corporation 2008 Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (Operator Instructions)l. As a reminder, ladies and gentlemen, this conference is being recorded today, February 9, 2009. Thank you. I would now like to introduce Greg Peterson. Mr. Peterson, you may begin your conference.

Thank you, Britney. Good morning, and thank you for joining us for AGCO's fourth quarter 2008 earnings conference call. On the call with me this morning are Martin Richenhagen, our Chairman, President and Chief Executive Officer and Andy Beck, our Senior Vice President and Chief Financial Officer. During this conference call, we will refer to a slide presentation. The slides, earnings press release and our financial statements are posted on our website at www.agcocorp.com. The non-GAAP measures used in the slide presentation are reconciled to GAAP measures in the appendix to the slides. During the course of this conference call, we will make forward-looking statements including some related to future sales, earnings, production levels, market share improvements, availability of financing, general economic conditions, currency translations, foreign income, working capital, cash flow, margins, effective tax rate, interest expense, market conditions, retail sales financing, pricing levels, capital expenditures, and strategic initiatives. We wish to caution you that these statements are predictions and that actual events or results may differ materially. We refer you to the periodic reports that we file from time-to-time with the Securities and Exchange Commission including the company's Form 10-K for the year ended December 31, 2007 and Form 10-Q for the quarter ended September 30, 2008. These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. A replay of this call will be available on our corporate website. Now, I'd like to turn the call over to Martin.

Thank you Greg, and good morning everybody. Since we last spoke in December, we have seen continued slowdown in the global economy and the tightened credit markets are beginning to impact our industry, most notably, in the developing markets of Russia and Eastern Europe and South America. We continue to believe AGCO is well positioned financially, strategically and operationally to serve our customers and execute on the positive long-term fundamentals of the agricultural sector. We've maintained a high level of financial discipline and it's reflected on our balance sheet with our low level of net debt. Our strict focus on agriculture equipment has kept us less exposed to the ailing general economy. Given our overall financial health, we are comfortable that we have the right policies in place to manage our business through this current financial climate. In general, our dealers and our farm customers are in the healthiest financial condition in recent memory. Their balance sheets are strong and in most of the developed markets they continue to have access to credits. Today, AGCO Finance, our joint venture with Rabobank provides financing for about 50% of AGCO's retail sales in our major markets. AGCO Finance is well capitalized. It does not rely on the commercial paper or securitization, well I have to exercise a little more next time, markets for its funding, and it stands ready to increase its participation in financing our retail sales should other credit sources tighten. Let's turn our attention now to the AGCO's 2008 results. I'll begin my remarks on slide 3. You can see from this slide that AGCO had a strong finish in 2008 with both record sales and record earnings for the full year. Our sales increased over 23% compared to 2007. Our margins expanded nearly 100 basis points, and earnings…

Thank you, Martin. Good morning. Slide six details AGCO's regional net sales for the fourth quarter and full year of 2008. The bar graph shows our regional sales performance excluding the impact of currency translation. For the fourth quarter, currency translation had a negative impact of approximately 13%, and for the full year currency translation had a positive impact of approximately 4%. If the currency exchange rates hold, currency translation will continue to put pressure on our 2009 sales. During the fourth quarter, Europe, Africa and Middle East segment had sales growth of approximately 9% excluding the impact of currency translation compared to the fourth quarter of 2007. The growth in our Europe, Africa, Middle East segment in the fourth quarter was led by France, Austria and Central and Eastern Europe. North America sales increased approximately 17% compared to the fourth quarter of 2007 excluding currency translation impacts. Strong sales results in combines, hay tools and sprayers contributed to the improvement. Full year 2008 sales in North America increased approximately 21% excluding the impact of currency. Fourth quarter sales in South America improved approximately 18% from 2007 excluding currency. Strong market demand in Brazil drove most of the increase. Sales in our Asia Pacific segment decreased approximately 4% in the fourth quarter of 2008, compared to 2007 excluding currency. Despite strong market demand in Australia and New Zealand, shipments from our European factories were delayed and our wholesale revenues were impacted. Part sales for the fourth quarter of 2008 were $218.4 million, up 7% compared to the same period in 2007 after removing the impact of currency. Growth was strongest in our South American market. For the full year of 2008, part sales were $1 billion compared to $883.6 million in 2007, up 14% compared to 2007 excluding the impact…

(Operator Instructions). Your first question comes from Ann Duignan with JP Morgan.

Hi, good morning, guys.

Good morning, Ann.

My question is based on slide nine, where you said that your free cash flow was impacted by customer credit. Could you just explain what that is and what we should look for, going forward, in that category?

What happened was we had produced tractors that were just in for certain markets, particularly, Eastern Europe and Central Europe that we did not ship because of lack of credit availability in those markets. So we were effectively holding inventories into the year that we had previously had demand for but chose not to ship or couldn't ship because of credit issues. Some of that should probably be able to get sold in 2009 and other parts of inventory will work at diverting to other markets as well.

I mean were these products coming out of Germany in particular or were they coming out of North America?

It'll be mainly European factories.

Mainly European factories, okay. And then in that context, just as a follow-up, you had noted in December that you'd expect the pricing to be up 4% to 5%. Now you're saying 4%. Can you talk about that a little bit? Is that just a mix change and you're not shipping as much large product to somewhere like Eastern Europe or is pricing coming under pressure right there in the marketplace with the moderating demand?

I think that's not come under pressure, it's just mix.

Okay. Okay, that's helpful. I'll get back inline. Thanks.

Ann, you forgot to say that we had a wonderful year 2008.

Well, considering you had said $3 as in earnings for 2008, $4 is like pretty darned good. I'll agree.

Thank you.

Your next question comes from the line of Charlie Rentschler with Wall Street Access.

I'd like to say this is certainly no longer Bob Rattlers little farm machinery business, is it?

Charlie, thank you very much.

I wanted to ask about, if you could tell us any detail on your capital expenditure plans for '09. Are you saying $275 million to $325 million up from $251 million? This would be almost 4% of your estimate sales for '09. And can you give us some details of what's going on here, you're finally going to build a big wheel tractor plant in North America or what's ... I know you can only say so much.

No, but you know that we did put three light assembly factories into North America.

Yes, sir.

Which ... and those might one day develop of course in a full slash, not all of them but one could maybe develop into a factory for North America. So that means we are heading into that direction but we of course, want to do that in a very careful way and not add just overhead cost to the organization. A big part of the capital expenditure plan for 2009 is related to the France plant, and we see continuous growth for this kind of technologies outside Germany and we therefore want to be prepared to take advantage of that situation. So that shows that technology itself. And with that, I hand over to Andy because he wants to make some more remarks.

I think Martin is right on it. The real key to the increase from 2008 is the project that we have going on in France. We have a major capital expenditure project where we are expanding some of the operations particularly UN transmission building, as well as looking at some advancements in the assembly area as well, which will give us more capacity but is well, really relays out the entire flow of the operation and gives us significant productivity benefits going forward. So that is probably... that is most of the... almost all of the increase from 2008 would be associated with that project.

And for tractors, it might be interesting for all of you to know that last week we did do a major product introduction for high horsepower tractors under the Massey Ferguson, Challenger AGCO brand, here in Atlanta. We had rented the dome and we had more than 2000 people attending the meeting, and we are very proud to be in a position to tell you that the leading tractor technology in high horsepower now is with us and everybody confirm that. So that means we are very optimistic that we also here in North America start to become a much more competitive and we do that by our technology because we do.... as you know we never were very much in favor of buying market share by price.

Well, this segways into my follow-up question which had to do with maybe you giving us a little bit more information on North American results. You finally had a profit for the year. Could you give us some idea of how Challenger Silo is doing vis-à-vis, I'll call it traditional Silos and what kind of progress you're making there, please?

Yeah we already said that Challenger dealers are little slow in acceleration, but once they are getting in motion, it's almost difficult to stop them and this is concerned by the numbers. So when you look in our top ten dealers, you would find a lot of Caterpillar dealers there and you could maybe share the numbers with us.

Sure, our Challenger sales in '08 were $465 million, that's about 35% increase from 2007. So, strong growth in that line, that excludes the sprayer business which is now, was over $400 million in sales and that business is now being sold almost exclusively, or exclusively through Challenger Caterpillar dealers in most cases as well. So we're getting a lot of throughput now through that Caterpillar network and with very good results.

So it's almost $900 million when you throw the sprayers into the Challenger?

That's correct.

Okay. Thank you very much.

Your next question comes from Andrew Owen with Bank of America Merrill Lynch.

Yes. Hi, how are you? Good morning.

Good morning.

Just if you could comment a little bit more about your comment on slowdown in the second half in North America, if you could just give us more details as to what you're seeing with the feedback from the dealers, and why you're putting in this cautious language, right now.

I think, we had a look at our orders that we have right now on, North America they are up from where we were a year ago, particularly strong on the high horsepower side of the market, but still are concerned about situations on the lower end horsepower into the market, that's really more tied to general economic conditions and that's what's primarily driving down the market in our view. We're just little cautious in terms of what happens in the second half of the year. I think it's more, a little more in terms of uncertainty at this point how conservative farmers will be in the second half. But economically they should be in pretty good shape.

Let's say... I would like to add one general statement here. I think overall the fundamentals, as we say also in our reported fundamentals our industry didn't change at all. 2009 is just a little difficult to understand. A little bit more difficult to forecast and we want to be as always a little bit more on the conservative, on the safe side. And therefore, we also reduced one of the other market numbers. But, overall, I'm very optimistic and overall I'm also... I would also like to point out that 2009 for our industry, certainly, is much better than for most of the other industries. So that means investment in Ag business compared to all other industries still is I think a much safer and much more interesting place.

And if you look at your order book for high horsepower equipment and compared to where you were last year, are you seeing any specific red flags to be more cautious on, particularly large horse power equipment in the second half albeit now it include combines there too?

Not at this point.

It's even higher. So that means, we actually see very, very positive numbers there. But as we say, it's a little bit more difficult to understand what will happen during the year and therefore we are, basically, a little bit more cautious. But, as Andy said, more based on the small tractor business and on the big professional business which also confirms that our vision is right. So we geared the company to be leading in the professional farming business and this seems to be the right niche to be in.

And just a housekeeping question. In terms of profitability for Asia Pacific region, it always seems to fluctuate quarter-by-quarter. Should it go back as I think about '09, what's the good range to think about it? What specifically happened in the quarter? Or was it just shipments not going out?

Yeah, we just didn't get some product there that some of the higher horsepower equipment because of some of our supplier delays and so we just had kind of a weak mix and some currency issues affecting us in the fourth quarter. But, as we look into 2009, we're looking for comparable margins to 2008 in our forecast.

Thank you very much.

Your next question comes from the line of Henry Kirn with UBS.

Good morning, guys.

Good morning.

Good morning, Henry.

Wonder if you could discuss a little the age of the fleet versus historical by region and how you view replacement demand going forward?

I would say no big change compared to the previous year. I don't have the numbers with me, with the exception of Russia and the countries of the former Russian... how do you call it, confederation or federation; actually, no big change but in Russia, the problem gets bigger and bigger in a way that the population is shrinking and the average age is going up all the time. So which means or underlined in a way that they need equipment urgently and that might also have some impact on the politicians to put some maybe finance, quicker finance subsidies in place.

And, could you talk a little bit about the trends in the AGCO finance, loan portfolio, delinquencies, how the credit spends are shaping up?

Sure, in AGCO finance, the retail finance portfolio, in general, is very strong. Our risk foot rates and all that have been very good in 2008. The only market where we have any issues is in Brazil and we've been talking about this for some time that the Brazilian portfolio has been impacted by the government mandated deferrals payment schedules in that market over the last few years. And so we have a situation where our collateral that securing the portfolio as a little more hours on it than we would have wanted, and so we have made appropriate provisions to offset that collateral depreciation as we go through the years. So our only concern would be in Brazil, that's the one we have our eye on. We hope we believe that we're well positioned there, but the rest of the markets, the credit standards have not changed and are very strong.

Okay. Thanks a lot.

The next question comes from Mark Koznarek with Cleveland Research.

Hi, good morning.

Good morning.

I'm just wondering for the industry outlook, if you could give us a sense whether your unit growth or declines as it were the expectations by region have changed. Latin America down 15 to 20, Western Europe down 5 to 10 and North America down 0 to 5.

I'd say that the one that's changed is South America, where we did say 15 to 20, in December when we talked and now we're talking about more on the 20% to 30% reduction. There is a significant drought in Argentina. That's going to affect that market this year. Dry weather conditions in other parts of South America as well. As well as the impact of tightening credit, and credit availability is not really on the tractor credit availability because we have AGCO Finance, but it's more credit within the entire sector and so we see grain production to be down in 2009 and that will impact as well as the drought and in other situations we think will impact the market fairly significantly in 2009.

Okay, and then the high horsepower tractor category in North America, I think in December we were talking that, that category was going to be up despite the overall market down 0 to 5, is that still your expectation?

Yeah, we think so.

Okay, and then finally, what's the outlook for Eastern Europe/Russia compared to how did that sector do in '08?

We think that those markets are going down not because of the overall demand but because of the Russian bank problems. So that means securitization of credit and availability of credit become more difficult. So therefore we are little bit more conservative about those markets. I personally think that Russia needs to fix that problem, but since we do not see solutions yet, we are more on the safe side.

So what kind of decline are you expecting then Martin, this year?

Probably in the 30% range.

Okay. And just to clarify, is that in the Western Europe outlook or that's considered rest of world?

It's in the EAME. It would be within the Europe, Africa, Middle East segment and I believe our outlook was just talking about Western Europe, so would not be included in that.

Okay, got it. Thank you.

Your next question comes from the line of Andy Casey with Wachovia Capital Market.

Good morning.

Good morning.

A quick question Martin on the issue you just talked about with Russia, has there been any movement whatsoever on the part of the government to deal with the mechanism that's kind of broken, right now.

No, but I talk about it. I'm aware on several sessions of the parliament talking about it, so it's... they hopefully... at least have the right sense of urgency and I'm sure that something will happen, but there's no concrete outcome yet.

Okay. Thank you. And then I guess a detail question Andy, on tax rate for '09. What range are you looking for given the puts and takes in FX in the relative strength of North America?

We said, it should be pretty similar. We said in our comments low 30% range... low to mid, but it should be fairly consistent. As I do say there are ups and downs, but we don't expect a major change.

Okay, thanks. And then the under production versus retail to control the inventory or get it down. How much of that is impacting the Q1, 15 to 20 and if you axe out the 15 accounting change issue...?

That's going to affect our... I think when you look at the lower production that's going to impact our margins by about $10 million to $12 million in the first quarter.

Okay, 10 to 12. Lastly, just a question on the backlog, as you see kind of weakness in international areas, as an example you talked about the Eastern European Russian drag on some of the European production rates. Is that starting to impact the availability in a positive way? In other words, availability of machines for markets that remain reasonably strong such as North America?

I hope so. Yes, that's what we try to do.

Okay. Thank you very much.

Your next question comes from Joel Tiss with Buckingham Research.

Good morning. Congratulations on a great quarter, guys.

Thanks very much.

Does the exchange rate change have any impact on sort of the intensity to move production out of Europe and Brazil into the U.S. or that's sort of a long-term project that there is no impact?

That's more like a long-term project. So that means when you think about it, you would like to become independent from exchange rates in the main markets, South America, U.S. and Europe, and so therefore that doesn't change our strategy.

Second, CNH is saying that they think supply demand of corn and soybeans and wheat is going to come into balance in 2009 and you seem to be saying that probably not, we're still in a strong market for the foreseeable future. Can you just talk a little bit about some of the factors you're seeing? Is there some of the drought or the financing problems that are going to keep production down or just give us a sense of what you're seeing out there?

Just look into the wheat production, wheat and then you can see that there still will be a problem and I look at it more long-term, and what I see is that fundamentals didn't change. So I think that the demand for crops will be rather high. The markets will be demand driven also in the future. And when you look at the crop crisis as the commodity prices, those are what you could call crisis prices and compare them with other commodities and then you will see that they didn't go down as much as prices for copper for example or things. So that means this seems to somewhat underline the assumption that the demand for food and also the driving factor of changing diets and renewable fuels will be very important, and the fundamental didn't change at all. So I think therefore overall we can be highly optimistic that farm income will be pretty strong also in the future.

Okay. Thank you.

Your next question comes from the line of Jerry Revich with Goldman Sachs.

Good morning.

Hi, Jerry.

Good morning, Jerry.

Can you please help us through the drivers of the difference between your outlook for retail sales versus company sales, particularly in light of the production cuts you mentioned; sounds like you expect retail demand to be down 10% or more, but your sales guidance implies sales for dealers only down 5 or so percent. Can you help us through the moving pieces there, please?

Yeah, the difference obviously is that we've got pricing coming in at positive to the sales forecast as well as some improvement overall in mix, and as well as some market share improvement that we're forecasting as well.

And the market share improvement, Andy, is that based on what you've realized over the course of '08? So has your market share ramped up over the years, so you just anticipate that you continue at that 4Q run rate? Is that the driver?

Well, no, I think it's also the expected impact we have with some new products that we're introducing this year. Martin talked about some very important new products that we introduced here in North America on high horsepower tractors, we've got new products in Voltras (ph) coming out later this year, as well as new things coming out. So we expect to outperform the market because of these new introductions.

And so Andy based on those comments, sounds like you expect the greatest market share gains to be mostly in North America? Is that a reasonable way to think about it?

I would say, we're looking for some improvement in North America and in Europe.

Okay. And Andy, how much of a working capital cut does your free cash flow guidance assume for the year, and can you help us through what kind of cost savings you expect or working capital savings you expect from the initiatives you outlined early in the call?

Yeah, we are in a situation where our guidance reflects some working capital reduction. I think what we're targeting is that we will reduce our receivables and inventory by 200 million plus but some of that will get offset by probably lower accounts payable and accruals because of the volumes coming down as well and production volumes coming down. So the net impact is somewhere of a $50 to $100 million improvement in working capital in 2009.

Okay, got it. And Andy, how you're thinking about new loans in your financing JV next year? Will you be looking to step in into those funny GAAP in Eastern Europe and will you be doing less loans in South America, given the situation that you mentioned earlier in the call? I guess how are you thinking about the allocation in that business next year?

Well, we have not changed our credit standards. So we will continue to have business as usual in all our credit companies around the world. So, there won't be any changes because we don't have funding availability or anything like that. Rabobank is firmly behind those credit companies. So if we have a worthy customer , we will do the business next year. In terms of your specific questions, in Russia and Eastern Europe we do not have our own credit company. So we are still relying on external financing sources. Local banks and other programs like that. So that, in the middle of the situation with the banks and the tightening there and that's one of the reasons why the markets will be down in 2009. As you look in Brazil, again, there we do have a credit operation there, our credit standards will be the same and... but I would obviously expect the number of applicants to go down just because we think the market is down. But it shouldn't be any change in our availability of credit.

And, Andy, presumably you get some pretty attractive pricing in your finance joint venture, if you were to step into the vacuum in Russia and Eastern Europe, can you step us through, how you're thinking about that potential decision to enter that market?

We don't have any thoughts of participating in the financing of the equipment in those markets at this point.

Thank you.

Next question comes from the line of Jamie Cook with Credit Suisse.

Hi, good morning.

Good morning, Jamie.

Most of my questions has been answered; just two quick follow-ups. One, I think you mentioned in the prepared remarks that South America was a region where you were sort of hit by material cost more in the quarter. I was wondering if you could just quantify that and what your expectation is for 2009. And then my last, in terms of material costs for the entire company relative to pricing and then my last question, I know you've talked about production being down, it being down more in the first half versus the second half. But I don't think you quantified on a percent basis so if I've missed that or if you could just quantify if you have now.

Our production will be down based on our current outlook about 8% to 10% for 2009. And your first question was...?

Just South America, I think you mentioned in your prepared remarks the material cost there and then what you're assumption for the full company for the full year?

Not sure, I have that in front of me, but we did... we still didn't really recover fully. Our pricing was up... was probably up about 5% or 6% in South America and we didn't fully recover that cost even in the fourth quarter. So, as we look into 2009, we're hoping to get that straightened out where our pricing is exceeding cost. I don't expect the cost to continue to go up at the same rate, but we are not seeing the prices of steel and other materials go down as rapidly as we are and some of the other markets at this point just because of exchange rates and local market conditions, but hopefully we'll see some change throughout the year but certainly not as much as we're seeing in other markets.

What do you assume for material cost for the full company for the year?

Well, we have a pretty high carryover cost coming through and then we're expecting that the cost for the... and there won't be much additional cost increases and they could even come down. So, we're hoping to recover a little more than what we've got in the pricing. So we got 4% pricing and the cost should be slightly below that.

Thanks. I'll get back in queue.

Your next question is the follow-up question from Charlie Rentschler with Wall Street Access.

Yes, as I look at South America, the last couple of years '07 and '08 you had 9.3 and 9.0 operating margins. Are we ever going to get back to the held seen days of '05, '06, when I guess they were up in the mid-teen area or there is things that have changed this or maybe in the Gary Collar area of 10%, 11% is optimum due to more competitors, maybe more integration, bigger staff etcetera-etcetera down there. We try to model and look at things two or three years out what can you help, can you give us some...?

I would like to make two general statements before Andy talks about the precise numbers. One is that we have established and agreed upon very ambitious strategic targets for all areas with the Board of Directors. Second, when you look at South America and Brazil, it's important to know that even we don't communicate exciting good news, the market is more or less down to 2007 levels and 2007 was a very good year for South America. So, we are not talking about a disaster but a catastrophe here. Andy?

Yes, Charlie I think what's changed is that two factors, probably the competition element that you introduced and also the impact of currency. There is the number of markets that we do business selling some of the products in dollars and the margins on those products outside of Brazil have declined over the last few years. So the question is, are we going to get back to those mid-teen levels. Certainly we'd like to see that, but I would probably think that we're probably in the lower, little lower than that because of the competition and where the currencies are right now.

Your next question comes from Ann Duignan with JP Morgan.

I guess, I have a quick follow-up on your outlook in South America. Could you give us some color in terms of what's your expectations are for combines versus tractors given that, on the tractor sector you have complexity of sugarcane et cetera-et cetera versus combines are directly for crop, just interested in your outlook for the segment.

Combines we think will be more down more than tractors to your point. It's more related to low crop production which is... which grain production is going to be down next year and as well because they are more costly machines than little more affected by credit conditions as well.

Can you give us directionally which mean by more than, what you're looking for combines, I mean last time they were down 75% over two years? What kind of detail are you looking for?

Not maybe more like 45 to 50 something like that.

Okay. Okay, great. Thank you.

Ladies and gentlemen, we have reached the end of the allotted time for questions-and-answers. I will now turn the call back over to Mr. Peterson for any concluding remarks.

We want to thank you for your time this morning, and if you do have follow-up questions, I encourage you to get back with me later today. Have a great day; and we look forward to talking to you again soon. Thank you.

This concludes today's conference call. You may now disconnect.