AGCO Intros Tier 4 Final Strategy

AGCO Corporation ( AGCO - Analyst Report ) has introduced its Tier 4 Final/Stage IV engine emissions strategy for its AGCO POWER diesel engines. Tier 4 Final/Stage IV will provide the farmers with an efficient technology to reduce nitrogen oxide (NOx) and particulate matter (PM) emission from diesel exhaust.

The U.S. Environmental Protection Agency (EPA) started to enforce limits on diesel exhaust emissions from nonroad diesel engines in 1996 and stationary diesel-engine generator sets in 2006. These regulations were implemented in a series of steps called Tier levels. Eventually, the regulations put into effect more stringent limitations on NOx, PM, carbon monoxide (CO) and non-methane hydrocarbons (NMHC).

In response, the engine manufacturers brought forth innovative designs and sophisticated engine control systems to comply with the successive tier levels. All major generator set manufacturers now provide technologies that meet the Tier 2, Tier 3 or Tier 4 Interim standards in various horsepower categories.

The Tier requirements have been implemented for over an 18-year period that will end in 2015 with Tier 4 Final. The big move towards emission reduction began in 2011 with Tier 4 Interim and is due to conclude in 2014 and 2015 with Tier 4 final standards.

Diesel emissions have been reduced successfully with the introduction of these regulations. It is further expected that NOx and PM emissions from diesel engines will be diminished by about 99% by 2014 with the introduction of Tier 4 Final.

The major technologies that are used in diesel engine generators to meet Tier 4 regulations include Selective Catalytic Reduction (SCR), Diesel Particulate Filter (DPR) and Exhaust Gas Recirculation (EGR).

AGCO will be using its e3 SCR technology in AGCO POWER engines to deal with the requirements of Tier 4 Final/Stage IV engine. Its power engines will function effortlessly delivering total fluid economy (diesel fuel and DEF), either meeting or exceeding the same fluid consumption levels as in AGCO’s Tier 4 Interim/Stage IIIb machines.

With the introduction of Tier 4 Final engines, customers will get what exactly modern agriculture demands – emission efficient, cost efficient as well as reliable performance. Apart from AGCO, Astec Industries Inc. ( ASTE - Analyst Report ) is also investing significantly to redesign its engine models from Tier 3 to Tier 4 standards.

AGCO retains a short-term Zacks #3 (Hold) Rank. We have a long-term Outperform recommendation on the stock.