UPDATE 1-Deere to build tractor factory in Russia
* Announces new Russia factory as Obama lands in Moscow
* U.S. icon picks investor friendly region to make tractors
* Factory to build tractors, combines, timber equipment
(Adds details, chairman quotes)
MOSCOW, July 6 (Reuters) - U.S. farm machinery maker Deere & Co. (DE.N) will start producing tractors in Russia within the next 5-7 years, Deere Chairman Samuel Allen said on Monday, ahead of the arrival of U.S. President Barack Obama for a summit.
Russian President Dmitry Medvedev last month told a global agriculture summit that his government would devote financial resources to boost its position in world grain markets, creating potential opportunities for industry suppliers like Deere, the world's largest maker of farm equipment.
"The investment into the Russian economy will allow us to increase our production and technological capacity which is also in line with the plans of the Russian government," Deere Co. said in a statement.
The factory, in the Kaluga region southwest of Moscow, where large manufacturing parks are growing up around investors such as Volkswagen (VOWG.DE), will produce large tractors and combines, as well as machinery for Russia's large timber industry.
The Kaluga regional administration "is a progressive government to work with, very pro-business," Allen told Reuters after the press conference.
Business leaders hope the summit will warm up economic ties between the two countries, which exchanged $36 billion in goods last year, no more than Russia and Poland, but rule of law remains a grave concern for foreign investors. [ID:nL6105150]
Deere expects Russian sales to fall 20 percent this year as Russia suffers its first economic recession in a decade and import tariffs bite, Allen said.
Deere said on Friday it planned to invest over $500 million in new Russia projects. It currently employs 75 people at a plant producing pneumatic sowing machines in the remote town of Orenburg. [ID:nL3656958]
It plans no acquisitions or joint ventures and plans to grow organically, Allen said.
"Acquired companies often have different cultures, which makes it hard," he said. "Joint ventures require a lot of time and partners do not always agree. So there is a lot to be said for doing it organically." (Reporting by Simon Shuster; writing by Melissa Akin; editing by Simon Jessop)
