Thank you Susan, and good morning ladies and gentlemen. As a fellow industrial engineer, it's a great privilege to be asked to address this respected organization at your annual conference. I can't think of a single discipline that could have better prepared me for the fascinating and demanding career I enjoy today.

I understand there are several members of academia in the audience this morning. I'd like to commend you in the way you are preparing today's IE students for the vast career opportunities awaiting them. As businesses seek new ways to increase efficiencies, I predict there will be more collaboration between the two of us in the years ahead, where we can each maximize our resources for mutual benefit. But that's likely a topic for another speech!

As Susan mentioned, I have the pleasure of working for a company whose past, present and future was, and remains, heavily dependent on the field of industrial engineering.

For instance, our founder, a blacksmith named John Deere, demonstrated IE's fundamental principles - improving quality and productivity — when he took a discarded saw blade back in 1837 and forged it into the first commercially successful, self-cleaning steel plow. The year was 1837 in the northern Illinois settlement of Grand Detour, where John Deere had migrated from his native Vermont.

Soon after his arrival, John Deere met frustrated pioneer farmers whose cast-iron plows couldn't cut through the sticky soil of the thick, grassy prairie. The farmers were forced to stop every few steps and remove the rich, black dirt from the plow bottom by hand. It was back-breaking, slow and laborious work. So you can imagine how productivity soared when John Deere came up with an idea and later demonstrated that a highly-polished steel plow could cut through the Illinois prairie with ease.

It wasn't long before manufacturing plows became the main focus of John Deere's business, but quality was never sacrificed . In one of his most often quoted phrases, John is said to have vowed: "I will never put my name on a product that does not have in it, the best that is in me."

Today, John Deere has grown to become the world's leading manufacturer of agricultural and forestry equipment; a leading supplier of equipment used in lawn, grounds and turf care; and a major manufacturer of construction equipment. Quality and productivity improvement remain central to our current and future success, as we work hard to build a more competitive business in today's ever-demanding global environment.

And industrial engineering is at the very core of John Deere's efforts to improve our business. That's what I'd like to talk to you about today.

I'll briefly discuss Deere's version of lean manufacturing — something we call the Deere Production System, or DPS, and then profile a few of our own IE's, all at different stages of their careers, and explain how they are using DPS and other practices to make John Deere a great business.

Corporate Strategy
Let me first begin with some background and a look at our corporate strategy. When Bob Lane took over as our chairman and CEO in 2000, John Deere had a lot of things going for it: quality products, a rich heritage, fiercely dedicated customers, a top-notch dealer network, a highly visible brand and an enviable market share. But something was missing, and that was a consistently GREAT business.

We hadn't figured out how to successfully navigate the cyclical nature of our business. We rarely earned our cost of capital for more than a few years in a row. We had an "okay" business, but certainly not a great business. We needed to find a way to serve our customers and employees better, in a way that delivered much more value to the shareholder.

It came down to two basic problems: we were asset heavy and margin lean. Everything we did, however good, we did with too many assets, too much capital and too much cost.

So under Bob Lane's direction, we set out to improve our operating performance and grow the business. We called this initiative "Building a Business as Great as our Products." It became the inspiration for a three-point strategy that we're currently heavily engaged in: exceptional operating performance, disciplined growth and aligned, high-performance teamwork.

The key to Building a Business as Great as our Products is a concept we call Shareholder Value Added, or SVA, which is essentially, the difference between operating profit and pretax cost of capital. SVA is the primary financial metric we use to gauge our progress and it is reflected in each of the three legs of the strategy.

Exceptional Operating Performance
Now while I explain our strategy, keep in mind the vital role industrial engineering plays in its success. The first leg of the strategy is exceptional operating performance. This means running the business as efficiently and effectively as possible, while distinctively serving our customers at the highest possible level.

We aim to build and grow a business that is lean and nimble enough to be profitable throughout the business cycle and that takes our performance to new highs, especially when our intensely competitive global markets are strong.

Specifically, we're looking for a 20 percent operating return on operating assets at normal volumes, resulting in sustained SVA. Year-in and year-out! Even under the weakest conditions, our goal is to earn our cost of capital, creating positive SVA. In other words, every year, we aspire to generate returns equal to or above our average cost of capital.

Undoubtedly, this is a tall order, especially when you consider only three percent of companies attain similar goals. But we've made significant progress. By 2004 we recorded positive SVA for the first time in six years — not only positive SVA, but double the amount of SVA of any previous year — to the tune of more than a billion dollars.

Last year, at $938 million, SVA was more than twice our highest levels of the 1990s, yet we still missed our target. So while we're well on our way to achieving exceptional performance, we must continue to focus on asset efficiency in order to successfully operate in today's deeply competitive, ever-changing global marketplace .

Disciplined SVA Growth
The second leg of the strategy is disciplined SVA growth. It focuses on growing our business through innovation, invention, and accelerated customer focus. By becoming positive SVA, we've earned the right to grow the business. We're challenging ourselves to deliver average SVA gains of six to seven percent a year over the business cycle. This will require not only smart cost and asset discipline, but as I mentioned, an increased emphasis on customer focus.

We are currently growing the business with a number of exciting initiatives, including innovative and technologically-advanced products and services that make our customers more productive and profitable. These growth plans are aligned with key global-economic trends like the increasing world population, and the rising popularity of renewable fuels such as biodiesel, ethanol, and wind, which will ultimately make farmers producers of energy as well as food. And very importantly, our growth plans are aligned with the move toward increasing automation and productivity.

Aligned, High-Performance Teamwork
Tying together these first two legs of the John Deere strategy is the critical third leg: aligned, high-performance teamwork. This is the fuel that powers our operating performance and disciplined SVA growth initiatives.

Our 47,000 employees are our most distinctive asset, and when they work toward a common goal, the results can be awesome! Their aligned efforts are not only hard to duplicate, but provide a great competitive advantage.

A key tool we use to facilitate aligned, high-performance teamwork is our Global Performance Management System. Salaried employees follow performance management plans that spell out how each individual's efforts contribute to the broader picture of meeting unit and company goals. We've also introduced a new compensation system that helps ensure this alignment to a common purpose.

I'm pleased to say that John Deere people around the world have embraced aligned, high-performance teamwork with great success. On the hourly side, most wage employees are eligible for additional pay based on improved productivity through our CIPP, or Continuous Improvement Pay Plan, and our continuous improvement process that we call CI Grow. The response has been outstanding, with productivity jumping by nine percentage points worldwide in the past two years, helping to ensure our long term competitiveness.

What makes adherence to this third leg of the strategy even more noteworthy is that it has been accomplished with a large number of new employees. Of our 25,000 U.S. employees for example, half of them have less than five years experience.

So there you have our three-point John Deere Strategy: exceptional operation performance, disciplined SVA growth, and aligned, high-performance teamwork. We're well on our way to building that great business.

Deere Production System
I can say with certainty that we could not have made such impressive gains in our operating performance and overall strategy without the Deere Production System. DPS is the enterprise manufacturing strategy that incorporates the most effective elements of modern manufacturing philosophies into a systematic, common approach.

For example, a commonly-used technique for workstation organization is called 5S, which stands for sort, set in order, shine, standardize and sustain.

John Deere had been addressing lean manufacturing since the mid-1990s, business by business, but it wasn't producing the exceptional, sustainable performance we desired. In 2002, we began in earnest to create an enterprise-wide solution and developed the Deere Production System by leveraging best practices from all our equipment divisions: agricultural equipment, construction and forestry equipment, commercial and consumer equipment and John Deere Power Systems.

We needed a strategy that accounted for our unique business requirements and characteristics. First, we build highly engineered, very complex products. For example, one of our large combine harvesters has nearly 18,000 parts, and a big row-crop tractor has 10,000 parts.

Secondly, our volumes vary widely, from a few hundred in the case of specialty product lines like cotton harvesters, to hundreds of thousands, in the case of our L100 lawn tractors.

Other factors that needed to be considered were the cyclical and seasonal swings of our business. Planters and combines, for instance, have a four-month use and demand period, and in our lawn care business, two-thirds of our sales occur in a 17-week period.

Finally, as Deere continues to grow globally in terms of operations, supply bases, and customers, our lean strategy had to be able to function on a worldwide basis.

In four short years, DPS has proven to be a significant addition to driving and sustaining real business results, through lean principles and best practices captured in a common language, common tools, common systems and common training. DPS has become, and will continue to be, a competitive advantage for John Deere.

Profiles
As you can imagine, industrial engineers at Deere are very familiar with DPS and other processes that are helping us distinctively serve our customers through a great business.

I'd like to tell you about some incredibly talented IE's at various stages of their Deere careers and explain how they are at the forefront of our drive to build a great business.

First, I'd like to introduce you to Stacey McCoy, an IE graduate of Georgia Tech with an MBA from University of Tennessee . Stacey joined Deere seven years ago as a manufacturing engineer and supervisor. His first assignment was to help start up our skid steer loader factory in Loudon, Tennessee, and he later moved into supply management at the factory. Four years ago, Stacey moved to our Ottumwa, Iowa, plant where he's currently supervising the mower conditioner assembly lines.

Before joining Deere, Stacey held positions in industrial engineering and manufacturing engineering. Now, Stacey says, he's found his niche on the shop floor, where he can utilize his technical background and previous management experience.

Stacey will tell you that his first responsibility is safety — making sure that his work group makes it through the day unharmed. He conducts daily safety meetings and is quick to respond to safety issues. Due in large part to his efforts, there hasn't been an OSHA recordable incident in Stacey's section in over a year. Stacey finds his IE background is helpful when working proactively with the unit industrial engineers to develop Job Hazard Analysis sheets and ergonomic assessments for each work station.

Overseeing quality and productivity in his department are major daily responsibilities for Stacey. Quality problems are noted and countermeasures implemented promptly. When it comes to improving productivity levels, Stacey collaborates with manufacturing engineers to analyze all non-value added components of his line's work, then works with the team to come up with ideas to reduce those elements.

A key Deere Production System metric, linearity, is also a big part of Stacey's responsibilities. It's his job to make sure the right product is built on the day it's scheduled, thus ensuring the product is delivered on time. This can be challenging when work content can vary by plus-or-minus 20 percent from model to model in a single production line. But Stacey's team has made impressive improvements in recent months. Just ten months ago when Stacey took over supervision of the mower conditioner lines, linearity performance was about 50 percent. Today it's between 80 and 85 percent.

The systematic approach to manufacturing that the Deere Production System offers has made a dramatic difference in Stacey's work and the work of those he supervises. He says that having a framework to execute improvements and solid performance metrics to measure his team's performance have helped focus their work. He credits the CI Grow and the 5S processes with helping get his team in line with DPS.

Together, Stacey and his team are helping drive exceptional operating performance and significant business improvement.

Let's move on to some IE's in middle management.

Jason Brantley stands apart from the other IE's I'm profiling this morning by the fact that he's never practiced as an engineer with John Deere. Jason joined us 14 years ago with an IE degree from North Carolina State. He hired into the sales and marketing side and has stayed there ever since. Along the way he earned an MBA from Purdue with an emphasis on agribusiness and is currently Factory Marketing Manager for our Seeding Group.

Jason began as a marketing representative with our Atlanta Branch and worked in the training department while attending systems schools. He's gone on to work in both our ag and commercial and consumer equipment divisions in a variety of jobs and locations including division aftermarket manager, branch parts and service sales manager, division marketing manager, regional sales manager and division sales manager.

Today, as Factory Marketing Manager for the Seeding Group, Jason is responsible for leading the integration of customer requirements into our EPDP, or Enterprise Product Delivery Process. He says the process has helped him better understand the dynamics of bringing solutions to market. As Factory Marketing Manager, Jason is also involved in product promotion, order fulfillment, customer support and creating the Seeding Group's business strategy.

You may remember that the second leg of our strategy, disciplined SVA growth includes the need to accelerate customer focus. Jason's position gives him the opportunity every day to positively impact customer acquisition and SVA by improving the solutions we deliver to the marketplace, improving the realization of that value, and enabling the delivery process.

Even though he hasn't worked as an engineer at John Deere, Jason says his technical background was useful in his early days in product support. And, he says, the analytical and process management skills learned as an IE undergrad have been invaluable throughout his career.

Another one of our mid-level IE's is Kim Beardsley. Kim began her industrial engineering career at John Deere even before she had the diploma to prove it. Kim was a summer intern at our Des Moines Works plant, then returned there as a full time employee after completing her BSIE from the University of Iowa in 1990.

Her first position was in production engineering, programming punch presses and bend brakes. She was responsible for the method development, tooling and standards setting. As her career progressed she held several positions, including line supervisor, division superintendent, manufacturing manager and even an engineering recruiter. And along the way, she found time to earn an MBA from the Duke University Fuqua School of Business.

Just two months ago, Kim was promoted to the position of Factory Operations Manager at John Deere Commercial Products in Augusta, Georgia. There, she's responsible for the daily production of utility tractors while focusing on the vital metrics that spell success for a manufacturing operation: safety, quality, delivery and productivity. This is no small feat, as the Augusta plant is one of our major tractor manufacturing facilities, producing tens of thousands of utility tractors each year.

Kim is recognized as a leader in the Deere Production System. DPS includes common processes for nine key elements that we call element lanes. These nine elements work together to enable employees to have a direct effect on our business goals and to align operations to produce the products our customers need, when they need them.

Kim currently serves as the element lane owner for DPS Leadership and was recently the lane owner for Employee Environment. She performs monthly DPS audits of various departments in the Augusta factory, as well as regular informal audits for CI boards and 5S.

As an aside, I might mention here that out of 50 manufacturing locations, Deere is on schedule to certify half in DPS by the end of the year, and reach 100 percent DPS factory certification by 2007. Unless factories have reached our highest silver or gold level certification two years in a row, audits will continue on an annual basis until DPS becomes engrained in their daily business.

Kim understands the power of DPS and CI, as well as such tools as W-Planner, which involves planning and designing manufacturing operations in the virtual world, and AliSS, or Assembly Line Solution Set, which provides the benefits of performing operations simulation modeling without developing a model and extensive training requirements. She believes these processes help her make better data-driven decisions, not only in the project planning stages, but also in daily factory operations.

Now on to our senior level. As a 27-year veteran of John Deere, Dave Larson has taken his IE degree all over the world in an effort to improve manufacturing effectiveness, safety, quality and productivity.

Dave joined Deere in 1977, after graduating in industrial engineering from the University of Iowa , and later earning an MBA from the same school. His work at Deere has spanned three of our four equipment divisions. Dave has served in product and manufacturing engineering positions at both the staff and management levels. He's opened three new factories, managed one of those factories, and served as business group manager for our commercial mowing and utility vehicles products. That particular position oversaw marketing, manufacturing and product design and development.

As Vice President and General Manager of the John Deere Vehicle Group, Dave helped grow the business three-fold, maintaining an SVA-positive position for five years running.

Today, Dave is Director of Engineering and Quality Services, supporting all Deere facilities worldwide. He manages process engineering, factory master planning, industrial engineering, modeling and simulation, lean manufacturing, Six Sigma, virtual engineering and engineering mechanics, to name just a few. He also holds leadership positions on the enterprise Manufacturing Leadership and Order Fulfillment Councils.

You won't find a bigger cheerleader for the Deere Production System than Dave. Speaking from his varied career experience, Dave credits DPS with providing the enterprise a proven and robust manufacturing framework to rapidly reduce the time and cost of achieving world-class, build-to-demand capability.

This is not to say that driving a global, lean strategy hasn't and won't continue to be difficult. Our business spans 24 time zones, 11 major languages and we're challenged with teaching people to think and work differently, not just our engineering staff, but the entire John Deere workforce.

However Dave can point with pride to some amazing success stories in the few short years since DPS was implemented. At our Horicon, Wisconsin plant, there used to be a 4-month lead time to make changes on a garden tractor. Today it's 2 days.

Another factory moved from a baseline assessment score of 28 percent to a certification score of 79 percent in only 10 months. Specifically, that included a:

• 25 percent reduction in OSHA recordables,
• first pass yield of 95 percent, up from 90 percent,
• 98 percent on-time delivery performance figure, and
• 21 percent reduction in inventories in just 5 months.

Those are a just a few examples of how Dave's leadership-driven approach and that of his colleagues is influencing incredible performance improvements in a short time.

As you can see, I'm pretty high on industrial engineers and the work they do to make our company more productive without sacrificing quality.

That said, I might add that as John Deere works to aggressively reduce assets and cut costs, we're not forgetting that another necessity to becoming globally competitive is innovation. We must innovate faster than others and avoid the temptation to cut R&D spending as we look to reduce expenditures in other parts of our operations.

My Deere Experience
Before I close, I haven't forgotten that I mentioned earlier the positive impact an industrial engineering education has had on my career. So I'll take a minute to share with you the experiences of an IE grad at the executive level.

As you heard in Susan's introduction, I joined John Deere in 1975 after earning a degree in industrial engineering from Kansas State University. My IE degree gave me the skills to work in a variety of management positions throughout the company including production engineering, mechanical services and sales.

My industrial engineering background helped me make data-driven decisions, forcing me to examine underlying elements to solutions and the best way to optimize inputs to improve results and make them sustainable.

Moving into senior positions in our worldwide agricultural equipment division created opportunities to live abroad and oversee operations in dozens of countries. It was then when I most fully appreciated the fact that IE is really a people-oriented discipline. It's the art of pulling together all the resources and working with fellow employees to get a job done.

My IE skills have proven especially beneficial with cross-cultural work groups. Members of these groups may come from vastly different backgrounds, but because of the commonalities established through industrial engineering practices, they are all working efficiently toward a single goal.

Although I'm understandably biased, it's my opinion that industrial engineering provides a better, more broad-based management preparation curriculum than any of the other engineering disciplines — or even a general business degree, for that matter. By focusing on data analysis and fact-based decisions, the industrial engineer is well prepared to improve quality and productivity in any business operating in today's competitive market.

Through my comments this morning, I hope I've been able to explain how valuable the profession of industrial engineering is to the manufacturing world and to John Deere in particular. In every part of the John Deere Strategy: exceptional operating performance, disciplined SVA growth, and aligned high-performance teamwork, industrial engineering is making a real difference!

From giving customers what they want, when they want it, to reducing the assets necessary to run our businesses, to creating a common operating philosophy throughout the global enterprise, industrial engineers at John Deere are figuring out how to do things better, and in doing so, moving us ever closer to Building a Business as Great as our Products.

Thank you.