DR EVIL

[NY 986]

Since the IH discussion is about to fall off page 1 I wanted to keep it "fresh" for anybody who is interested.


Interesting how components were sourced for Farmall. The timing was very poor for IH to rebound from the strike. The ag economy was in poor shape to start the 1980's with Carter's grain embargo and stagnant milk prices. Interesting to read about the plant management assessment that a year of normal would have fixed IH's finances. Had this happened that would have set in motion its own set of events much like the failure to rebound did. It has been said that Case wanted IH for the dealer network as much as any physical assets. Without the IH dealer network and other IH facilities such as the combine plant I wonder what direction Case would have gone. Would they have gotten the jump on Ford for New Holland? Back to IH it might have meant more normal in terms of tense stockholder meetings. With the recession maybe that would have paved the way to spin the truck division off to another builder in that industry. Kind of doubt that though as it was mentioned that by the mid-1960's IH had a large contingent of managers and stockholders with NO farm background and no emotional connection to IH as a builder of farm equipment. Perhaps that is what set Deere apart from its competition in that management, stockholders, and plant employees had the same vision of Deere as a farm equipment builder first and foremost.

 

[DR. EVIL]

My Boss at Farmall had a phone conversation in early '81 with a marketing guy from Chicago. The marketing guy was ecstatic that sales were WAY UP over the week before, almost 250 80 to 200 hp tractors sold nationwide. Boss yawned, and proceeded to inform him that we could build that total amount of tractors on Monday and Tuesday morning by lunch, and take the whole rest of the week off. You add in the capacity of Deere, Case, Ford, White Farm, Massey, and the amount of over-capacity in the Ag industry becomes obvious. Since 1981 no-till planting has reduced the amount of hours put on tractors. Sprayers have replaced cultivation with tractors. Farmers watch total fuel use per acre, it's a cost of production just like seed and fertilizer.

Back in the mid and late 1970's I filled out job applications at every Deere plant in the Quad-Cities. In the ones I filled out in '76 and early '77 there was a question if you had a farm background. That question disappeared and I can assure you probably 5% or less of their employees know anything about farming now. When my nephew worked at Planter works for a few weeks years ago He was the only employee assembling row units that understood what they did. The days when farmers went to work in the Shops and built farm equipment in the winter then quit and farmed in the spring, summer, and fall stopped in the early & mid 1960's.

I had a classmate at St. AMBROSE University in Davenport that was a marketing person at Deere. He and his coworkers predicted in 1978 that by 1985, construction equipment would exceed 50% of their gross sales. And they were correct. Construction equipment sales stayed the same and Ag Sales was about 20-25% of 1978 sales. The local Moline papers made a huge deal in 1981 when Deere predicted sales for 1982 in tonnage of equipment, because Dollars were inflating so bad. They predicted '82 at 120% of '81 and results ended up at about 50%. So Deere's crystal ball was no better than anyone elses.

I would not try to romanticize Deere too much. They face the exact same challenges as all other manufactures of big and small equipment. And frankly, they fail as often or more as any. I swear they only build equipment sometimes so they can rework/repair it. I mentioned a year or two ago on another forum about hourly assemblers of combines making over $100,000 a year. If you are a pre-1996 employee getting paid on the top pay tier, you don't even have to work that much O/T. I always believed in equal pay for equal work. But Deere and their friends in the UAW must not. Eventually, after another contract negotiations like the last one, good skilled workers will be able to get better pay, benefits, and work conditions at Walmart.

 

[NY 986]

Is Deere perfect? Of course not. But the game seems to be about shooting yourself in the foot the least. As far as what the environment was in Chicago I can only pass along the stories of people I encountered or knew in some capacity. It was pretty much the same story and I would imagine as the farm population as a percentage of the overall population declined any of the builders had to be less picky as to farm backgrounds.


How do you weight the predictions? I would imagine a lot of late 1970's predictions looked foolish by the time the 1980's kicked off in earnest.


Is not the goal of every large scale employer beating wages down to retail levels? I know guys that work for dealers and regardless of the color sold the pay is minimum wage other than a handful of key positions. The manager of the local CaseIH outlet years ago asked me about going to work there. He talked in terms of a dollar amount paid per week which looked barely OK until all the expected hours to work were tallied. I would imagine that there is not a lot of difference in mindset between Deere and CNH at the corporate level these days.