A Corporate Tragedy

[fcurrier]

"The Agony of International Harvester Company"
By Barbara Marsh

Here's where you'll find out what "happened" to IHC. It's not a simple answer. Copyrighted in 1985, Ms. Marsh did a wonderful job of making an easily read story out of what could have been presented as dry facts. I bought this book off eBay for $56, and don't regret it. It's available for loan to anyone here who wants to pay the postage. Also, here's the kicker: it's a reprint that's sold by Binder Books, one of the sponsers of this forum.

 

[dfrisk]

FRANK - I have one from the first printing. It really doesn't get into a lot of details that really should have been explained but it's a good overview. I think it did explain the arrogance of some of IH's top marketing people that they tried to get into WAY too many non-profitable markets they had no business getting into. Back in the late 40's when companies like M&W Gear and Heisler were making hop-up parts for the FARMALL M IH was trying to sell the Cub Farmall and the A & B. And as We've dreamed over on the RPM forum, IH should have released the Super R-TA in about 1952, the 350 cid 4-cyl. engine from the Super W-9 but in row-crop form with about 12 forward speeds, TA, live Hydraulic, live PTO and factory power steering that actually worked. They couldn't have built them fast enough. JD would have never survived to get their new 3010/4010's into production in late '60 or spring '61.

 

[proessler]

Frank [Fcurrier] I got the book "A corporate Tragedy --The Agony of IH" from my local library. I got immersed in it and finished reading in a week. It was very interesting! Thanks for the tip on the book.

 

[fcurrier]

Bump. For those following Dennis's historical posts.

 

[jott]

How Long of a lending time do you have on the book? A month? 2 or 3 weeks?

 

[fcurrier]

Josh: Whatever it takes. I'll get it back from my daughter (who has had time to read it, bless her heart. She's in management and I think everyone we elect should take a test on what's in this book). If that sounds political all I can say is "SORRY CHARLIE" Email's in profile. I'll need your mailing address.

 

[rmcshane]

That book was quite interesting. I did a report on it in hight school and really liked it.

 

[fcurrier]

I just watched it come off an auction site for $80, shipped, in paperback. Those hardcover first editions are running around $250.

 

[dfrisk]

FRANK - An old Boss of mine & I were talking years ago. His wife was taking graduate Management courses for her MBA, and they were using Corp. Tragedy as a supplement to the Prof's text book. It was a reinforcement in why to do things he way he said in his text book, NOT the way IH did some things.

From Post WW-II till about the mid-1950's IH could almost do no wrong, but they spent too much R&D time & capital trying to compete with CAT, Massey-Ferguson, FORD, etc. Eventually the competition caught up with them.

 

[sblunier]

I personally thought she botched the last 2 pages with all of the farm sale crap......

BUT, the remainder of the book was very informative and telling.

 

[dfrisk]

STEVE B. - (having just re-read the last two pages....) I think Barbara was trying to explain the really poor economic conditions Farmers were facing in the early/mid 1980's. But I agree, if you didn't KNOW how bad things really were, you would have never gotten that out of the farm sale stuff.

I laughed at the frt page story in about NOV '81 lauding the fact that JD's marketing dept was predicting a 20% INCREASE in TONNAGE of equip. sold/shipped because inflation was so wild Dollars didn't mean anything, so JD started predicting TONS of equip. sold per quarter & year. I forget the exact excuses used a year later when JD posted their worst financial performance in over twenty years with shipments about HALF of what '79's were. '79 was a record year for both IH & JD.

By Dc. '81 I was laid-off, and sometime in June or July '82 at my 10 yr HS class reunion about twenty of us, from a class of just under 200 all talked about if "The Shops", IH, JD, CAT, would ever get back to "Normal". For those of us building RED equip, it never did!

 

[fcurrier]

The way I read it, very high on the list of IH mistakes was allowing a union contract that didn't allow mandantory overtime and JD and CAT didn't have that stipulation. Trying to be "all things to all people" ranked right up there, too.

 

[dfrisk]

I know JD had manditory O/T and pretty sure CAT did then too. Manditory O/T sounds worse than it really was/is but it rallyed the UAW against IH. Part of the fine print in that issue was relaxing some of the job transfer & reassignment regulations which is what IH really wanted. But didn't get. And it cost IHC hundreds of millions of Dollars of high interest rate borrowed money during the big strike of '79/'80.

In late '80 & early '81 we had all salaried & management employee meetings several times @ FARMALL. FARMALL and one other plant, think it was one of the three in LVL did not have office unions for salaried technical & professional people. The Plt Mgr said at one of those meetings that if FARMALL was able to run WIDE OPEN, 175 tractors/day, they could have generated enough business for other IH plants like LVL, E.Moline, Canton, IL, Memphis, Indy, etc. and generated enough profit to bail ALL of IHC out of debt in ONE year. They had AWESOME profitable manufacturing potential in spite of their older mfg. plants, but they needed volume! to run efficiently. During most of '80 & '81 FARMALL was only making 125, then finally 105 tractors per day. They would not schedule less than 100, they'd shut the place down for a month. They couldn't make money at 100 or less. One week in spring of '81 my Boss told be that the WHOLE 75-200 HP tractor market one week nation-wide was 230 tractors, about two day's worth of work for FARMALL. And remember, JD was still building @ Waterloo, Case @ Racine, Allis @ W. Allis, WI, White Farm in Charles City, Ia, Ford @ Troy, MI, plus Massey-Ferguson @ Canada (I think). The last thing IH needed to do at FARMALL was to work overtime!

 

[fcurrier]

Bump! Since this came up again in the main forum, I'm bumping it up here. Great book! Mine's still lendable - if I can find it in this cluttered place I call Home.

 

[hydroharry]

Frank - geez I hadn't seen you start this thread. I need to read this book. I'd heard of it but didn't know the exact title and han't looked into it. My take on IH from what I had understood from others, was that the IH Board hired some hotshot CEO from Xerox who took all the money out of R&D, which allowed the competition to gobble up the market and IH could never recover. Now, from the comments here that doesn't sound quite right.

 

[rrunty]

A little late to the thread, but a very interesting time in history. I worked at a Cat plant here in Il during this time, and I vividly remember echoing Dennis's comments with co-workers. At it's height in the late 70's, the Joliet plant had around 7500 employees and encompassed about eight buildings in it's manufacturing structure. Today the plant is down to one building and about 900 employees. They talk of how bad things are now, but I remember those early 80's has being literally a depression around here. Joliet had an unemployment rate of around 26% at the time and I can remember a period of about from early '82 to mid to late '83 where all of the group of friends I hung with were out of work. We were early to mid 20's in age and there was literally nothing happening, manufacturing, construction, you couldn't find a McDonalds job. The line at the unemployment office used to literally wrap around the building down the block. We went from unlimited overtime in '79 to layoffs that became permanent for many by early '82.
I look back and can see a variety of problems back then, archaic union rules that limited job classifications, a management stuck in the 40's and 50's mentalities, antiquated manufacturing processes that had failed to keep up with technology, etc.

Bob

 

[hydroharry]

Frank, et al - just finished reading the book. What a really sad sad sad story. Such a wonderful company that outgrew it's management knowledge. My take overall is the company did have many of the right ideas, was doing alot of the right things, but their timing and implementing (or not) got all out of whack. There are always questions like - Was it the unions? Was it management? Was it the competition? Was it the economy? Was it the products they built (or didn't)? By the book it was most of these at some point that resulted in their downfall, BUT overall it was the management. It was managements choice to get into so many products. It was managements choice to build to many products. It was managements choice to not keep the plants modernized at the correct times. I honestly don't put any real blame on the unions. If the book is correct the unions kept things fairly equal on a competitive basis, except for the non-mandatory overtime issue at IH. But that should not have been an issue if management really would have had their finger on the pulse of the market and the economy (which they didn't). They would have realized it shouldn't have been an issue resulting in their longest ever strike - again a whole mismanagement issue. I can't hardly put any blame on the competitors either. This company knew where they had product issues compared to competitors, but they had built a terrific dealer network and had extremely loyal customers that believed in them and believed they would come thru with the right products. If it weren't for the economic conditions (Gov't Farm Program, grain embargo with the Soviet Union, Fed Reserve, runaway inflation, etc) I have to think there was a good chance IH would have made it thru this. I believe it was their mis-management at the time combined with these economic events that resulted in the failure. It's a very interesting read - and actually makes me wonder why this doesn't happen more often. I'd recommend everyone with any interest in this history read the book.

 

[dfrisk]

HARRY - That's probably the BEST summation of the book and what happened to IH I've read.

IH was able to design and build as cost effectively as ANY company. They wrote the book on Vertical integration in manufacturing. They had their own share of an iron mine in Minnesota, two of their own lake going ore ships, their own steel mill, their own coal mines and lumber mills & forests, made their own hardware. There was much more IH material in every IH machine than ANY of their competitors.

Their machines were designed to be durable, functional, no fancy unnecessary bells & whistles, just simple, productive machines people could use for work to make MONEY. IH promotional material stressed the productivity of IH equipment constantly. They may not have ever had the leading edge technology in ALL fields but they spent enough money on R&D to offer state-of-the-art advancements in many. They were one of the first to offer something similar to the Torque-Amplifier, first Hydro-static drive full size farm tractor, they released their Axial flow rotary combine a year after New Holland released theirs. IH worked on it for close to ten years. First practical "Plate-less corn/bean planter" with the IH Cyclo planter. They started building trucks so farmer's could haul their crops to market and ended up being the largest medium & heavy truck maker for many many years. They bought Solar Company out in California back in 1960 to investigate turbine engine use in large over-the-road trucks and off-road equipment like bull dozers & ag tractors. IH sold Solar off in 1981 to CAT to get cash. Solar had always been profitable for IH, but turbine engines never achieved the fuel efficiency that a diesel engine did in trucks & tractors.

SO... All that being said, IH should have been eminently profitable. And they did make money, but felt they had to pay a stockholder's dividend every year, even if they had to borrow the money, which the did frequently. Their Marketing Dept forced them into businesses they should have avoided, or to make machines for small niche markets that would never result in the volume of product where their productivity would allow them adequate margin on their sales to cover the development costs. They wanted to be #1 in ALL their markets and in many they were, but around the mid-1950's they should have abandoned several markets so they could concentrate on their primary businesses. Trucks never performed as well as they should have, construction didn't do well either. I remember our Plant Manager, Matt Glogowski, telling all the salaried & management people at FARMALL in early 1981 that if FARMALL could run WIDE OPEN, 170-175 tractors per day, FARMALL could have bailed IH out of debt all by it's self in less than one year since so many other IH plants supplied materials to FARMALL. By then IH was real close to owing the banks more oney than they were worth, and paying way too high of interest rates on it all. Problem was the entire ag tractor market was only selling 200-250 tractors per week back then of the sizes FARMALL made.

IMO, the strong arm of the Markketing dept., and the inability of management to tell them "NO" is what got IH into trouble. Too many big ego's in their marketing dept. for them to survive.

 

[bjamison]

The amazing thing to me is how much name reconigition IH still has - even among younger generations. I see IH logo's on truck windows, clothing, etc. Walk into a tractor supply and you see a large stack of CaseIH stuff laying around, but the straight IH clothing get's sold pretty quickly - IMHO.

I would have thought that Tenneco would have divided CaseIH into two parts - Case Construction and International Harvester ag. In doing so, I think they would have maintained the name reconition of both brands where their presence was the strongest. An example of leveraging a brand is that AGCO recently dumped their "AGCO" tractors and the Allis Chalmers corporate colors for Massey Ferguson's colors and are mashing MF as their flagship tractor brand (I am to understand). It makes a lot of sense. Who ever heard of AGCO? Say what you will about MF, but it is a well known name. I think the use by Tenneco of International Harverster & IH would have been much better marketing than CaseIH.

Again - this might just be a "my neck of the woods" thing, but I don't know of any Case products around here or really down in Western NC where I have relatives that farm, but IH was very popular. My Wife's Grandfather was a dairy farmer - a small family operation. He told me one time he was an IH man. He used IH tractors and equipment and drove IH trucks. He said that he just liked IH equipment. I worked for a firetruck company one time and International truck chassis' were always thought of by the senior engineers as the best.

I feel fortuniate from a "hobby" standpoint to have had a direct connection to IH as my first "car" was an IH Scout 800A. Wish I had it today. IH was way ahead on the "SUV" idea back in the day with the Scout and it was one of the most useful vehicles I've ever owned.

I guess IH still lives on to some extent in legacy with Navistar International and CaseIH.

BACK TO LURKING!!!!!!!!

 

[wkashner]

It seems the late 70's into early 80's was the time for much of corporate America to make questionable decisions. Recently read "30 Years under the Beam" concerning Bethlehem Steel. This book had input not only from long time physical workers but from various management levels as well. The opinion is that if the corporate bosses had taken care of business instead of looking out for themselves, 'the steel', as some workers called it, would still be producing today.