Category: General

Why Did International Harvester Go Broke?

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International Harvesters was an agricultural machinery manufacturing company formed after the merger of McCormick Harvesting Machine Company and the Deering Harvester Company. It was a household name, employing thousands of workers for decades. The International Harvester products included tractors, combines, forage equipment, hay tools, seeding equipment, tillage equipment, and sprayers.

 

Tenneco later bought the agricultural manufacturing sector of the International Harvester as well as the agricultural manufacturing business of J. I. Case company and merged the two to create Case IH. Later, the merger between Case IH and New Holland N.V. became Case New Holland (CNH), now known as CNH Global.

 

As fate would have it, International Harvesters, the company that revolutionized American agriculture, could not weather all storms. Consequently, the 150-year-old company would lose footing, leaving dealers and farmers uncertain about their future and investment.

 

In this article, we shall explore the history of International Harvester and how it went down.

 

The Rise of the International Harvester

The International Harvester traces its roots to Cyrus Hall McCormick, a great industrialist during the 19th century and the son of a farm machinery inventor. Although Cyrus McCormick’s father failed commercially, Cyrus Hall followed in his father’s footsteps and tried his luck.

 

At twenty-two years of age, Cyrus Hall McCormick invented a better reaper for harvesting grain and got a patent on it three years later. This success milestone prompted him to continuously improve his reapers by adding elements that enhanced the machine’s efficiency.

 

The First Fall – Difficult Economic Times

In 1837, economic panic befell America. The President at that time would later note that the crisis resulted from the ease of credit access and rampant speculation. This led to a widespread lack of employment, economic depression, cotton and paper money devaluing, bank failures, and financial failures.

 

The economic difficulty saw Cyprus take a financial dip driving the business into bankruptcy. This would also see Cyrus Hall McCormick take seven years to repay his debt; luckily, this was not the end of his story.

 

In the 1840s, he discovered a bigger niche for his machines on large farms out West in Ohio, Indiana, and Illinois, prompting him to move his business to Chicago.

 

While in Chicago, he improved his machines, added other agricultural products, and expanded his factories. Cyrus and his brothers mastered the art of marketing and distribution within this industry as they had over 10,000 dealers, further making the business grow.

 

The Second Fall – Fierce Competition

After surviving the 1837 economic panic with great difficulty, Cyprus had to battle the rising number of competitors.

 

Deering, Milliken, and company, whose inventions leapfrogged the McCormick machines, led to intense competition for the farmer’s money. By the 1890s, both the McCormick’s and Deering’s had big factories, and both competed for dealers and farmers, which strained the McCormick Harvesting Machines Company.

 

The fierce competition led to the 1902 merger between the McCormick Harvesting Machines Company, the Deering Harvesting Company, and three other companies to avert the awaiting tragedy. This merger gave rise to the International Harvester Company.

 

Officially a Sleeping Giant – Out of Touch with The Market

In the mid-1970s, the company was no longer expanding, and its profit margins were dwindling. Its competitors, like the John Deere Company, had surpassed them in the market.

 

The International Harvester Company also had a heavy debt burden that threatened to cripple the company.

 

Xerox President Archie McCardell was hired to reinvigorate the sleeping giant to avert this situation. The company now focused more on investing in new plants, innovative technologies, and new products, not knowing they were watering dead grass.

 

Customers, dealers, employees, and experienced executives should have been listened to when they tried to advise the company. Regardless, the company increased its debt load.

 

Another reason International Harvester fell is that it had less favorable contracts compared to its competitors like Deere and Caterpillar companies. These poor contracts also saw workers put down their tools and call a strike for about five months in the UAW, further weakening the case of the IH parts company.

 

Nonetheless, the company continued production of tractors and farm equipment, disregarding the market downturn. The managers miscalculated and assumed that farmers would order heavily to restock inventory after the strike ended, but this was not the case.

 

Around the same period, inflation and interest rates flared, making the company more susceptible to losses as farmers stopped buying International Harvesters Machines.

 

The inflation and high-interest rates slowed down the market, reducing demand in dealer territories. Another devastating factor entered the picture when President Jimmy Carter imposed a grain ban on the Soviet Union, further reducing farm equipment in the markets.

 

This saw the company possessing yards full of unsold inventory and large amounts of capital tied up. Due to this economic crisis and miscalculation, the company lost around $500 million in six months, narrowly surviving insolvency.

 

The Last Straw – Being Bought Out

The unsold inventory and tied-up capital further constrained the International Harvesters Company as it desperately needed operating funds, prompting it to borrow loans.

 

The company’s source of income would manifest when dealers sold machines. Unfortunately, dealers’ opinions were not sought while improving the company and were subjected to comply with strict rules.

 

They had to comply with building a new facility, the prototype building, as the company wanted all dealers to look the same. From the losses the company made in subsequent years, International Harvester’s Board of Directors voted to eliminate the company’s annual $1.20 common share dividend, further demoralizing stakeholders.

 

In the year 1985, International Harvester was beyond salvageable. It sold its farm equipment division, and the remainder of the company was sold to Navistar International Cooperation in the subsequent year.

 

Since the IH merger, customers have stayed loyal to the red equipment. Both dealers and customers feel that the merger turned out well for them. Customers can find Case IH parts and services for their equipment.

 

Conclusion

The fact is that the International Harvester was a giant in the industry for years. However, these factors, among others, brought it crippling to its knees with weak and ineffective management over the years, evidenced by the lack of listening to customers’ and dealers’ opinions. High-interest rates and a heavy debt burden made surviving even more difficult. Call us!

What Happened to Case Tractors?

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The Case brand has been in existence for close to two centuries. It has seen a fair share of ups and downs.

 

We still have Case products, such as tractors and other Case IH parts, in the market. But how has such a brand stayed afloat for such a long time? In this article, we investigate what happened to Case tractors.

 

Founding Of Case

Case brand was founded in 1842 by a young man, Jerome Increase Case. As a young boy, Jerome had read about machines that would harvest wheat. He got intrigued and became passionate about agriculture and mostly the technological side of it.

 

His first invention as a 23-year-old was the handheld thrashing machine. His machine started work in Wisconsin the same year, but the following year, in 1843, he moved it to Racine, Wisconsin, and opened the Racine Threshing Machine Work.

 

Working in Racine gave him access to water power, allowing him to improve his machine.

The Case company was incorporated as J. I. Case Company. However, the company was popularly referred to as Case. The first two letters are initials for his name.

 

Case continued to grow through the latter part of the 19th century and became an international company with its first expansion into South America in Argentina.

 

Jerome Case died in 1891, leaving behind a thriving corporation that had brought forth the first self-propelled traction steam engine.

 

Other Developing Companies That Influenced The Case Journey

Alongside the development of the Case tractors, other players in the market were also producing competing machinery and technology. This input from different players is what led to the mergers that have been experienced in the industry over time.

 

To begin with, it was the McCormick Company. The McCormick company was in operation in 1871 when a fire decimated their factory. Jerome Case offered to help them after the fire, but they declined. They built a new factory, and in 1881 they introduced the Twine Binder and Harvester in the market. This introduction would mark the beginning of the harvester wars that lived through the 1880s.

 

At the advent of the new century, in 1902, the McCormick company merged with the Deering Company and three smaller manufacturers and formed the International Harvester Company. Under the International Harvester Company, they produced construction and agricultural equipment, commercial trucks and automobiles, garden and lawn products, and household equipment.

 

Another company that would be very instrumental in the Case story later is Tenneco. Tenneco has undergone a few rebrandings since its inception in 1930. It started as Tennessee Gas and Transmission Company, then rebranded to Tenneco Automotive, and now it is traded on the NYSE as Tenneco.

 

Mergers

The J. I. Case ran for 105 years before being bought by Tenneco in 1967. However, Tenecco continued using the Case name and branding in the market.

 

Before 1984, however, Case purchased the British tractor manufacturer David Brown Ltd. Also, they bought the majority shares of Poclain, a French construction equipment manufacturer. Case would sell its garden tractor segment to Ingersoll Power Equipment a year before the big merger. 

 

In 1984, Case’s parent company, Tenneco, bought the International Harvesters agriculture division. The purchased International Harvester agricultural division was merged with the Case agricultural division and rebranded to Case International, which would later become Case IH.

Under the new formation, the company produced the Magnum flagship tractor brand.

 

Two years later, Case IH bought the Steiger brand. And just as Tenneco kept the Case branding, Case IH kept the Steiger brand to date. Later in 1996, they purchased an Austrian manufacturer, Steiyr.

 

In 1999, Case IH bought the New Holland N.V. and became CNH, currently CNH Industrial. The merger with New Holland saw Case absorb former Fiat and Fordson tractor lines in Europe. It also revitalized the McCormick brand and redid the design and style of the Magnum and the Steyr tractors.

 

Technologies By Case Over the Years

The inception of Case was a result of technological innovation. Jerome Increase Case invented the thrashing machine that separated straw and grain.

 

Case started producing the gasoline engine in 1895, but it was not until 1904 that they sold the first gasoline tractor. At this time, the Case company had expanded into Europe and was doing well in that market. In the mid-teen years of the 20th century, they also experimented with kerosene engines.

 

Before the gasoline engine, Case used the steam engine, which halted its production in 1927. They produced over 30,000 steam engine tractors until the cease of production.

 

The founder built the steam engine in 1869 when he built the first portable steam engine to power wheat threshers. Seven years later, Case made the first self-propelled traction steam engine.

 

With the industry’s and technology’s development, the following revolutionizing technologies from Case were the Magnum tractor and the Maxxum tractor.

 

The Magnum tractor was the first to emerge after Case and International Harvesters merged. Maxxum followed four years later after the merger. The Maxxum tractor is an economical, multi-purpose tractor that stands out because of its serviceability, maneuverability, power, versatility, and performance.

 

In 1995 Case IH introduced the AFS (Advanced Farming Systems) system. The system employed satellite technology and other innovative solutions of its time to help farmers monitor yield and maximize productivity.

 

That same year they introduced the Autosoft sugarcane harvester, which makes sugarcane harvesting efficient. This technology was improved in 2013 by introducing the first two-row sugarcane harvester. The two-row sugarcane harvester improves the harvesting speeds and machine flexibility.

 

Three years later, Case IH expanded into the application equipment market by adding the production of sprayers.

 

Later in 2006, they introduced the first commercial cotton picker that could do modules as it is harvesting.

 

Ten years later, Case IH showcased an autonomous concept vehicle.

 

Nevertheless, seven years prior, in 2009, they had improved their engine and equipped them with CVT (continuously variable transmission) technology. This technology automatically balances the need for power and fuel efficiency.

 

In 2018, they improved the safety of tractors by introducing the Advanced Trailer Brake.

 

In 2020 and 2021, they worked hard to improve farming technology. In 2020, the AFS technology was upgraded to enhance farmers’ flexibility, productivity, and performance; in 2021, the AFS was further upgraded using telematics technology.

 

Case Tractors Take Home

The Case brand, started by Jerome I. Case, has partnered with farmers over the years. The Case name has seen good times and challenging times. It has adapted accordingly, and to this day, it continues to do so. Farmers trust the brand. Whether it is buying the whole tractor, or just Case IH parts, the commitment remains.