International Harvester

Just finished reading: A Corporate Tragedy, The Agony of International Harvester Company, by Barbara Marsh. It was an interesting read for me, as my Dad, my Uncle and myself all worked at the Farmall Plant in Rock Island.

Someday I will find an inexpensive way to read that. A couple of people that my dad knew had direct or indirect contact to people who worked at IH corporate maintained Navistar was pretty much 20 plus years in the making as a sizable group of stockholders and management want to shed or discontinue the Ag division. Both of these contacts actually were at a number of shareholder meetings. I don't think the 560 was as devastating as claimed in terms of reliability although it certainly did not help. Deere had its 4010 ready at a time when the market was shifting to 4/5 plow tractors and IH did not have a direct answer until Deere was ready to unveil the 4020 with a full range Powershift. Certainly there were other factors such as IH being too diverse for its management to handle in terms of products. Deere in the end understood that a strong financial division has a major positive impact on sales. Especially during the late 1970's when quite a few manufacturers had to turn to outside money which added to the purchase cost.

(quoted from post at 13:15:25 03/14/18) Someday I will find an inexpensive way to read that. A couple of people that my dad knew had direct or indirect contact to people who worked at IH corporate maintained Navistar was pretty much 20 plus years in the making as a sizable group of stockholders and management want to shed or discontinue the Ag division. Both of these contacts actually were at a number of shareholder meetings. I don't think the 560 was as devastating as claimed in terms of reliability although it certainly did not help. Deere had its 4010 ready at a time when the market was shifting to 4/5 plow tractors and IH did not have a direct answer until Deere was ready to unveil the 4020 with a full range Powershift. Certainly there were other factors such as IH being too diverse for its management to handle in terms of products. Deere in the end understood that a strong financial division has a major positive impact on sales. Especially during the late 1970's when quite a few manufacturers had to turn to outside money which added to the purchase cost.

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Contrary to popular belief the 560 did not kill IH. The 560 problems happened in 59/60. That did not fester for 25 years. If a bad product is going to kill a company it' happens pretty fast. 2-3 years at the most. It did give JD a chance to release their gen 2 tractors and to grab major market share. Several things killed IH. Bad management. That's the big one. Labor issues. but the biggest thing was trying to operate on too thin of margins. Company has to have money to pay for materials or goods up front. When any company gets to the point that they are borrowing money to make product they are on a slippery slope. Add that to their refusal to move into a power shift transmission that cost them sales?

I don't consider "A Corporate Tragedy" the answer all as to the failure. Just one persons take on it. Seeing as corporate records are not available to back any claim up as to fault? Well I just thought it was an interesting read.

Rick

I used to load new tractors out of there,back in the 70's. I was leased to Daily Express,our yard was across the river in Bettendorf. Remember coming up main st. and turning at the "Farmall Tap",to enter the plant loading yard. After getting loaded,you had to drive completely around the plant,getting to look in the big open doors and seeing the new tractors on the assembly line.

The Pioneer Library System will let you read any book they have available for
a small fee. I read "A Corporate Tragedy" ten years ago for a whopping five bucks.
System had access to a copy from Geneseo College. Worth checking out.

There's a copy in the four county Library system, You can borrow it if your local library is in the 4 county system. Actually it's if Delhi NY. Have your local library find you a copy. I once borrowed a book through the Mid York Library System and they found it in one of the Dakotas.

Whoa, you got loaded , then picked up ? ;^)

Most folks that I know that were in and around IH feel that labor union killed IH with a big strike right when they needed tractors. I was raised in and ih dealership and the company made their share of mistakes, bottom line is sure was a hard day in my life when we were told no more IH tractors.

IH historically had labor issues and the 1979 strike was devastating. Having said that the 1979 strike might have been survivable had the 1980 grain embargo and recession not happened. Had the strike been averted IH's slim profit margins among other factors meant it was in a poor position to whether out the 1980's. Instead of the Grim Reaper appearing in 1984 he might have held off until 1988 so in the end the result would have come out the same in terms of IH Ag. The difference might have been Case not waiting around for the pulse to cease for IH and made a move on New Holland. Maybe Ford would have bought IH for access to the IH sales network. My gut based on what I have heard from people close to IH in Chicago is that the Ag division would have been put up for sale around the same time that it actually happened but get more money because it would have been a bit more healthier. My understanding is that around the mid 1960's IH was being increasingly infused with non-farm background execs who had no personal interest in IH Ag.

A small piece of the story.
https://www.youtube.com/watch?v=RNqoO3VNduI

Really what killed IH,White,AC etc was there were too many tractor companies making tractors for the market something had to give,some hung on longer than others but the handwriting was on the wall.In IH case I've never run an IH that I really enjoyed being on for any amount of time.Most shifted mean and I know there are people that loved them guess that's the way it goes.
I have an IH 464 industrial now that I use like that one better than any IH I have ever run.

Like what others have stated, the 560 didn't kill IH out right you. However, when you sell over 22,000 560s in 1959 and then only 6,510 the next year, that is devastating.

I havent read marshs book but red power magazine had a great artice about IHs trouble last year. it said that IHs downfall may have started post WW2 when corporate wanted to keep military contracts and that money for R&D for military progects was given priorty and R&D for agriculture was cut so that could have led to the 560 problems. Then in the 60s IH invested in bad busniess deals . about this time Brooks Mccormick tried to get the company back on track but was not successful. It is my opinion the strike in 79 that finally did IH in.I remember that one of IHs parts warehouses was union and that parts had to come from farther away so insted of days to get parts it turned into weeks. also in the early 80s my dads farm was used by the local canning company to test self propeled pea combines. i was talking to one of the combines trouble shooters and he told me that they wanted IH engines but becase of the strike they couldn't IH engines so they went with Deere instead. i can't help but wonder if other people didnt't do the same thing.

Agreed 986 ! ,.the Buzz wuz, Case Was gonna to get married off to New Holland,,..somebody had to take responsibility for the ill mannered child that needed rearing at CASE , New Holland buckled and IHC was too intoxicated on its own poor earnings and LABOR pains , to look past the cover to see if there was anyprint on the pages of CASE 's .portfolio. Tenneco was not in a strong position either ,.The sadest truth , is the tragedy of events that tested IHC to the point she failed. The Unions added insult to injury. like having a snake loose in your house..

After reading the book, it seems to me that this is a fine example of what is wrong with Corporate America (no common sense). When you are flush with cash for several years (like after WWII & into the early 60's like IH's was) and you pay huge dividends on your preferred stock (like IH did)and then things get a little tough & you need operating cash, you don't continue pay dividends at the same rate per share on your preferred stock. To compound the problem, don't borrow money for R&D and then borrow some more in the same fiscal year, so you can still pay dividends on your preferred stock at the same rate per share that you did during the flush years. BTW, if you look at this carefully, I believe the author indicates that board of directors for IH and much of the management controlled most of the preferred stock. (Just my $0.02 worth. jal-SD)

The 560 did not cause IHC demise. I agree. However ,IHC was off balance when Deere surprised everyone with the 1960 LINEUP .Deere literally stole Case's thunder about their NEW 30 series ..It is never easy playing catchup , with 2nd bannana equipment and a dwindling market share.Even with Great innovations that showed promise , Trying to be everyones Daddie 's, and taking responsibility for everyone elses problem's,Unions, Ag Economy , Debt service ,, dragged the poor old IHC not " Down the tubes" but down the aisle to a Shotgun Wedding to someone "SHE "hardly knew but had always heard to stay away from them ,And That very nite SHE had to go to bed with Him and Bear offspring IMMEDIATELY ..Now tell me i told The story Right ?

I heard the same thing on the stock matter and that a fair amount of management and 2-3 blocks of shareholders being a little too cozy with each other made for an unhealthy arrangement for IH. I don't know how much cash IH had during the early 1960's but I had read that limited cash was a reason to develop the 60 series versus starting fresh such as it was with the 06 series. It would be nice to read actual company reports on that matter.

Bad management through the years......always spending money to start ventures in new fields that had been dominated by other experienced very successful companies for a long time like the home refrigeration and heavy construction equipment markets. Then they had salesmen in top management positions that cried for new stuff, and got it, to sell that wasn't field proven and that severely damaged their reputation in the most revered products they ever had sold and the backbone of their business through the years. For many years they were generous with their employees almost to a fault and spoiled them like a favorite child then had to almost punish them in later years. They never held enough cash in reserve to be able to finance new ventures so they siphoned the cash flow of the steady profit making operations so badly they couldn't bear the costs of updating the established products to stay competitive. Then near the end they put the company into the hands of a guy who didn't see the perils ahead in the agricultural economy or know the nature of agriculture at all and thought that huge inventories of product would eventually sell out and create large sums of much needed capital. It just didn't happen. Letting the strike go on and on at horrendous cost every day and borrowing cash at the high interest rates of the times because of sagging credit rating that was needed to sustain the company at all hurt terribly. The last management team inherited a mountain of debt that couldn't be covered in any way possible except to try to find a buyer for the division that had always been the heart and soul of the company. Had it not been for the acceptance and potential profits to be made with the axial flow combines it's likely there may never have been any buyer willing to take on the Ag division because of the condition it was in..

A lot of things went on. Like the continued production and marketing of the money losing Scout/travelall and pickups. They should have stopped production on those in the 60s. Trying to operate on a 2% margin when most companies think 5-8% net is healthy.


Rick

I agree with the others about going to your local library to get the book. All libraries belong to a network and can get almost any book for you. I was looking for a book; Japanese Destroyer Captain by Tameichi Hara a while back. There were no copies in any Minnesota libraries but my local library got a copy shipped in from Kenosha, WI.
In this age of the internet, etc we tend to forget what a great, free resource libraries are.

I currently work for a company that paid out a dividend far longer than it should have, but the fear was if they discontinued the dividend, the stock prices would drop like a stone.

There came a point where my company could no longer sustain paying the dividend. The moment they announced that, the stock went straight in the toilet.

That's probably why IH kept paying out the dividend.

(quoted from post at 04:34:09 03/15/18) I currently work for a company that paid out a dividend far longer than it should have, but the fear was if they discontinued the dividend, the stock prices would drop like a stone.

There came a point where my company could no longer sustain paying the dividend. The moment they announced that, the stock went straight in the toilet.

That's probably why IH kept paying out the dividend.

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You could well be right but people, especially people who don't invest, like to believe that something evil is happening. What a heck of a lot of em don't think about is that their 401K is just such an investment.

Rick

IH could have come out the 1979 strike smelling like a rose had they did the opposite of what they did do. As soon as the strike was over they began running production at maximum levels building up for what they was going to be a huge couple years in agriculture. They borrowed money to keep the production lines running to build up a massive inventory - that took a couple years to sell off. Had they ended the strike and only took back half the workers and run regular shifts they would have come in the devastation that was the early 80s in a pretty good condition.

The biggest issue with management was the president and CEO that was hired from Xerox in 1977. Building farm machinery was a lot different than manufacturing office equipment. After paying the guy millions to lose billions they finally got rid of him.

(quoted from post at 04:34:09 03/15/18) I currently work for a company that paid out a dividend far longer than it should have, but the fear was if they discontinued the dividend, the stock prices would drop like a stone.

There came a point where my company could no longer sustain paying the dividend. The moment they announced that, the stock went straight in the toilet.

That's probably why IH kept paying out the dividend.

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In case of a preferred stock, it is really a type of bond. Not paying preferred dividends is a default, not paying a dividend on common stock is not. A lot of preferred stock is held by insiders, but it has no voting power.

I always figured the 'Torque-Amplifier' killed IHC in the ag market

I was born in the mid-1960's and grew up on our family farm. I still spend quite a bit of time on the farm, particularly in the spring and the fall. We used to have pretty much all IH equipment on our farm until we hit the mid-1970's. Our 806 Farmall was the start of the change. It was a "lemon," which was mostly attributed to its gasoline powered engine, rather than the Torque Amplifier, which tends to come up rather often in criticism towards the products made by IH. When our local dealer had his IH dealership taken away, that cinched it. There were various product shortcomings/issues over the years, and some of these were raised by those who commented. There were management issues, which resulted in poor decisions being made which had long term and significant negative repercussions to the company. My father was involved in a product development survey group sometime in the 1970's, initiated by International Harvester. I tend to believe some of the outcome from that stemmed to the development and release of the 5X88 series, which I thought turned out to be a very good tractor, and basically served as the basis for the original Magnum tractor line. This tractor came out too late and during a time leading into the depths of the farm crisis. Had it come out earlier, particularly it being released rather than the 86 Series, it might have helped some, but probably would have stalled off what did happen for a few years. None of us really know for sure, but International Harvester struggled and ultimately failed. I tend to think of International Harvester and its failure in a similar light to our nation's domestic auto industry, particularly General Motors. At one time, General Motors was a powerhouse of a company, and I recalled reading that in its glory, GM was the single largest employer in this country. What we have today pales in comparison, and I believe Wal-Mart holds that distinction of single largest employer. Draw your own conclusions as to what I think about that analogy. There are certainly parallels between IH and GM. Both were "top dog" in their industry at one time. Both have had their struggles with unions. Both have had poor management during some critical times in history. Both had products rushed to production and sold to the consumer. Both have had resultant outcomes from all these difficulties/issues which led to problematic products sold to the customer. The loyalty of the ultimate purchaser is no longer what it once was. I cite this because I have had some "buyer's remorse" with the majority of my GM products, just like my father and grandfather had with their IH products they purchased in the 1960's and 1970's.

You are talking about Archie McCardell who headed Xerox. My father in law and his brother were long time Xerox employees in Rochester, NY. Anybody at Xerox could have told you what Archie was like and saved IH the aggravation.

The feeling was that IH's low profitability would have caught up with them at some point during the 1980's. Deere's Waterloo Works handled the outsourcing for Winnebago and Chrysler during the 1980's to keep Waterloo from being a money sucker. Deere also had JDFP to keep money rolling in especially when interest was in the teens. It would be nice to say if IH did one thing different that they would still be here but that just is not the case.

As I recall Archie McCardell laughed all the way to the bank and the union labor force struck at a very bad time.

I question if the Navistar management is any better even today.

dumb dumb moving from the old Harvester works in Fort Wayne to CHicago. that move is costing the stock holders every day because of the higher experiences associated with Chicago versus Ft Wayne.

Navistar guys make big $. when then 1st announced they were closing Ft Wayne and move to Chicago alot of engineers started looking. We were hiring and interviewed a couple. they were easily making 2X what we were paying (which was a little low but not 2X).

i've also heard the Chicago office has a revolving door for employees.

on a similar topic of poor corporate management. look at DuPont. pretty much nothing left due to managers. GM will very likely fail again. nothings changed from the bailout. Oliver/White is a similar story in White truck management not taking care of the ag side, and in the long run the truck side either. many others too.