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Farm Implement Dealer Consolidation

J

JD Dave

Member
I found this article interesting.
https://www.nytimes.com/2018/01/25/business/economy/mergers-worker-pay.html
It seems the companies are all encouraging the consolidation of dealers into many bigger stores owned by fewer people.
You can bet it's not real good for the customers and employees.
 
As one who left a consolidation dealer mess, I can tell you they can and do make it miserable for their workers .
 
(quoted from post at 07:20:37 02/04/18) I found this article interesting.
https://www.nytimes.com/2018/01/25/business/economy/mergers-worker-pay.html
It seems the companies are all encouraging the consolidation of dealers into many bigger stores owned by fewer people.
You can bet it's not real good for the customers and employees.
Click to expand...

Why would that be bad for either? Volume buyers normally get better prices that they can pass onto the customer and most larger companies offer better pay/bennies for the workers.

We have 3 chain owned dealers in the area (out to 60 miles one way). 2 are decent to do business with while the 3rd is more of a small dealer trying to play with the big boys. Both the CaseIH (Titan) and JD (RDO) dealers are pretty good while the AGCO one is pretty bad. I know people who work for both Titan and RDO. All seem OK with pay and bennies. All would jump ship if conditions, pay or bennies were not good.

Look at it this way. Larger companies pay less for better health coverage for employees. Simple math on that. The insurance company gives them a better rate because they are buying for hundreds of employees instead of 10 or 15. Same thing applies when getting a 401K set up. Cheaper to set one up for a couple of hundred employees than it is for 10/15/20. The only real benny to working for a small place is you MAY.....MAY have a friendlier work environment.

Yea we all fondly remember good ole Joe's tractor emporium. Went to school with him/his kids ECT. That doesn't mean he wasn't making a bigger margin or paying his employees better. An example is here. The mom and pop places that swore Wal Mart would drive em out of business are still here, 10 years later. Charging 10% less than they were. That means that they were gouging us by at least 10% before wally world moved in.



Rick
 
Old Tanker. I usually agree with a lot of your comments, but,
having put up with it for four years after 33 years same shop when
it was sold, it was pure hell.
Now the dealer I went to after that is being expanded to about15
dealers and the whole crew are a soured bunch. Lot of bitterness.
 
I don?t know where Oldtanker gets the idea that it?s not a bad thing, but it is. There?s less competition for both employees and customers, and both get screwed as a result. Ag equip mechanic is a very skilled trade requiring in-depth knowledge on tractors, combines, hay equipment, tillage equipment, seeding equipment, etc. Beyond that you aren?t dealing with only equipment made in the last 5-10 years.. you?re dealing mostly with stuff made in the last 15 years, but some dealers also see a lot of older equipment, from 30 years old, to 50 years old. Deere is by far the worst for pushing consolidation of dealers. They aren?t just selling consolidation on economies of scale, and discounts that encourage it, they sell it on, ?if you don?t, you won?t be a dealer? Don?t consolidate, and you won?t have a contract next time around. CNH is mostly indifferent I think, if you want to, here?s some discounts, if not, as well as you?re doing well, and selling enough parts and wholegoods, we don?t care what you?re doing.
 
Not necessarily the concrete company I worked for bought out several competitors when I was there employees of all companies ended up with some better wages and better insurance since we were in a bigger labor pool.Prices to customers weren't really affected but we were able to off more varied products because of increased sales.
 
Also could mean there margins are 10% less which
is more likely the case. Walmart has a lot more
buying power.

Vito
 
Consolidation is not good for any one but the dealer/manufacturer..it eliminates area competition,developes hard feelings with the mechanics and sales people..I see it here,,I use to like to go to a dealer to pick up parts and visit a bit,,but not any more,,it's been over 2 years since I have been to one...If Farm prices stay low we will see some serous issues develop...the bigger they are the harder they will fall,,,our mega dealer puts you in mind of one of those guys in a TV show that is laundering money for the mob...and I would not be surprised if they aren't....
 
Oldtanker: I do not agree with any part of your discourse. The consolidation around here means I can only get maybe 2 completive bids on any new equipment I would buy. I have to travel for 50 miles to even get two.

Farmers are kind of a stupid bunch in that we have let this happen. IF a car dealer shares their BID on a new car with their other dealerships it is illegal and called price fixing. With farm equipment it is exempt from those consumer protections. So if your buying a $30K car your protected from price fixing but if you buying a $250K tractor your not.

With JD, the dealerships and JD company require the salesman to use JD program called "Sales Quote" when pricing you equipment. When the salesman finishes the quote it is stored and goes system wide among all the dealerships in the chain. So when your name is entered by any other salesman of that chain they get the original quote. Every chain I know of has the policy of that first quote is the price you will get from ALL the stores in the chain. It is kind of funny how that is not price fixing?????
 
Whether you like it or not Deere obviously has had the better business model of all farm equipment companies they prosper while others fall by the wayside.These days I'd say the
majority of sales and profits come from 2 groups very large farming operations and homeowners/hobby farms medium size farms have to take what they get.Money drives all business
decisions as it should,sentiment don't pay the bills or keep the shareholders happy.
 
It's not price fixing because a single individual company can't price fix within itself. It would be price fixing if that quote went out to all JD dealers in the state and/or country, and they could see that price and would all quote you the same thing. What is anti-trust/anti competitive are 'in territory' discounts. You would likely know more about this than me, but my understanding of it is that Deere corporate assigns a territory to each dealer, which is what you would expect. Thing is, selling to a customer in 'your' territory gets you, and only you, discounts of several K (say 5K). To meet your quote, another dealer would have beat your quote by 5K, and to beat your quote, their quote would have to be more than 5001 less than your dealer. If crap like that ever went on in the automotive marketplace, the fallout would be unimaginable. Fines would go right out of sight. If Deere owned all the stores, then price fixing couldn't exist, because like I said, a company can't be anti competitive within itself. Same would go for GM, Ford, etc. Luckily for the consumer, that doesn't tend to happen.
 

Not in NH

New Hampshire's "Auto Dealer Bill of Rights" hurdled its final roadblock back in October 2016 when the U.S. Supreme Court declined to hear a legal challenge to the law. As a result, New Hampshire automobile dealers are better protected from suppliers—and so are equipment dealers.

New Hampshire Senate Bill 126 amended an older version of the law, RSA 357-C. The new law changes the definition of "motor vehicle" to include farm and utility tractors, forestry equipment, industrial equipment, construction equipment, farm implements, farm machinery, yard and garden equipment, attachments, accessories and repair parts. Off-highway recreational vehicles and snowmobiles were already included.

"It's very important to have laws that level the playing field between dealers and manufacturers," says one New England dealer. "That is exactly what this law in the state of New Hampshire does for equipment dealers. Dealers worked hard as a team to make this law happen. It's something to be proud of."

The Northeast Equipment Dealers Association (NEDA) worked closely with the New Hampshire Automobile Dealers Association to lobby the law's passage.
 
I would agree that consolidation is usually only good for the surviving dealer and the manufacturer in most cases. I would also like to mention that at least here in New York that going mega is filling a vacuum where it is not a force out of some other dealer. There were dealers here regardless of color that were dying because the dynamics of the business were changing and were not going to get bought out by an individual. Not only are there fewer farms here but the rapid increase of Mennonites mean sourcing parts through their own networking bypassing local businesses. Also, the larger towns and cities are dying economically so there are more people buying big box outdoor power equipment and fewer buying Deere, Kubota, and NH badged equipment. I don't like mega but mom and pop were not making a living anymore in a lot of cases. As to the notion that Deere is the only one pushing the mega concept that just is not true where I am. Go back to the 1970's Case went mega with one dealer and there were a couple three location IH dealers. I don't recall any 3 location Deere dealers back in the 1970's.
 
There are two major things that many Americans feel obligated to believe, that kind of wrap into one. Captalism is good, and therefore, greed is good. You show me where in the bible has greed, EVER, EVER, EVER, been a good thing. Greed is not good. All of these companies do very questionable and often corrupt things in the name of money. Of all the system's in this screwed up world, capitalism is good, but it does not therefore follow that greed is good, because it isn't.
The only prefect system would be communism with Jesus in charge, short of that, capitalism is where it has to be at.
As far as the majority of sales and profits coming from 2 groups, I'm not so sure about that. I'd have to see the numbers before I'd go making a claim like that. What I can tell you is that sales and profits don't go hand in hand. I don't know if you're ever heard of Multi Unit Discounts(MUDs), but the discounts are substantial enough that if a manufacturer is having a tough go of it now, if every customer was large enough to qualify for MUDs, the manufacturer wouldn't be able to make it work.
You may be over estimating how many CUT's are sold, and while you'd think the margins on them would look really good, in the case of Deere, they don't manufacture any of their own CUT's, instead, sourcing them all from YANMAR, which means they aren't as competitive as they could be. At this point, Deere hasn't figured it to be worth the investment to manufacture their own CUT's, which should say something about the scale and/or profitability. Either that or Yanmar can build them in Japan and transport them 1/2 way around the world for less than Deere could build them in North America.
Now, beyond all that, 97% of farms in the US are family owned (2015 stat). I'm aware there are a lot of large family owned farms, but to supplement that above statistic, 88% of all American farms are considered 'small family farms'. A small family farms is one with a GCFI (gross cash farm cash income) of under $350,000, which I'd consider to be a very fair estimation of farming in the US today.
 
We had three JD dealers here. Two small family owned and one large family owned store. It was nice to have three. If one didn't have what you needed the other two did.

The two smaller dealers were always 20-25% less than the large dealer. In the late 90's the large dealer started buying up the small ones. Started out with two, then three, Now have 17.

They send out letters telling how they can better serve you by having more dealerships mean more parts inventory and faster service. Later they send out letters stating they have too many dealerships and are closing one closest to you.

I collect toy tractors. Use to buy toys from the two little dealers. I learned not from the big dealer. His toys were considerably higher. In fact, I can now order toys online from other JD dealers pay the shipping and still save $20-30 on one toy.

I think the big dealer parts prices are crazy. My big dealer wants $90 for a model 60 distributor cap, $120 for the starter drive. For a model B they want $100 for the brass choke shaft.

Big dealers don't care about the customer. No longer are dealers open on weekends during harvest. Big dealers only care about there bottom line.
 
Many interesting comments here. But many of us are part of the trend, too. We farm more acres and milk more cows than we did 25 years ago. We are part of the same trend. I can't blame the dealer for doing what I did to stay in business. Yes, I'd like to think we still have the same family values we did 25 years ago, but then again, maybe not in the eyes of others.

And are we helping the situation with where we buy things? How many shop online? Or Walmart?
 
Farmer Boy and Traditional Farmer: Your both wrong on this. The Ford dealership at Dyersville is owned by Browns that also run the store at Guttenberg. Then got busted around 10 years ago for sending quotes back and forth. The selling of autos has a lot of consumer laws to favor the consumer. You can see the consolidation going on in car dealerships too.

I still think that much of what John Deere is doing should be illegal. They are aiding and abetting price fixing by their programs. They get away with it because the state they are based in have factories that each state is afraid of loosing if they take on JD.

Over the last fifty years the federal anti-trust enforcement is a total joke. Walmart, Microsoft, John Deere, Bayer/Monsanto and others have created monopolies that make Rockefeller look like a piker. The consolidation of seed and chemical companies is bad too. There are less than 3-4 big players owning 80-90% of many traits. While the average American is watching spoiled brats play a game to day their getting raped by monopolies stifling competition.
 
You guys car about the big dealers that have many stores. but lets look what has happened to Farming i will use may county as to compare. 50 years ago there were a farm on nearly ever Qt section in Lake county South Dakota. Most all countys had jd ,ih ,case and some had other brands there are 36 sections in one township and 16 townships in lake county , now thats a lot of farms as most were i/4 and the btos were 1/2 sec, when i retired 2008 ascs said there were 700 farms i was farming 5 an 1/2 qts that ranked me in the top 120 in the county now this has happened all over the country, so dealers have had to get bigger or get out we now have Case ih an JD here an its 40 miles or more to any other dealers Deere built new about 6 years ago Cost 4 mill plus. the deere store here is one off 22
 
While I admire Jesus greatly he's not the person I want to pattern as an economic model as he never owned anything and died broke.Yanmar hasn't built tractors for JD for quite awhile.
Like I said like it or not JD knows how to survive and prosper in a tough business where most others have fallen by the wayside.Sort of like a friend of mine that sells Kubotas he's not out to get the guy that is shopping price he's looking to sell to the guy that's only worried about whether he can get financing and how much the payment is each month.
 
Those stores are not set up as independent business of each other the different locations are set up about like branch banks are set up in relation to the main bank they're still one business
no matter how many locations they have.
 
And look what happened the ones that charged less probably not enough to make a decent profit had to sell out to the larger one that charged more.Now which had the better business model?
 
I 100% believe I'm right on this. I would think that the same family (Brown's) owning 2 dealer ships IS NOT the same as the family (Brown's) owning 1 dealership with 2 locations. (i.e- If they both carried the Victory Ford name, and were operated as one business with 1 main store and 1 (or more) satellite store(s)).
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Anti-Trust isn't what it used to be, whether in the US or Canada. I know when it's cut and clear, they tend to fine them pretty hard. There were a few gas stations in 2012 here in Ontario that got fined 2+ million between 3 of them for price fixing. The 2 national chains got the worst of it, at $1 million. When they can get the needed evidence, they will fine them everything they can.
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They do try to do their part when it comes to preventing monopolies, such as the CNH merger, and Deere's attempted acquisition of Precision Planting from Monsanto. Deere and others seem to be so dang sneaky about anything that could be construed as anti-competitive, I don't know how they hide it, but some how they do.
 

OLD TANKER Rick don't take this the wrong way, but how can you support this statement: "

Charging 10% less than they were. That means that they were gouging us by at least 10% before wally world moved in."


Have you ever been self employed? I have. There were times when I made a pretty good income. Other times when the economy was off I did not. You can't cut your employees ay back if you need to keep them through a slow time. You have to cut your own pay back. Is that gouging?
 
Later they send out letters stating they have too many dealerships and are closing one closest to you.

That right there is exactly what the corporation I worked for did. Bought a dealership that was competition, promising the owners it would stay open and almost immediately had an auction on the shop and equipment. Then closed the dealership I had worked at, incorporated it with a another location. Then closed that one and sold the whole works that was left to Titan. Had a bunch of legal troubles as well with unsavory dealings they made. Really soured a lot of people.
 
Are you fuuking kidding me? Doesn't seem to matter how many times you're told, but dealer profitability has hardly ever been what consolidation is about. Deere pushes consolidation. Like I said before, and this is fact, if they don't consolidate, they cease to exist. Those smaller dealers were doing just fine with a loyal customer base. That's what Deere doesn't seem to realize. Eventually they're going to wear out their welcome.
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Deere has loyalty mostly for one reason. The Great Depression. They didn't repossess equipment, despite the owners being in default. Deere Corporate recognizes this as one of the main reasons for the extreme customer loyalty they have.
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I'll tell you a quick little story. Once upon a time in this area of Ontario there were 2 Deere dealers. One in Teesewater, one in Paisley. Both had a very good business with an extremely loyal customer base. In the late 70's, a dealer quite a ways to the south told Deere (or Deere made the opportunity available to them) they could build a new building and have that entire territory. They did this, Deere closed the other 2 dealers down, and the new dealer was DEAD as dead could be. It got to the point that the company that built it sold it because it was nothing but a loss from day one. Farmers refused to deal with them because of the other dealers being shut down. The guy that bought it spent the next 20 years building up their customer base. Very long road, but they now have a fairly loyal base. Pint is, Deere's policy got them into trouble. It was somebody else's business model which made it a viable business.
 
Now you're just showing your ignorance on the subject. Yanmar builds EVERYTHING from the 1 series tractor, right up to the 4 series, as well as originally having a lot to do with the original 5 series (5200, 5300 etc.) Everything on the 5x00 series is essentially a Yanmar except the engine)
 
Funny ain't it? Not to make this about me,but newcomers here seem to think I'm some kind of lefty or something. Fact is,if they read the things I was writing ten or twelve years ago,they would never believe I was the same person. I started to come around to realizing half a dozen years or so ago that what's good for big business and investors is screwing the rest of us right to the wall. Glad to see from some of the responses that some of the bloom is starting to come off the rose and others are starting to catch on to the same thing that I've come to realize over time.
 
Pleasing Deere is part of the successful business model,and really you have no idea how much each dealer is making or not.If JD wants one to succeed and one to fail that's the way it'll
go as JD holds all the cards.
 
Do you support Monsanto's monopoly in the seed business that has way more control of that than any tractor company has on tractor sales? Monsanto's monopoly doesn't
bother me I figure anyone that deals with them gets what they deserve.Pretty much the same with JD as far as I'm concerned.Best way to break up any racket is quit spending money there.
 
Again, your ignorance on the subject is showing through. My short story is all fact. Got it right from the horse's mouth. That dealer was dead and that's a fact. Plain and simple, in that case, Deere's pro-consolidation business model failed them. Some body else's business sense made that dealer profitable again. If Deere did that here, I have no doubt they did it elsewhere as well. As far as Deere holding all the cards, if they keep it up, the tail will get to wagging the dog. It wouldn't be inconceivable for say the 3 largest Deere dealers in the country to tell Deere this is how it's going to be. Deere would risk loosing 1/2 the dealers in the country if they decided to play hard ball and lost.
 
I left my favorite John Deere dealer becuse they got bought out buy a mega store rdo I think I went to another dealer that only had two stores and they were a great dealer but now they got bought out buy a mega chain Stotz so now I guess it?s back to my original favorite dealer they still have and have always had the best prices on parts and the most parts in stock
 
That's pure dreaming Deere dealers are not going to bite the hand that is making them big bucks.They could care less what you or I think of the situation.How much did you spend at a
JD dealer last year?
 
Exactly. How many here shed a tear when the neighbor who had 50 or 100 acres of ground could not make it or his job that paid the taxes on those same acres disappeared forcing him to sell out. Especially if it happened during the 1980's or 1990's when ground was just a fraction of what is currently or was just a few years ago in some instances. Did we as survivors refuse to grow in size to maintain a level of fairness or did many hope that the selling neighbor was several years out of touch on land prices therefore selling cheaper than he should have?
 
No I don't,but the evil Monsanto has been bought out and for all intent and purposes doesn't even exist anymore. Every time I found a source of seed corn that didn't cost an arm and a leg,Monsanto bought them out then sent me a letter telling me why it was so darned good for me. I guess now the new parent company will do it until they're the only one left,then it'll be Happy Days Are Here Again for everybody won't it.
 
Does that law also say dealers can't go broke? Drive through most small towns and see the vacant stores and old long
closed auto dealerships. Their suppliers did not put them out of business, any more than some evil spirit put the
farmer with 40 acres and a mule out of business in the 30's. Economics, a changing world, and customers that can now
drive 30 miles to buy stuff changed their profitability equation, just like the mom and pop grocery stores now long
long gone.

Looking for a culprit?......look at the locals driving 30 miles to buy their groceries and new cars and to visit the
doctor and eat in a restaurant....and on and on and on. What law do you have in New Hampshire to stop that?
 
Less than $200. I don?t like how Deere does things, choose to support my CIH dealer. That and I work for a CIH dealer, but even when I worked for a Deere desler, I spent less than $1000/yr. Even getting parts for a very substantial discount where I am now, and NO discount at all at the Deere dealer I worked at (9 locations), I?d put money on it that my current employer has made more off of me than the Deere dealer ever did.
 
Case IH has been closing as many stores as John Deere has in this area there used to be ten different small stores within a 200 mile radius now there is just two mega dealers
 
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