Harvestor Company

I am currently reading a book by Barbara Marsh titled, A CORPORATE TRAGEDY. It's about the demise of the International Harvester Company. A very interesting book and kinda sad. They had such brilliant leadership, yet were blind to the things that were slowly killing the IH business. They were so diversified that they didn't have the capital to maintain and upgrade their factories, to push sales, to do research, and any number of other things that require money.
Labor cost were a big problem for IH from as far back as the turn of the twentieth century when Labor unions began to form.
One of the companies biggest mistakes was in trying to quickly build and release tractors, trucks, and construction equipment that was poorly designed, in an effort to keep up with Deere, Cat and other big name brands. The bottom line was that they were more interested in "selling" than they were in research and development, mainly because "sales" brought in the money the company so desperately needed. Company management believed IH had such a loyal following, that regardless of poor design and an often a poor quality product, the customers would remain loyal. Time proved them wrong.

The book is no longer in print but can be borrowed from most state or local libraries.

Thank you for your post, it is very well written. A sad story indeed.
Dave

Besides all that, they continued to pay those who owned "preferred stock" the same dividends that the company had been paying since the end of WW II, when the company was "rolling" in cash. The corporation even borrowed to do it. Oh, by the way, most of the "preferred" stock owners were on the corporate board of directors.

That's a great book! I also recommend checking it out from a library. People want a fortune for that book. Bought mine from a library discard shelf for $5. Probably not going to happen anymore. The follow up to that is called Red Tractors. A good book that overlaps the first one & fills you in on what happened up 'till 2013.

Mike

Couple of other blunders that were made early on that may have saved the company. This information comes from a book I have on the history of the IH truck division. It was the only division that survived the bankruptcy. In the early '60's, Studebaker approved truck division management with a proposal that they would drop there truck division as they only had about 1% of the light truck market. Studebaker would sell IH in the urban market, including the new "Scout" that IH had recently marketed. Studebaker had a good urban dealer network. IH would then sell the recently developed Studebaker Larks through IH's excellent rural truck dealership network, benefiting both companies. Truck division was excited, as it already had about a 32% market share of the light truck market. The bulk of the rest of the light truck market except for about 5% was divided between GM & Ford. At the time, IH had a market share that was larger than either Ford or GM, in their opinion. Corporate leadership "nixed" the idea. I wonder what a difference that merger that merger may have made in the automotive market place. Maybe the "Big Three" (Chrysler,GM & Ford) wouldn't have been able to squeeze Studebaker- Packard out of the automobile market.

Corporate sacrificed all aspects of the business in order to pay dividends and keep stock prices up as long as possible.
Until the ponzi scheme failed.

it is sad. similar stories have happened to many other companies as well including some farm equipment companies.

until the stock holders stand up and demand changes it won't change. there are no CEOs worth the millions they make. yeah they are probably worth a high salary but few are worth what they get.

IH never went bankrupt. They sold ag to Tenneco and Case IH was formed. International Harvester continued then and today as Navistar with International brand trucks, among others.

There could have been a big fourth automaker if...

Corporate execute James Nance at Packard had a vision of merging the four independent auto makers into one large company that would have been called American motors. It would have included Hudson, Nash, Studebaker, and Packard.

Unfortunately, Nance was killed in a crash before he could get his plan started. Ultimately, Packard bought Studebaker in what was probably the worst business deal in automotive history. Packard was flush with cash while Studebaker was drowning in debt. Studebaker took Packard down as they were sinking, and pretty much used what was left of Packard's cash to shore themselves up.

Meanwhile, Hudson and Nash merged to form what became known as American Motors. Their cars were of poorer quality than either of their parent company's cars.

I think that if Packard had stuck it out alone, they might have survived. But, going into 1958, the country was in recession and the economy was not as strong as it had been a few years earlier. That was why the decision was made to continue with the less expensive Studebaker cars rather than the Packard luxury cars. For the most part, they failed from poor management decisions rather than being "squeezed out" by the big three.

I have the book . The unions felt free to strike at the worst times as well. Good book . That Archie McCardell laughed all the way to the bank. He was also hired as the most highly paid CEO in USA.

Why would stock holders stand up and demand change when they are collecting dividends and their stock prices are going up-up-up?

"I DON'T WANT MONEY! RARRRRR!" Really?

I wonder if JD might be following that business plan 4 to 5 decades later?

Paul

The only reason IH didn't go bankrupt was because Tenneco, an oil company, had a bunch of cash and wanted to get a line of agriculture equiptment to go with their ag tractor division. So they bought a bunch of IH debt & then the rest of the company.

They were already into heavy construction equiptment manufacturing as well as a agriculture tractors. Tenneco had dumped the Case farm machinery line when they had acquired it because they originally only wanted the construction line, but continued to make ag tractors because of sales of the popular ag tractor.

Case dealers had to pick up short lie equipment lines to survive. After the "merger", if there were two dealerships (Case & IH) in the same town, which ever one had the largest volume of business stayed if they didn't sell an other tractor brand. If they sold another tractor brand, they were automatically gone from C-IH. The other was told they were going to lose C-IH brand. I know of several dealers that survived because they had an excellent short line equipment business & loyal customers. Some even picked up another tractor line or survived because they sold another ag tractor line to begin with. Ask Don Livingston how he got started in the "old" Case tractor parts business sometime.

Also, don’t forget, they sold Solar Turbines to Caterpillar. Cat paid more for Solar than the total value of IH stock at the time. The benefits of the high purchase price though (to Cat) is that they didn’t take on any of the massive IH corporate liabilities of the time.

I, too, read the book a few years ago. It's a very sad story but very revealing.

Tom in TN

According to my copy of "International Harvester Trucks", IH management screwed up again during the gas "crunch" of the early '70's. All major engine makers were looking to develop a V-8 diesel. Ford came to IH truck division & offered some $ because they knew IH was working on investigating how it's 5 main bearing V-8 gas engines might be able to use that block design for diesel use.

Ford's deal was that it would put up a bunch of $ that IH could use for R&D. Then Ford wanted to buy "X" number of the engines for Ford to use at what it cost IH to make them. Truck Division thought it was a real deal because they couldn't get enough R & D $ from the corporate headquarters. Corporate nixed the deal, of course.

So who later purchased the light diesel engine division from IH Corporate as part of the truck division's survival plan? And for less $ than was offered as R & D money? So - where did Ford's Power Stroke Diesel engine basic design come from?

I've had two people tell me over the years that the stockholders and management from the early on 1960's onward were divided over the future of the company. The previously mentioned two people worked for IH corporate in Chicago said there was a lot of intense bickering as to whether IH should become a truck company only or retain agriculture as well as the other divisions it had. Navistar was a dream come true for those who wanted to have a transportation products only company.

I don't know that IH's ag product line was any worse than any of the other major ag builders. They all had hits and misses. Compare 1970 to 1980 and I think that IH upped its designs substantially so if they were not state of the art that they were most likely in the top quartile. 800 planter versus 56 planter. 1460 combine versus 915 combine. 720 chopper versus 650 chopper. 684 tractor versus 674 tractor.

IH the last few decades was not the low cost producer that some of its competitors were. The 560 hurt IH but was far from devastating for IH. I've heard guys say that they could buy an Oliver 1850 or JD 4020 diesel synchro for less than an IH 806/856. I remember it said during the 1970's once the 1460 combine came out that JD still could undercut on price with its 7720 combine. 1440 combine versus 6620 combine. When the 6620 combine hit the market the area JD dealer said he could put a farmer in a 6620 combine with corn and grain head for around 50,000 dollars. IH 1440 seemed like they were nearly 10,000 dollars higher.

Disagree that sale to Tenneco was the only thing that saved IH. Half a billion dollars cash from Cat in 1981 certainly helped.

BTW, $.5 Bil cash from Cat, is about $70 Mil higher than IH got from Tenneco (cash and stock value) for their Ag division.

Despite the first two letters of my handle I'm also sad. Until 1976 we had all IH equipment. Harvester had a strong presence in New Jersey in the 40's, 50's and 60's. Oliver had a chance with the potato growers but John Deere was near non-existent around here during that time. Then, - my uncle, - who had actually worked for the IH dealer in the 1950's and came to partner with my dad, said in 1976, - "That's it, we're going to Deere. The first green here was in the form of a 2640 for the pto orchard sprayer. The rest is history. The story I got about Harvester was that they ended up like General Motors in the 1990's with a lot of red-tape, higher-up, over-paid, fat-cat managers and the company just simply couldn't support that culture.

As long as fiat cnh is in the farm equipment business Deere doesn’t have anything to worry about

Archie was a idiot that out smarted the IH boys, but he was no manager! He did more harm that good to the company! He should of never been hired!