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Agribusiness Sample Lesson
AB105 History and Growth of Farm Equipment Companies
MAIN IDEA: How did farm equipment companies become what they are today? To find the very first farming tool you would need to search ancient history to find the inventors of the hoe, rake and scythe. The best guess on when the seeds for our modern farm equipment industry were planted is 1831. That is when Cyrus McCormick invented the first mechanical reaper. McCormick also proved to be a skillful business entrepreneur. While some earlier inventors had patents on mechanical reapers, McCormick gets much of the credit because he refined his invention and captured the grain binder market. His company grew to become International Harvester. A few years after McCormick invented his reaper, an Illinois blacksmith by the name of John Deere introduced another history-making innovation. Deere was a Vermont blacksmith who followed the pioneers moving westward. He settled in Grand Detour, Illinois. There he set up shop shoeing horses and repairing equipment for the pioneering farmers who were moving into the area from the East. Farmers coming into Deere's shop complained that the cast iron plows that had worked well on light eastern soils did not work in sticky prairie soils. Deere was convinced that a plow with a highly polished and a properly shaped moldboard and share ought to scour itself as it turned the furrow slice. In 1837, John Deere designed the first steel plow using steel from a saw blade. That invention became a key tool used to break open the prairie land that became the U.S. Corn Belt. There were many other inventors and skillful entrepreneurs who left their mark on the farm equipment industry. Another was Jerome Increase Case who developed an innovative threshing machine. In 1842 Case founded the "Racine Threshing Machine Works," which became J.I. Case of Racine, Wisconsin. Case moved quickly to add other equipment to his line, including the steam engines used to power his threshing machines. By 1886 Case was the world's largest manufacturer of steam engines. Many other Case tools were added, even a Case automobile that was marketed in 1915. Many other names deserve credit for early innovations. One is Henry Ford who introduced the Fordson tractor in 1918. Another name was Harry Ferguson, who invented the three-point hitch that Henry Ford used on the innovative Ford-Ferguson tractor. HOW COMPANIES GREW Each farm equipment company has a story behind it. Not all have followed the same path. In each story individuals and boards of directors made business decisions that helped to shape these companies. Often they started when an inventor had an idea. But that alone was not enough to create a company. Additional business and marketing skills were required to generate revenue and profit from the invention. As these companies grew, more decisions were required. What additional products could they offer? How much could they afford to invest in new product development? What could they do after a product failed, or when an economic setback left them with losses? The decisions made by company officials as they faced these questions and problems are largely responsible for the kind of farm equipment industry that has grown to serve producers today. Some well-known companies have succeeded while others have not. Oliver, for example, became well-known for its plows and introduced its first diesel tractor in 1940. Despite its efforts, Oliver was unable to survive. In 1960 the White Motor Corporation purchased Oliver and the name Oliver disappeared from farm equipment in 1976. About the same time Oliver introduced its diesel tractor, International Harvester (IH) was also introducing its first new diesel wheel tractors. IH also grew into a large company and enjoyed many years of business success, but eventually was sold to J.I. Case. THE DEERE STORY While some familiar names have disappeared, Deere & Company was able to survive the test of time. John Deere was a business entrepreneur as well as an inventor. He planted the seeds for a business that grew into the world's largest producer of farm equipment. After inventing his self-scouring plow, Deere broke away from the blacksmith's tradition of building tools on order for customers. Instead he decided to build a business by manufacturing a supply of plows before he had orders for them. He then took them to the country to be sold. The fame of his "self-polisher" plows spread quickly. The demand for Deere plows soon exceeded the amount of steel that could be found in the area. In 1843 Deere arranged to import steel from England. By 1846 he was able to get more steel from Pittsburgh and in 1848 opened a new factory in Moline, Illinois, to take advantage of the water power and transportation offered by the Mississippi River. John Deere the inventor continued to look for ways to improve his plows and was constantly making changes in design. While new business partners often objected, John Deere insisted that he would "never put my name on a plow that does not have in it the best that is in me." Deere & Company takes pride in that tradition and still invests heavily in research and development. John's Deere's business was incorporated in 1868, becoming Deere & Company. His son Charles proved to be a forward-looking businessman. Under the leadership of Charles the company grew, offering a wide range of steel plows, cultivators, planters and other implements. In addition, Charles developed a marketing system through a network of independent dealers. Tractors did not become a part of the Deere line until 1918, 11 years after Charles had died. It was then that Deere & Company purchased the Waterloo Gasoline Traction Engine Company. Even then, mergers and acquisitions were a part of the farm equipment industry story. The purpose was to acquire designs and patents as well as markets. A great-grandson of John Deere, Charles Deere Wiman, directed the company from 1928 to 1955, through the economic depression of the 1930s and World War II. Even during hard times the company continued to grow. Research and design efforts continued during the war years preparing the company for a strong postwar market. The research and design base put in place by Charles Deere Wiman helped the company to experience one of its greatest periods of growth from 1955 to 1982. During that time it became the leading producer of farm equipment in the world. It also became a major producer of industrial and lawn care equipment. Those moves have helped the company to offset the ups and downs in the farm economy that often lead to sales losses and unsold farm equipment inventories. Today Deere & Company does business in more than 160 countries and employs approximately 43,000 people worldwide. It promotes itself as a company that invests heavily in research with a commitment to high product quality. A HISTORY OF CHANGE Deere & Company has survived and been successful because it was able to adjust for changing market conditions. It got a head start on building a strong marketing organization. At the same time it developed a long line of farming tools that farmers needed and it built a reputation for quality, durability and good service. Many other companies tried to do the same. Many of them, such as International Harvester, J.I. Case and Massey-Ferguson were competitors of Deere for long periods of their history. But eventually, each of them has been acquired by another corporation or merged to form a new company. Many of these changes have come recently, but they are not entirely new to the farm equipment industry. There are many examples in earlier farm equipment history. The story of Ford tractors is one of them. That story dates back to before World War II. THE FORD STORY The steel-wheeled Fordson tractor from the early 1920s was the first smaller tractor to make an impact in the switch from horses to tractors. It was very popular and at one time dominated the market with 70 percent of all farm tractor sales. The Fordson became outdated after Allis Chalmers introduced the first pneumatic rubber-tired tractor in 1932. When the Allis Chalmers rubber-tired tractor succeeded, other companies quickly rushed to add rubber-tired models. In 1938 Henry Ford and Harry Ferguson of Great Britain entered into a handshake alliance that produced the Ford-Ferguson tractor. It had a unique hydraulic hitch system to operate tractor-mounted implements. It became known as the three-point hitch. That hitch system had been invented by Ferguson. It was Ford, however, who designed, built and marketed the Ford-Ferguson tractor, using the Ferguson system. Since then that idea has been used on many other makes of tractor. After World War II Henry Ford II pulled out of the handshake agreement and continued to produce Ford tractors with the same system. Ferguson went to court and won the largest settlement in Ford's history. Ferguson then produced and tried to market a similar Ferguson tractor. In the early 1950s Ferguson merged with Massey Harris of Canada to form the Massey-Ferguson Company. That name is now among the products of AGCO Corporation. Meanwhile, Ford tractors and implements continued to be a factor in the market into the 1980s. In 1986 Ford purchased New Holland to form Ford-New Holland and just five years later in 1991 sold out to Fiat GeoTech, an Italian company. In 1999 Fiat merged its ownership of Ford-New Holland with Case-IH of Racine, Wisconsin, to form a new company named CNH Global. Case-IH had also been formed as the result of a major farm equipment company merger. Both companies had periods of great success, but eventually they were not able to survive as well as Deere. THE CASE-IH STORY International Harvester enjoyed a very long history of successful service to U.S. and world agriculture. It dates back to Cyrus McCormick who invented the reaper. In 1848 McCormick formed the McCormick Harvesting Machine Company to produce and sell his grain harvesters. This eventually led to the creation of International Harvester in 1902. Early on International Harvester established strong dealer distribution channels and a full-line product offering that included implements, tractors, harvesting and haymaking equipment. It was a pioneer in row-crop tractors. Its Farmall tractors became very popular, including its diesel-powered models. Meanwhile, J.I. Case also thrived under the leadership of its founder. While he had built a strong long-line company, his family was not as successful. The company lacked the strong dealer network enjoyed by Deere and IH. Product development and quality both fell short for J.I. Case. By 1964 the company had lost so much ground there were doubts about its survival, but it had taken steps to branch out into industrial equipment. That interested the Kern County Land Company, which acquired a controlling interest in Case. Then in 1967 Tenneco Inc. of Houston, Texas, purchased Kern County Land Company. The new investors were able to breath new life into J.I. Case. Its industrial equipment business thrived, but it still lacked the strong dealer network it needed to survive in the farm equipment business. The 1970s brought a period of prosperity to farm equipment business. Farm prices were high and farmers wanted new equipment to help them to produce more for growing export markets. Unfortunately, farmers were encouraged to produce more than markets would eventually take at high price levels. In addition, they had overinvested in high land prices and new farm equipment. By the early 1980s farm prices were suffering from a buildup of surpluses. Most farmers had all the new equipment they needed. Machines purchased in the 1970s could be repaired, and farm equipment companies suffered the consequences. Even Deere & Company saw years of red ink. While Deere was able to survive, some other companies did not. More mergers and acquisitions were soon in the news. In 1985, Tennico Corporation, the owners of J.I. Case of Racine, Wisconsin, purchased International Harvester to form Case-IH. The move came as a big surprise, because until then Case was seen as the weak sister in the farm side of the industry. But IH had what Tennico wanted, a strong dealer network. A year later Case-IH acquired Steiger, a small company that had developed and produced a line of large, articulated 4-wheel-drive tractors. NEW GLOBAL COMPANIES EMERGE The formation of CNH Global was one more example of a trend that got under way in the 1990s. Many U.S. firms were merged into large, new companies that own, produce and market a number of brand names. Their business is global. They have factories, marketing networks and dealer outlets around the world. Another example of a newer global firm is AGCO, headquartered in Georgia. The early seeds for the growth of AGCO were planted in 1985 when the German firm Deutz Fahr acquired Allis Chalmers and its Gleaner combines. In 1990 the U.S. management team of Deutz-Allis acquired the firm and formed AGCO Corporation. After that AGCO continued to grow as it acquired 17 additional farm equipment companies throughout the world. Many familiar brands are marketed by AGCO. They include Allis, Gleaner, Massey-Ferguson, New Idea, Hesston and White. White tractors are the result of an acquisition of Oliver and Minneapolis Moline by the White Motor Corporation. It will be very interesting to look ahead and follow these companies. A key question: How well will these new, global, multibrand companies compete with Deere, a single-brand company in the early years of this century? EXERCISES: Discuss in class and/or write answers to the following for your teacher. 1. Why is it important for you to know something about the history of the farm equipment industry? 2. Why might the history of the farm equipment industry be of any interest to people who are not involved with farming or agribusiness? 3. Select a brand or make of farm equipment that is of interest to you and do some research to learn more about its history. Internet resources listed below can provide a good starting point. You may also be able to find more in agribusiness textbooks, history books, company literature and antique tractor and equipment clubs. You may want to visit a local dealership. The salespeople there may be able to tell you more about the history of the equipment they carry. You also could write to the company to find out more about books and literature that tell about their history. What have you learned from your research? INTERNET RESOURCES: NOTE: You will find many more company sites listed under Agribusiness Companies in AgEdNet.com Ag Hotlinks.
** American Society of Agricultural and Biological Engineers - Looking Back
** Association of Equipment Manufacturers - Home Page
** Farm Equipment Manufacturers Association (FEMA)
** FEMA Member Index TEST:
1. Name three of the five innovators discussed in this lesson who contributed to the early development and growth of the farm equipment industry.
2. Who invented the self-scouring plow? 3. Deere & Company has long been known as the leader in farm tractors because it produced the first tractor that was small enough to be practical for small farms and was the first to market a diesel-wheel tractor. TRUE or FALSE?
4. Some of the companies discussed in this lesson were successful over much longer periods of time than others. Name at least four factors that successful companies had in common, which likely contributed to their success. 5. Equipment brand names including Allis, Gleaner, Massey-Ferguson, New Idea, Hesston and White are now all a part of a company known as AGCO. TRUE or FALSE?
----------------------------------------------------------------------------- END STUDENT SECTION AB105 History and Growth of Farm Equipment Companies
TEACHER'S GUIDEOBJECTIVE: Students will know the names and the stories of early farm equipment inventors and business innovators. They will be able to discuss how the industry has grown and evolved. In addition, students will be able to list and explain factors that have helped some companies to enjoy longer-term success than others. PREPARATION: Review lesson content. Be ready to help students with exercises, especially Exercise #3. Let your students know in advance how much time you want them to spend on that exercise and the results you expect -- such as a term paper vs. a brief report or quick answers in class. While the lesson concentrates on larger tractor and implement companies, Exercise #3 could be used to help you expand into the history of smaller firms such as those that provide grain handling or livestock feeding equipment. INTERNET RESOURCES: NOTE: You will find many more company sites listed under Agribusiness Companies in AgEdNet.com Ag Hotlinks.
** American Society of Agricultural and Biological Engineers - Looking Back
** Association of Equipment Manufacturers - Home Page
** Farm Equipment Manufacturers Association (FEMA)
** FEMA Member Index IMPORTANT TERMS: acquisitions, articulated 4-wheel-drive, diesel, distribution channels, entrepreneur, grain binder, independent dealers, innovators, inventors, mergers, patents, reaper, research and development, self-scouring plow, three-point hitch. EXTENSION: Invite one or more equipment dealers in your area to send a representative to visit your class. Ask them to discuss what they know about the history of equipment companies and the models of equipment they are providing to local farmers. Encourage students to ask questions. ALTERNATIVE EXTENSION: Organize a field trip to one or more dealerships and meet with a representative who can discuss history and the changes that have taken place in companies they represent. NOTE: A similar exercise is also suggested for the lesson AB104 Providing Equipment for Farms, Ranches and Feedlots. EXERCISE ANSWERS: 1. A study of history can help you to learn more about why things are the way they are today. It also can help you to gain insight on how things may change in the future. If you are considering a career in agribusiness, the history of an industry and its companies can help you to identify the best opportunity in those industries so you can get the training needed to take advantage of those opportunities. If you want a career in farming or any other business that uses or deals with farm equipment, you will be able to do your work with a more knowledgeable perspective on the equipment you are using. This can be especially important if you are involved in the selection and purchasing of equipment. 2. Historians who wrote the history of our country focused much of their attention on governments and national leaders. Meanwhile, companies and industries that have provided the jobs, the food, the technology and modern products that improve our standard of living often get less attention. Farm equipment is an industry that has made an enormous contribution to the high standard of living Americans enjoy today. The shelves, coolers and freezers of our food markets are loaded with high quality, inexpensive food products. It is food that has been produced with a fraction of the labor required in the past, and that is still required in many other parts of the world. Much of the credit for our highly efficient food production system must go to the inventors and agricultural engineers who created today's tractors, implements, combines and materials handling equipment. Credit also needs to go to the business entrepreneurs who created the companies that produced and marketed that equipment to farmers across the nation. 3. Give your students some suggestions on how much time you want them to spend on this exercise. It could be done quickly with a little Internet research along with a few other sources that are readily available. On the other hand, it could also be expanded into a project that results in the writing of a term paper and/or presenting reports to your class. You may want to consider this as a group project with several students working together doing the research and writing a paper covering the history of an interesting company and its equipment. TEST KEY: 1. Name the three of the five innovators discussed in this lesson who contributed to the early development and growth of the farm equipment industry. Any three of these five are correct: Cyrus McCormick, John Deere, Jerome Increase Case, Henry Ford and Harry Ferguson.
2. Who invented the self-scouring plow? Correct answer: B. John Deere 3. Deere & Company has long been known as the leader in farm tractors because it produced the first tractor that was small enough to be practical for small farms and was the first to market a diesel-wheel tractor. TRUE or FALSE? FALSE. Henry Ford's Fordson tractor was the first practical smaller tractor. IH and Oliver marketed diesel-wheel tractors before Deere. 4. Some of the companies discussed in this lesson were successful over much longer periods of time than others. Name at least four factors that successful companies had in common, which likely contributed to their success. Students should be encouraged to answer in their own words, but answers could cover both product and marketing factors. For example:
Product factors:
Market factors: 5. Equipment brand names including Allis, Gleaner, Massey-Ferguson, New Idea, Hesston and White are now all a part of a company known as AGCO. TRUE or FALSE?
TRUE.
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