Posted by JD Seller on November 29, 2019 at 17:55:12 from (208.126.198.213):
In Reply to: 80's mergers posted by Morgan in ar on November 29, 2019 at 12:01:59:
Morgan; Lets start with IH and AC. They both where conglomerate companies. They often had divisions that where losing money for decades but they shuffled money around to keep them going with few changes to the losing divisions. So even in good years they really did not generate a good profit company wide. AC was the worse at this. They had a iron ore mine in Upper MI that lost money just about the entire time they owned it. They kept it because one of the board members "Liked" it. The AC combine division in the 1950s, was the only agricultural segment that was making a profit. The tractor division was losing big money and losing market share fast. So there was little money for new product development. IH tried to be everything for everybody. So they had too many options on just about everything they made. They had few "standard products". This made their manufacturing cost be higher than companies like JD. JD was making 6-8% profit on it tractors in the 1960s, IH was making 3-4%. IH also had a terrible relationship with the United Auto workers. IH on average had a much higher labor cost per tractor than everyone else. So both AC and IH did not have the cash reserves to weather high interest rates with falling sales. Basically poor long term management in both companies.
Massey Ferguson made it by building more smaller tractors for a much more world wide market. So the US farm economy crash did not stop MF from still selling tractors in other countries. MF construction division actually lost them money.
White is a more interesting story. White Motor Company built trucks and heavy equipment for decades. Starting in the 1950s they started a long decline in profits. White owned Cletrec. So they did business with Oliver. In the mid 1950s White borrowed money from Oliver. Oliver became financially exposed and it was bought by White. Oliver's assets where worth more than its stock value. So a hostile takeover. Then White Motor Company kept falling and finally sold the Ag division to try and keep the truck division going.
The Ford Ag division was such a small percentage of the Auto division that the auto profits allowed Ford to weather bad farm economies.
Tenneco/Case was backed by oil/natural gas money. It was another conglomerate too. It had six unrelated divisions. So the profits from the oil/gas bought J.I. Case and IH. With the first Gulf war making oil/gas profits fall. Tenneco sold part of CIH in 1994 and all of it by 1996. Then Fiat bought them in 1999.
All of these companies all suffered the same fates because of management practices that failed for the economics of the time.
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