Troubled International Harvester reaping its efforts to stem losses

By , Special to The Christian Science Monitor

When Cyrus Hall McCormick invented the first successful mechanical reaper in 1831, he created what was to become the agricultural equipment industry. His company, which in 1902 was named International Harvester (IH), became the premier manufacturer in that industry.

But a series of financial setbacks dating to 1979 hit the company, due primarily to a crippling 5 1/2 month strike, high interest rates, and foreign competition. IH fell heavily into the red, losing $854 million in 1982. Along the way, something funny happened to the company: It became a truck-maker struggling to get back into the industry it pioneered.

But last year the company, under chairman and chief executive officer Donald D. Lennox, was able to cut its losses to $434 million, largely because of better truck sales. Agricultural equipment sales are the key for '84, Mr. Lennox says. Spring sales will be tallied in May.

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''The agro-economists say there's going to be a 10-15 percent increase in equipment sales in 1984,'' Lennox says. ''That's a modest increase, considering we had a very depressed year last year. If that (increase) is going to happen, we have to see it happen in March and April. That's the buying season for tractors.''

As the nation sows, so shall it reap. Lennox maintains that an increase in spring tractor sales will lead to an increase in the sale of combines in the fall. But he is cautious about spring forecasts, mainly because he sees agro-economics as an inexact science.

''The only encouraging thing to me is,'' says Lennox, ''we're practically sold out of planters, and those are big-ticket items - $20,000 to $30,000 for one of those big automatic planters. We are selling those like hot cakes, which means they are going to plant row to row.''

Meetings with farmers in western Illinois and the Delta region of western Mississippi recently were encouraging, he says.

''I spoke to a superfarmer meeting in East Moline (Ill.) - 'superfarmer' is our term for a guy who grosses $1 million or more - and they're optimistic. The farmers I talked to in the Delta area said for the most part they would be buying equipment this year.

''Generally speaking, in the last few years on these trips you felt a certain level of pessimism. You don't feel that this time,'' Lennox says in the swallowed-syllable drawl of his native Pittsburgh.

Regardless of Harvester's performance in the agricultural equipment marketplace, its truck sales are expected to continue strong. First-quarter 1984 figures appeared more impressive. Losses from continuing operations were reported at $55 million, compared with $165 million a year before. During that period, truck shipments rose 42 percent to $666 million, from $470 million, accounting for 67.8 percent of Harvester's first-quarter revenues.

Agricultural equipment registered a first-quarter increase of 26 percent, from $252 million to $317 million. Both sides of the company were bolstered by increased sales of other-equipment-manufacturer diesel engines.

The whole company became the beneficiary of a new, long-term refinancing package announced in December. Private lenders, a reported 200 of them, covered 1.4 billion in debt of the parent company.

Mr. Lennox maintains that the new financial package will allow IH to devote all its energies once again to achieving profitability. He is reticent about when the company might go into the black, but a good spring quarter for agricultural equipment would not hurt, he says.

During the two years since Archie R. McCardell resigned as chairman and CEO of the financially stricken company, Harvester has increased its hourly labor productivity a reported 30 percent. IH says it has reduced the number of salaried personnel 50 percent, and marketing and administrative costs have been cut 40 percent. The company has removed itself from construction equipment and operations for truck axles, transmissions, and parts remanufacturing. It has also sold its interest in several foreign subsidiaries and affiliates.

Lennox gives his senior management high marks for loyalty during what is known at Harvester as ''the troubles.'' Employee morale is on the upturn, too, he says: ''There had been a concern about all the negative press with respect to the ailing, failing, financially troubled International Harvester. They don't see that any longer.''

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