Massey-Ferguson harvests a modest profit. Big Canadian tractormaker bucks famine times in farm equipment

Massey-Ferguson Ltd., maker of the red tractors and combine harvesters familiar to farmers around the world, has made its first profit since 1979 -- at a time when the farm equipment business remains in poor shape. One consequence of widespread economic problems in North American agribusiness is that farmers have not been buying as many new tractors as the industry needs to surivive.

``Against all odds we have both survived and are making money,'' says Victor Rice, chairman of the Toronto-based company. Massey-Ferguson is the world's largest producer of tractors, although the title of the largest farm equipment manufacturer goes to Deere & Co. of Moline, Ill.

Even though its sales of farm and industrial machinery dropped about 11 percent in 1984, Massey-Ferguson posted a profit of $7.2 million (US). Sales were $1.47 billion, compared with a $68 million loss in 1983 on sales of $1.54 billion.

Over the years, Massey-Ferguson, once one of the sturdiest of Canada's blue-chip companies, used its reputation and accompanying credit rating to borrow heavily to finance expansion. When interest rates rose and farm equipment sales fell, Massey was drowned in debt.

The farm machinery producer has lost $1.2 billion since 1978. Twice it has been rescued from collapse by its bankers and the government of Canada and the province of Ontario. Without those rescue missions Massey-Ferguson would surely have gone bankrupt. The company is a shell of what it once was. In the late '70s it had 68,000 employees; now it has about 20,000, and ``we continue to reduce our head count,'' Mr. Rice says.

Last year Massey-Ferguson picked up two percentage points in the world tractor market, selling a little more than 17 percent of the global total.

The market for combines is weak. Rice predicts continued poor demand this year, especially in North America. Sales of combines last year were just under 15,000 units for both Canada and the United States. That is 56 percent below the 1981 level of 33,500.

``I see nothing in the United States and Canadian markets that will be better in 1985, and Europe could be worse,'' says Rice.

Massey-Ferguson was able to increase diesel engines sales by 30 percent. Last year the company bought the diesel division of Rolls-Royce through its British subsidiary, Perkins Engines. Last year's engine sales of $314 million included $51 million from the Rolls-Royce division.

Rice hinted Massey may be looking to buy into other companies: ``We are out on the prowl, looking for more Rolls-Royces.'' But he added that ``diversification for diversification's sake would be a disaster.''

Still, analysts are pessimistic about the long-term outlook for farm equipment in North America. ``It's nice that Massey made a profit,'' says John McGinty, an analyst with First Boston in New York, ``but the farm equipment market continues to be surprisingly weak.'' He says Massey's future will be dictated by the health in the sales of tractors and combines, not by cost-cutting measures at corporate headquarters.

Consolidation is a trend in the farm equipment business. International Harvester joined with Case. KHD, which manufactures Deutz tractors in West Germany, announced a $100 million takeover of the farm equipment division of Allis-Chalmers. Industry leader remains John Deere, which has continued to thrive despite problems at other firms.

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