Below is the full interview between Mike Lessiter, editor of Farm Equipment, and Horsch Farm Equipment owner and founder Michael Horsch, in which he describes how his dream of farming turned into a $600 million shortline equipment operation fueled by family support, customer education and tailoring equipment to meet local markets’ needs — internationally.
Mike Lessiter: Tell me what Horsch Farm Equipment is all about.
Michael Horsch: Well first of all, we're not really a farm machine manufacturer. We don't see ourselves like that. Myself, I'm a farmer. I'm a classic farm boy and all I wanted to do all my life is farming. I just ended up basically doing a detour into farm machine manufacturing. Basically to make some money, to become a farmer, this is one of the driving things behind our business today. Never wanted to be as big as we are today. It was not intended. So that is probably one of the closest answer I can give you when somebody asks me what are we about.
The other answer we give is that since our main background is farming, where we come from that's where our passion is. Obviously, we seem to be more solution driven, more challenges driven, like any other short-line manufacturer in the industry. And also, because we're scattered all over the road so much, you know? We're in all the main farming areas, where the big large acre farming is taking place whether South America, North America, Australia… But most of our business is Eastern, Western European. And every area, every climate zone, every country, you have different challenges and so that means you have to adapt to those challenges. And first of all, we're interested in the challenges before we look at what we offer in terms of equipment.
Mike Lessiter: I've seen some of the story about you coming over as a teenager. Tell us that history of coming over and then what you took back to Germany after that?
Michael Horsch: Well, first of all you have to know I'm Mennonite. There's lots of Mennonites here in the states too. We Mennonites are still a small group all over the world. Everybody knows everybody and Mennonite had a program- It was a training program and for me that was the chance to come over to the States in '78, '79, '80 on a Mennonite training program working on farms. And this is what I used to come over here because that was the only way to actually stay here for at least a year and have a working permit. Back in those days there was not other way. Otherwise you could only come for three months and that was it. So I used this as a way to come here to the States as a teenager, 18 years old. And I was trying to find out what farming is like here in North America. I always dreamed about the big farms of corn and soybeans in Iowa, Illinois, and whatsever.
My father, by the way, was also a Mennonite trainee in the late '50's. He always talked about this and showed me pictures from his stays in Nebraska and Iowa where he was trainee. And so, that was my first chance to actually come here. With the idea of maybe I could find a place to stay in and a piece of land to farm and maybe become a farmer here in North America. That was basically the dream of an 18 year old that had four more younger brothers that also wanted to take over the home farm. So, there were five of us, it was clear that not all five of us would be able to get the home farm and to take it over from my father.
That was the start of it. Actually was some interesting coincidences. I had to go back in late '79. I had to go back to Germany because my visa permit ran out and I had to actually redo it from the German side to be able to come back and immigrate here. That was the intention. The problem was the German government didn't let me go out because I didn't do my service. In those days, you still had to do your army service— or I had to do civil service instead. And so they said, “still you haven't done your civil service you will not get another permit to leave the country.”
And that basically was the start of the company, during my civil service. I had to do my civil service, during the evenings I was drawing up machinery and starting to build no-till seeders. And the background of that is also something you have to know. You have to go back into the '60's when my father, two of my father's brothers, and three of my father's cousins got into farming in the early '60's. They were able to gather all the land. That was right after the war and Germany was building up and the industrial revolution was taking place. And, all the farm labor was going into the industry and there was no cheap labor anymore for farming. And there was large — large in those days — two, three, five hundred acre farms. Estate farms ran by Dukes and Lords that had lots of labor and their labor ran away. And so they didn't know how to run the farms anymore. So, they were looking for a way to either rent it out or sell out to the farmer. This was a chance for my father and his family and brothers and cousins basically to take over quite a bit of land in the '60's and become crop farmers in a big way. Big way — a thousand acres, twelve hundred acres... that was big for us in the '60's.
But they rather quickly found out that the old two bottom plow and the theory for five horsepower Massey Ferguson tractor would not do it. That would not get you anywhere. Plus some of the land my father farmed, the first farm I grew up on, was just four inches, five inches top soil, the rest was rock, you know? So I learned driving a tractor... As a five year old driving a tractor, pulling a trailer was where guys were walking behind it and picking out rocks and throwing them in the trailer. And so obviously, there was also a need to figure something else out than just plowing the thing up. And also on top of that, becoming more efficient. And so, it was actually our family that start looking into what we call a min-till/no-till farming system where there was no example for that. The scientists and the local agriculture institutes and the neighbors said, “What you wanna do is never ever gonna work.”
Mike Lessiter: What year would that have been?
Michael Horsch: '64, '65, '66
Mike Lessiter: Before it's even happening over here in the States, too?
Michael Horsch: Yes. But it's just our family approach, you know. So they tried it out themselves. And we still have, on my home farm… That's not the farm I grew up on, that's the second farm my father bought in '69... '68... Well, that one, the day they took it over they're still plowing that farm so we still have land that's over 50 years old not being plowed. Which you Americans laugh at it, but where I come from, there is where the plow was not necessarily invented but this is basically — if you hadn't plowed up your land by the end of October it was insane, you know? Maybe still is in some ways today, not quite.
Myself, my brothers, and cousins, we were basically injected with this min-till/no-till pioneer spirit from our fathers and uncles. Sundays after church, we walked fields with a spade and with my uncle, father and dug holes and looked at and learned basically how soil changes. Earthworm population went up and water infiltration went up and so on and so on... Issues with weeds and so on and so on... How to deal with it. So, we learned it basically within the family, by learning from fathers and uncles. And decide, one day if we're gonna start farming, this is what we're going to continue.
Problem with this was that there was no machinery available. So we always had to have special machinery being built and one-offs from machine manufacturers are built and then by the time they end up in our yard, we start cutting it up ourselves and rebuilding it with railroad ties and whatever. I always hated when my father — he was just rough on machinery and rebuilding it. He always worked, but he was always getting his ax and cutting stuff up and building railroad ties to it and whatever and changing openers. And I always hated it because then the nice piece of machinery with paint on it, he cut it up and didn't put paint back on it again. So, I already had some ideas about when I'm gonna build my own machinery, I'm going to make it nice and tidy and work it out first and so on and so on.
So, yes, there was some drive here. And because I was the oldest, not very good in school either. School decided that they didn't need me anymore pretty soon after high school. So, I just dropped out and here I went, took this training program coming to the States as a way to just leave the country, get out of it. And then, when I came back, I always had this in mind that I was gonna build my own no-till seeder, you know? Which was also enforced by my father and uncles. They always said, “Wow, somebody's gotta figure that out. We're gonna have to find a way to lift up the straw, place a seed underneath, and then put the straw back on top.” So it was this thing I keep hearing from them. And I was listening when they were talking and basically started to think, think, think.
And when I came back from the States and didn't like much to fulfill my civil service even though I had to do it. During evenings, I started doing some simple drawings and went out in the workshop and started putting some steel together. And when my father and uncles found out that I was onto something they said, “Well yeah, get on. Build, get it done. Here's some money if you need it. Build me one also.” This is the spirit in our family. The spirit in our family is if somebody has a good idea and nobody tells you, “You shouldn't do it. Not gonna work.” It's always the other way around. Just emphasize, “Do it. Do it. Do it.”
And so it was basically strong family support there, “Oh now finally somebody has taken this thing on and is figuring something out, because we always needed somebody to put his brain into it and start to figure it out.” Because so far, we've always built crude stuff. My uncle built crude stuff. My father built crude stuff, or had it built, and so on. It worked but it was not satisfying.
So anyway, with the family support, both financially and from a spiritual point of view, that basically was the start of the Horsch Machine Company.
Mike Lessiter: Those were the Exactor line?
Michael Horsch: '81 I built my first Seed Exactor. In '80, I kinda had the thing going and in '81 I built the first Seed Exactor for my father. And then basically every three/four weeks I had to build another one for another uncle, another uncle because the whole family came together and said, “Build me one also. If it doesn't work, it doesn't matter, we'll help you to make it work.” It was just this common thing of helping each other and making sure that if somebody — if a young guy — I was 21 years old when I did that, when I built my first machine. They always said, “Hey, if this works, this is what we need.”
This was the first rotary base with a seeding bar underneath. The machine which we first built. It's a no-till seeder. Actually, we would call it maximum no-till seeder. So, disturbance in those days wasn't quite a the way we wanted to place seed — obviously we're not in a corn and bean country where I grew up. It's mainly wheat, wheat country, winter wheat country. So, instead of putting seed down in rows, we wanted to scatter it. It was kind of a solid seeding system. No rows, but with no contact with trash. Because we always had the problem when we had too much residue in contact with the seed. The seed, well it was rotting, it was disturbing the small seeding with root system to grow. Without having some toxic issues.
That was the start... the unintended start. Because for me, it was basically just a jumping board to try to make some money to eventually just leave the country, buy a piece of land maybe here in North America, whatever, and become a farmer.
And as I kept building a few machines over the years, then I realized, “Well, maybe this is a way to stick a little longer at it and try to make actually real money.” So I had a better chance to get into farming in bigger way. Then obviously I got stuck with lots of debts and commitments. And where the dream of becoming a farmer would just drift away more, more, more. 'Cause I was stuck with the business. Then in '84, we officially started Horsch Machine Company. Before that, our family had a Horsch Cooperative where they had a large feed business and egg business and… Laying birds, yeah. And that business call was ran by one of my uncles. And he said, “Okay, as long you keep this thing going the way it is, we're going to help you to finance, we're gonna finance your steel, gonna finance your components you wanna buy. You're gonna sell something within the family, we're just gonna do the legal work and so on within this cooperative.” But eventually it got too big and then they said, "Well, you better start your own.” That was when the company was formed in 1984. But actually, it's older. Today if we go back, it is 37 years ago I started the business really.
Mike Lessiter: So, you got into manufacturing kind of accidentally or reluctantly 'cause your dream was to farm...?
Michael Horsch: Exactly.
Mike Lessiter: I was looking at your numbers coming in. 2000 employees... I mean something really big took on here. More than you had ever dreamed...
Michael Horsch: See, as I say, there was many things that happened that haven't been planned. or haven't been part of your big picture, where you wanna take something.
Another piece of my story in the '80s. 'Cause you have to understand that like I said, if you hadn't plowed up your land by the end of October, it was insane. So now me, as a young 21 year old trying to sell equipment — first of all, sold equipment to family. Family is big. Thought… I got the thing. I got it made. I got a system where I can go out and sell all the farmers — make 'em stop plowing and sell 'em this piece of no-till seeder and teach them how to do it. And this, this is the way to do it.” It did take me very long to figure out I had something nobody wanted.
And so for me, in the '80's it was very hard to actually keep that business going unless — and that's what I had to do, I figured out a new way of marketing. And the marketing was with a spade. So, what I did is, by the time the family all had their machine, I had to learn that I could not go out and talk to farmers and tell 'em, “Here, this is what I got and you better stop plowing.” The guy would look at me and say, “You're 22, 23 years old? And you have no degree, no business degree, no farming degree and you tell me what farming should be like? Nah, get lost, get outta here.” They wouldn't believe me.
So, what I had to do is I had to go far away from home, find larger farms that had heavy soils or soils with lots of rocks or stones on, that had already a problem with plowing and efficiencies. Then invited them to come and then when they come to our farm or my uncle's farm what I did is, I took the spade out and together with my father and together with my uncle, we walked the fields. So basically, we dug holes and showed 'em, “Okay, look what happens after 15 or 20 years when you don't plow. The soil structure change, the earthworm population goes up, and soil gets more active, and water infiltration goes up and so on and so on. Look at the yields. The yields are not any worse than plowing. You can improve 'em. Nothing's easy, but you can improve 'em. You have to watch this. You have to watch that.”
We kind of basically walked with a spade, we started selling the idea, not machinery, just the idea. And it took ages — they went back and forth and came back and looked at it again in the springtime, in the summertime. And then, eventually the guys start turnin' around and saying, “Now I made up my mind. What your father or your uncle does, I also want to implement that on my farm.” And then he started talking about, “Now I also need a piece of equipment.” So, actually instead of selling equipment, we sold them a different of farming. And I call this “Educational Marketing.” In a way, this is what we're trying to do here.
You see, all I did all my life, and this is probably why we're so different to any other short-line manufacturing in the world dealing with seeding and tillage equipment — we're marketing driven. We are education marketing driven. And all we did is, ever since the last 35 years, we only scaled selling with a spade, we scaled it. That's basically what we've done. We have farms all over now. We have farms in Czech Republic and Germany and France and here now we bought this small farm here in North America here. And then we have also partnership farms in Ukraine and Russia and so on. Now we're working one in Brazil.
All those farms we're using as cropping systems centers, you may call them, you know? And tryin' to develop a new ideas about — Regional idear. I cannot just take idea from what I do in Germany — what I do on a German farm I cannot take to France. 'Cause of different rotations, different climates so you have to look at it a little bit different when you introduce new tillage methods and you... Certain rotations that are common there and how to improve it with different ways of fertilizer placements or different ways incorporating straw and so on and so on.
And also, we're on a continuous research, practical research too. That's part of our marketing strategy as well. We're not competing with scientific research or with universities or other research organizations, but in a way we're trying to bring things together and research together. And make it practical, the practical side. That's what we're interested in.
The one thing you also have to understand is what happened in our part of the world in 1990. 1990 was the time when the wall came down? You see, where my home farm is, this is about half an hour away from the iron curtain. And for you Americans... Looking from American point of view, this was the end of the world. You know? Which in a way it was. 'Til 1990 it was the end of the world. Whether it was East Germany, Czech Republic or whatever, we never went there. We didn't know desire to go there because it was really an iron wall. And it came down over night, unexpected. And so, all of a sudden, overnight we had a huge access to large cooperative farms between — I don't know, between 3,000 and 10,000 acres in average, just right in our backyard. Those farms had never ever had access to any western equipment, never ever. It was all Eastern European, Russian equipment — junk! Real junk! You can't imagine what junk is. And so, those guys were desperate. Because when the wall came down, also for them it was something they could never believe but then thing they said, “We want to get rid of junk. We want only machinery from the west.” And so, whoever ended up with them, and told them what they got, as long as it is paint nicely, they bought it.
The '90s, if one had known that this would ever happen, you could have gotten ready for it. But, nobody was ready for it. Not the big guys, no the small guys. And so from 1990 on, obviously that was basically — 'til 1990, I was thinking a couple times of giving up and basically of stopping it — there was not much to sell really. I couldn't sell the business really for what-
Mike Lessiter: How big was the company in 1990 prior to the wall?
Michael Horsch: 1990? Hmm... 1990, maybe 20 people employed. Eighteen people employed, maybe.
Mike Lessiter: So you were just kind of breaking even during that time?
Michael Horsch: Oh yeah, always breaking even. Always! I was great at breaking even, but not making money. And again, if wasn't the family financing me, a bank would never give me a loan. I probably had a revenue of two million dollars in 1990.
Mike Lessiter: So then, the wall came down — what I wanted to pursue with you is where the money came from to gain access to the equipment.
Michael Horsch: Well, when the wall came down, right away all those cooperative farms were pushed into privacy because the government pulled out, the communist governments pulled out. But the farms were sitting on land, they didn't necessarily own the land, but at least they had a right to farm it. And they had lots of people working on the land and good people, people that were willing to also work for very little money just to continue.
And so if you had a good crop coming and could sell it for a good price, because then all of a sudden you could sell it for real money instead of this rubles or East German deutschmarks weren't worth anything. So if you just could survive for a year or two by basically paddling your way through and surviving your way through, all of a sudden then if you had a good crop and sold it for a good price, you could start buying equipment.
And then especially in East Germany, East Germany was the biggest growing market for us in the first couple years in Eastern Europe because East Germany had the West Germans as their buddies. The Czechoslovakians, they had no buddies. They had to basically fight for themselves. So it took longer in Czech Republic, which was next to East Germany, for them to survive and grow their businesses.
Obviously not all the cooperative farms survived. Some of them gave up or went bust, and this is how we got into farming. So this is how a guy got into farming and my other brothers in 1990. Then from there on we also grew the farming business. Today we farm about 55 thousand acres on top of that.
Mike Lessiter: It seems to me that you have a lot of products overseas that people here in the States don't know about yet because you've come with a couple big waves with the Joker and the Maestro. Tell us what maybe the average American dealer might not know about the Horsch brand, the company.
Michael Horsch: Well, first of all, we are seeding, planting, minimum tillage, and spraying, those are our four core business specialties. And if it comes to North American standards... see, where we come from is large-scale operations. Most of my competitors in Western Europe, the majority of the equipment they build is for the small-scale farmers. Where we come from day one is from a larger-scale farming background. From minimum till and no till and from larger-scale.
So we come from a completely different perspective than everybody else comes from in Europe. And again, if 1990 would never have happened, our business would probably not exist today. And it was just because of all of a sudden Eastern Europe came open and all of Eastern Europe was about was large operations looking for new technology. Nobody could have known that that was ever happen. And so yes, in those four areas we are technology-driven, the R&D is basic controlled by my brother myself. We have about 120 engineers, a little more maybe. And they're all controlled by the two of us.
From the very beginning, from the idea, from getting into details to a certain point and also the way we actually develop products is also interesting. You cannot compare us with others. Most of the products we develop first of all for ourselves, for our own farming. We have a need for something because of a certain soil problem and a certain soil issue and we want to grow a different crop and, oh, let's build equipment for it. Or we don't like the tillage we've done so far, we'd like to change it, so we'll build a product for it. We need a new planter, we build a new planter for ourselves.
And this is what I do a lot. Two of my oldest sons have now decided they want to become farmers, so they're actually doing what I was wanting to do. And so they are also involved in this type of development work — and we don't necessarily look for whether there's a market for it. It's the other way around. And many products you see, even some of the products we bring here to North America, like our planter design, which is unique. It's unique to the market, not only here, but also to Eastern Europe or parts of the world or South America, wherever else they're taking it down to.
That's been developed first for ourselves. We never had an intention to build large planters. We're number one in Europe now, in Eastern Europe, and when I say large planters it's anywhere from 40-foot to 60-foot bars. By far the number one, which the dark green guys obviously don't like.
But anyway, this is, first of all, where we are, and so that means that a lot of our products we have already available for our Western and Eastern European markets, quite a bit of products both in seeding and tillage also fit markets here. We have a factory up in North Dakota and we have also some engineering up in North Dakota, so everything we sell here doesn't 100% come from Europe. It's built here with 80% local content. That's where we are. And adapted for the markets here.
But some of the basic designs come from Germany, yes. For instance, we were the first ones bringing in the compact disc in the vertical tillage business store it. And then the next level was from vertical tillage was compact disc. We were the first ones, and I think still by numbers probably have sold the most so far in North America.
Mike Lessiter: You developed the market here when you guys —
Michael Horsch: Let's put it this way, we helped to develop the market, yeah. You may say we developed the market, yeah, but now look around. How many different colors around? Lots of them now. And so we've done a few of those things. Also, in Western Europe we started some products and now everybody has a copy of it, which is good. It shows that we're not completely wrong with what we bring here. And wait for what will yet to come.
Mike Lessiter: Can you recap how you came into the United States and go over that history?
Michael Horsch: It's very simple. First of all, I had a natural drive as a teenager, always had a dream to — actually now I'm farming here. I've actually become a farmer. So 37 years later... 40 years later, the dream become true. In a way it's true, yeah.
I must say, especially the Midwest, I think I know it like the inside of my pocket, as we say. I just like the countryside, the crops you guys grow, the farmers, the mentality, the people, and for over 40 years I've built lots of friendships here and I was always interested in what's going on here, and so there's a natural drive for me to... it's not like I try to sell all over the world, but not be here. It's the other way around. I started partnering with a small company called Anderson Machine in South Dakota.
Mike Lessiter: That's Kevin Anderson?
Michael Horsch: Kevin Anderson, yeah. '93 I started a small partnership with Kevin Anderson and from there I grew the business first together with him and then he just retired and wanted to get out and then we went on our own list. But it was a slow phasing out. So the last five years I would say we were more or less on our own.
Mike Lessiter: So when dealers and farmers first started getting familiar with the Horsch brand would have been in 2000?
Michael Horsch: Kevin was doing an opener for us, which we build air seeders for Eastern Europe and so we used his opener and together with him we modified the opener to make it fit the Eastern European markets. And actually the first product we built was 1998, '99, something like this. I say to Kevin, “I want to bring the air seeding here,” because at that time he only built openers. So let's build complete air seeders. Early 2000 was probably the real start of it, yeah. Before it was only a partnership where I sourced components and then we brought technology over in early 2000.
Mike Lessiter: And in early 2000, were you selling through…?
Michael Horsch: We only had one product which was a 60-foot air seeder. At that time it was a big one, it was a 500-bushel seed cart. It was a big air seeder in those days. And we only sold it in South and North Dakota and Butler Machinery was our sole dealer, which stayed on with us… I must say Dan Butler was always a big believer in us and he support us through some real serious times when things weren't quite nice. He believed in us and his people believed in us.
Mike Lessiter: Lot of them here tonight.
Michael Horsch: Lot of them here tonight. But it was Dan Butler. I think in those days he had just taken over the business from his father, and so on the farm machinery side we were one of the short lines he's taken on and he personally took a strong interest in it and we sold few machines, 5, 10 machines a year and so on. For a large machinery dealer like him, why should he actually care about a South Dakota and European farm machine manufacturer which is not much known. And he's helped us. He's helped us actually to grow and then, eventually, we went out of North and South Dakota into Canada and south. And then when we brought the planters, when the planters were brought in five years ago...
Mike Lessiter: 2012.
Michael Horsch: Five years ago we started bringing the planters in. Well, first we brought the compact disc in, but it was still about 2010. 2010 we owned only one single product, which was an air seeder, we had it obviously differently working with us, which we mainly sold in North and South Dakota and a little bit in Kentucky and in Pacific Northwest and so on and Western Canada. But 80% of the business was only with Butler.
And then we brought the compact disc in, and then we started growing into some other areas with more dealers, and then we brought the planters in, and that again helped us to grow, especially into the corn build. And this is how we've been able to expand our business, both in Western Canada and here in the Corn Belt. And then you know what happened, 213 was a peak and then free-fall.
If anybody would have ever told me that there's a never-ending free-fall, I would have not believed it. Because in my short life of farm machinery history, I've never expected a market to have a free-fall for more than one year. And we had almost four years of free-fall. Look at John Deere. John Deere's business, they went down from 7,000 combines to 3,000 combines or whatever, and tractors here in North America, and we got hit the same time. Falling free.
Every year, I said, “Guys, where's the bottom? The bottom must be somewhere,” and the guys say, “Well, there is no bottom.” This is an interesting experience. If a company like us would have to depend on the North American market, we would be bust by now because we also had some internal issues also with some strategic issues, how we would form... see, we're still a young company. And if we wouldn't have cash available from generating lots of cash in the rest of the world and pouring it in here in North America, if we would have to only live from what we generate from here, we would be dead by now.
Mike Lessiter: We can go back to Dan Butler for a moment. One of the cool things about these podcasts is that we're getting stories of the hard times a lot of them are in right now, but stories where they say, ‘there was a key supplier or a key dealer who stuck with us and helped us get through it.’ And it sounds like Dan, I know Dan, I've been up to his place, it sounds like he may have been one of those people
Michael Horsch: Oh, he was. He was a great believer. And sometimes I couldn't understand why he would still believe in us, but he would still believe in us. He was a great believer.
Mike Lessiter: Why was that? Why was he the believer he was?
Michael Horsch: I think it's his personality. He has a good feeling for if you work at something long enough and trust people that are at it and have passion that something will come up. And in a way, we have the same attitude. I have the same attitude. And I never look at things for short run. And at the end of the day, I formed many, many relationships and friendships, business friendships, over the years based on trust, based on belief.
Mike Lessiter: So you mentioned Dan Butler, you mentioned the family, that if they weren't funding you, you probably wouldn't have been here 37 years…
Michael Horsch: The biggest support was family by far. By far. And a lot of families, one of my brothers joined the business in 1990 — Phillip, — he's 9 years younger than me. Today he’s the CEO of the company. If it wouldn't be for him, we wouldn't be as big as we are. So, he's also a big driver of the company. But again, call this the family.
So my brother and my wife, actually, they run the business. They run the operational side of the business. So that way I get to travel and do things like I do today and talk to farmers and so on.
Well, but also, you're asking the right question. Maybe I have to give you a story that probably can tell you, again, what looks like we've done right. When the wall came down in East Germany, the first couple months in '89, '90, I remember I was going out and traveling to East Germany as soon as the wall came down and knocking on doors of East German cooperatives and very quickly could build a relationship because those people, they were all interested in talking to you because they never had access. Never had access to West German equipment, they never knew what was there because they never could travel. Information wasn't flowing.
So, I remember, I made my first deals with cooperative farms already in 1990. November '89, the wall came down, it was November, and say from April to August I sold quite a bit of equipment just on handshake deals because that time it was still the East German deutchmark, the only means of payment and there was no such things like a plan how business would be legalized and so on.
So, you only could do business with farmers or cooperative directors that said to you, “You know what? I like your piece of equipment. I think I can pay for it, but the only means of payment I have is East German deutchmark, and the exchange rate today is 1 to 3, but it's not legal yet.” Anyway, it's just the way it goes. So, what I did is I made deals on 1 to 3. 3 East German deutschmarks to 1 West German deutschmark.
And that was in, say, April, May, June 1990. And I sold quite a bit of equipment. In those days we were making also three-wheeled seeders, three-wheeled tractors, they're self-pulled seeders. And we sold three-wheeled tractors with self-pulled seeder, that was 300,000 deutschmark with the seeder. Those days was big money in deutschmark. So it was almost a million East German mark. So we signed a piece of paper that said, “Okay, once we deliver it, we want 900,000 East German deutschmark.” But another six months later, by the end of 1990, West Germany has agreed with the East German temporary government that the real exchange rate is 1 to 2. So I had a couple deals done where I actually was making quite a bit of money.
So, what I did is I took this money, I basically re-converted the 1 to 3 to 1 to 2, and said, "Okay, there is, say, on a 900,000 East German deutschmark deal, the 300,000 deutchmarks paid too much.” What I did is I basically sent the money back to the farmers. And I had at least two or three occasions where the director of those farms were really mad at me because I sent the money back. They said, “You know what? We have agreed with you that the ratio is 1 to 3, not 1 to 2, because we didn't know at that time. So it's my fault, not your fault.” And then they sent the money back again to me. And I said, “No, no.”
And the interesting thing is those people, if they're still alive, they still remember it today. “You were the one who actually didn't fool us. But there were so many other deals we did where we were fooled. Overpaid and over-exchange-rated.” Because they also charged too much plus they took the 1 to 3 and they said, “Oh, it's your fault.” And so this kind of trust we built with many, many people in East Germany, many cooperatives. They still today, even the next generation in the management of those farms, they still remember that their father, who passed on the business to the sons, said, “We still remember you guys. You were one of the very few West German businessmen that did not fool us, that did not pull us over the table.”
And at that time, I tell you what, in those days I needed the money. Every single deutschmark I needed. So it was not like I was sitting on money. And I had an uncle of mine — Walter — who he also was helping me to run the business, he died last year, and he was probably my best mentor.
Because he was it actually that said, “You know what? We have to give the money back. We cannot do this.” I didn't think much about it because I had other things to do. He looked after money more than I did, and well, we sat down together and said, “What are we gonna do?” And he said, “You know what? We'll have to give the money back, it's not right. It's not right. We cannot fool these people because those people, we fooled them.”
Mike Lessiter: And how many total do you think you returned?
Michael Horsch: Oh, it was millions. It was millions. It was millions in East German deutschmarks, so…
Mike Lessiter: That's amazing.
Michael Horsch: We sent back.
Mike Lessiter: Yeah. I bet that story gets told through the generations.
Michael Horsch: We still hear it today, it goes through. But this is our attitude, not only with East German farmers, this is our attitude with customers. And so all those early customers that we had to have cash upfront before we started building a piece of equipment. In other words, we couldn't buy the steel. And then the machine went bust after two years, not after one year. One year we gave warranty. So after two years, we could have said, “Sorry. Warranty's over, it's your fault.” No. We still went back and changed the frames or whatever. We still do it today, by the way. This is another thing we do with all our customers. We are known for that. We are known that once warranty is over, we're known for that that when things become serious. Sometimes you have a problem with frames or electric motor... we had a deal with electric motors here with planters. Farmers didn't even know that, that there was a problem with it, but we had it, even though the machines were three years old.” Even though it cost us millions, it doesn't matter. But farmers always remember that.
But if it's our fault, we haven't really engineered it right and we should have known better and then even after two years or three years we go back and say, “Have a new this,” and so on. Now we’re almost 2,000 people employed and so on and we have lots of managers, we have lots of different business, we have six different factories all over the world. Now what we tell our people is, “The most important is that we continue to do what we always did. When I started 40 years ago, 37 years ago, we have to be as close as possible to the customer. That's what counts, nothing else.”
And to be in close to the customer doesn't mean that you have lots of field demonstrations and calls on them with your managers and talk about new machinery and whatsoever. No… What did we talk about this evening? Was there a single piece of equipment we talked about? But the attention was there.
Mike Lessiter: I've heard that about you that when you take the podium, you're not gonna be talking about trying to sell a piece of equipment.
Michael Horsch: No, very rarely I do that. Very rarely. I'm very bad at this anyway.
Mike Lessiter: So, just trying to figure out where you are today. You got about 2,000 employees, you said six different factories…
Michael Horsch: Well, we have three large factories in Germany, which we're doubling right now in size, all three of them. Not knowing whether we ever will need them, but so far we always needed it. Someday. Then we have a factory up in North Dakota because of the downturn in 2013 ‘til today obviously we're not yet there where we were in 213 but looks like we're getting there again. Then we have a factory which we just built another one in Russia, last year we finished it.
Then we have one in Brazil, Curitiba. That's fun, that thing is fun because it's a small one, we start small and now growing it, growing the people. We only use Mennonite in our factory in Brazil. It's interesting. Everybody asks us, "Why would you ever go to Brazil? I was in Brazil, lost so much money, they're all crooks, you cannot work with them." Everybody went, "How can you do it?" Well, we have a —
Mike Lessiter: Workforce you can trust.
Michael Horsch: Exactly. Our language is German, and I have workforce I can trust and everybody's selected there. And where else? Well, we have a small place in China we just started manufacturing-wise. And then we have what we call marketing centers, just like we're building this down site now. We have... how many do we have on them? France, Germany, Czech Republic, Ukraine, Russia, down six right now. And we're looking at one in Brazil right now. Well, actually, together with our dealer now we're building one in Australia. It's always farm based. Marketing sense is always... it starts out with a farm. Even though it's a small farm, it starts out with a farm.
Mike Lessiter: So those marketing centers are like this?
Michael Horsch: Very similar. I'd call it demo farms, demo research, all of them.
Michael Horsch: Well, we have a big plan here.
Mike Lessiter: So your turnover is equivalent to 400 million US dollars?
Michael Horsch: More like 600 now.
Mike Lessiter: That's outstanding.
Michael Horsch: We grew from 2000 until today we grew by 25 fold. Just the last 18 years. We keep growing. I don't know.
Mike Lessiter: You're gonna have to stick with this manufacturing thing now.
Michael Horsch: I guess I have. I think the only comparative we have right now, by revenue, is John Deere. In seeding... Planting, if it comes to large planters... seeding, large planters, and medium tillage. We only have John Deere in front of us, by revenue. Everybody else, we've passed in these segments. There's one question he cannot ask me, because many times before his people asked me — whether we are for sale. We are not for sale.
Mike Lessiter: As you get around here in the United States, do the dealers know that you have this enormous world-wide presence and the resources?
Michael Horsch: I'm afraid not yet. That's another reason why I'm spending so much time myself, and my brother also, here. When I'm here, I'm traveling.
Mike Lessiter: How often are you over here?
Michael Horsch: Last year was four or five times. The thing is, when I'm here, what am I doing? I don't see many dealers. I'm always out with people, farmers. I hired a plane, I did this twice in Brazil… Northern Brazil is just always exciting. It's exciting what's going on there. To get around I hire a palottis for about 10 days. The nice thing is all those farmers have runways. Some of them have paved runways. I go from farm to another farm by plane. That way you get around quick.
Mike Lessiter: When you, Bruce, or Jeremy say, “We got a dealer who's showing some interest. It's time for them to meet you.” I know that's going to be a different style for you, 'cause you talked about education work. What's your elevator pitch? What's your close to them on why they should do business with you?
Michael Horsch: Let me quickly show this to you. If this is the customer, this is the dealer, and this is the manufacturer, that's me, that's a classic lineup. Especially, larger manufacturers work with customers and dealers. The manufacturer says to the dealer, “I'll get you covered with product. If you are big enough, I only want one line. The greens and reds and yellows, and give you any support you need, and finance support, but the relationship to the customer is yours. I may, once in a while, walk with you and listen to the customer, but the relation is yours.”
When I start my business, I sell it with a spade. The only relationship that worked was the drag relationship, and a dealer would not ever think about selling with a spade. Come on. I'm not in this business. I'm selling iron, not digging holes in the ground. When we started to grow bigger and bigger and realized that we cannot just start solid, we have to get out of dire selling because we need somebody else in there to do the service part, or do the used equipment part and help us actually taking care about the customer. Then we had to bring in the dealer from the site.
What we ended up with is a triangle relationship. That triangle relationship, together with education marketing, if Dan Butler would tell you the truth is, this is more money to him than this. It's also more work for this guy. That's the problem. The classic iron salesman doesn't understand that. He has to learn it. If he is not willing to learn with us, learning means investing in us, not only time and brainpower, also money, he will never learn it. It's not an easy relationship. It takes a long time to develop it. If you would travel Western Europe and I get you in contact some of my key dealers, they are the longest with us. They all will tell you, “I make more money with a Horsch product on this side than with anything else I sell.”
I don't need shareholder value. This is not important. They are driven by shareholder value. At the end of the day, they cannot just try to make deals where they allow us, a fast growing short liner, to control from the shoreline side their dealerships. That's what we did. Through this strong marketing, we start to control, but the dealer would allow the control 'cause he's making more money. It's a give and take thing.
This is, at the end of the day, what we bring to the table. It's something you can hardly explain. You have to live through it. You have to live it yourself. It starts with an investment. If you're not ready for this investment, you better not do it. You better stay away from Horsch. To start working with us, we are headaches. We're headaches. Just imagine you had a new dealer prospect sitting in a meeting like this this evening and not seeing a single picture of Horsch machinery. “What are they doing here? This is too complicated for me. I wanna sell iron. I don't want this.”
This is not very easy for us. If you go to Western Europe, getting rid of John Deere dealerships. If somebody finds out that we're kicking a John Deere dealership out, do you think we have to go out and try to find dealers? They're queuing up. They're all queuing up. For us, it was a very quick change. Guess what, those John Deere dealerships told John Deere. They said, “What did you do to our — now we are losing business! Now it's Case, it's ACCO dealers. Now, through this education marketing's customer. You will see, we're gonna lose tractors and combines.”
Mike Lessiter: Question about different markets. You're on every major Ag-producing continent it sounds like.
Michael Horsch: Yes we are. That's probably another advantage we have. We are personally, not as a business, personally.
Mike Lessiter: Wearing the Horsch Machine hat, are you doing business any different with your dealers here in the United States as you are in Australia, or Brazil? Or is it...
Michael Horsch: Yes. First of all, we have no problem with that. We bring dealers together on a worldwide basis. We would deal with them differently according to the scenarios they are in. When it comes to this triangle thing, we want to establish that everywhere. We don't necessarily have it everywhere, yet. This is another thing. I need this place here. This education marketing place is one piece I need to build this. If I didn't have that, I'm more or less dancing around like this all the time. This is what I don't want. All you do here is selling discount, at the end of the day. The farmer says, “Okay. That's all I want. Give me good service, and if not, you're out.” This is relationship, not discount.
By the way, they also understand education marketing. It's a coincidence that we happened to buy this off them and get them to know a little bit more. They also get us to learn a little bit more. In learning that, we have lots in common. Very interesting company.
Mike Lessiter: I'm reading his book right now. Darren Foster and I were there in Indiana, what a month ago?
Michael Horsch: Sonny's book?
Mike Lessiter: Sonny's book, yeah. They gave us one, I'm still reading that. We're gonna do some other European ones, but for this] podcast, I think the American dealers all know what it's like to be an American dealer. What I think is interesting is, if you could tell me what it's like being a global manufacturer breaking into the US market and what a dealer doesn't have any clue of what it's like to penetrate a market like this. If you could tell us a bit about that.
Michael Horsch: First of all, this is not a new market for me. Going back to my earlier roots, it goes back to 40 years of knowing, more or less, understanding, or being very interested in what's going on in the agricultural world here in Central US. For me, it's probably the least complicated to understand your mentality, to understand the way I should talk to you and what you’re interested in, what you're not interested in. I also knew that if I bring 1:1 Western European equipment here and it's not Americanized, it will not be successful.
Some of my buddies are also trying to come here and bring straight Europeanized equipment here. They realize that farmers... It starts with folding. How you fold things. How can I explain it to you? We Europeans have this stupid law that everything has to stay within 10 feet. Everything we fold we fold down to 10 feet. Some of those machines, especially when they are 40 foot wide and we fold them down to 10 feet behind a tractor with triple wheels, looks funny. What's the sense of having something 10 foot wide and being unstable because it's narrow and falls over. It just doesn't look right for the way an American farmer looks at equipment. It doesn't make sense.
You have to have this taste. Your taste is different. Our taste is how we train our farmers over there in Europe, or in Eastern Europe. It's interesting. The Eastern European guys, we have in Russia and Ukraine, we have scenarios like here in the corn belt. Big farms, wide rows or roads. They could easily buy North American equipment. They should only buy North American equipment, but they don't. Why? Because they look so much into the Western European side so they got more the taste from the Wester European side. The equipment has also a taste.
Look at the cars. A BMW or Mercedes car that's built here in North America looks different than in Europe, 'cause you have a different taste. What do you want to see? How things have to look and so on. In farm machinery it's very important. If you wanna change the taste of an American farmer you gotta be careful. Looks, things have to look right. You have to understand that. Obviously, I have dealt with this taste for 40 years and that's why I decide right away I have to have a factory. I have to have an Engineering sight to make sure that we get that taste right.
We have some products we bring over 1:1 from Germany, from Europe, because they are built to American taste. But there's certain other equipment which I would not want not want to bring here because the taste isn't right.
Mike Lessiter: You've gotten to know dealers in every country. What is it that is unique about the American market? Or the psyche or mindset of the American dealer that may be different from other places?
Michael Horsch: Generally speaking, American dealers are, in many ways, more professional that European dealers. Especially when it comes to service. When it comes to trade-in. When it comes to parts availability. This is those three things, the focus. A European dealer, you have the classic farm machinery dealer that has more or less a supermarket approach. He has maybe one main brand, but then he just sells anything he can sell. He a couple different shortliners, in-line competition like you wouldn't believe, and so on.
That's what the North American dealer, actually, even though he is allowed to do it, he's very careful doing it. That's what we're looking for also. We're not interested in dealers that love in-line competition. And obviously, that's a good thing about the likes of Deere and Case and New Holland and so on and ACCO, that because of this full-line approach they challenge the dealer skills. And also educate the dealers to do that. That's a good side.
And you don't find that much anywhere else in the world. Maybe a little bit in Australia you find that attitude, but that's about it. We're trying to educate and obviously now the main, the ACCOs and the CLASS's and Deere's anyway, in Europe, invest in Europe, they're now trying to more and more educate their dealers in terms of having better skills in those three areas. But it's a lot better here.
Mike Lessiter: Is it harder to get a dealer signed up here than in other parts of the world?
Michael Horsch: Yes, in a way, yes. In a way, yes. First of all, if they don't know who we are, they look at us... see, I'll give you another interesting story. In Canada last year, my guys were taking me out in Northern Saskatchewan, that's the end of the world for you guys, hardly anybody lives up there except a couple bears and wolves. And here is this shortline dealer, I don't know what he sells. He sells Argentinian headers and a few this and that and anyway, they signed him up and hasn't sold much of our equipment yet. And our Ontario sales guy has asked that dealer, because he took me around and says, “You know, Michael Horsch is coming into your... please make sure that we're gonna see a few of your key customers because he only wants to talk to customers.” So I don't spend much time, a couple minutes in the dealership and then we take off. Anyway, I was introduced to the owner of the company, a small company, 20 people employed, probably 10 million dollars revenue or so.
And anyway, then his sales guy took us out to the first customer. And so what I did is I hopped into his car, I had my guy following in his pickup and hopped in his car while we were going out this 50 miles or 60 miles to this customer, I was sitting next to this sales guy from this dealership. And I got to talk to him and I said, “How much do you know about us?” And he looked at me and said, “Yeah, I know you're a European company, I heard about you, you sold a few compact discs here and I think you're also selling seeders, I'm not so sure,” and so on. Probably he hasn't had much training yet from us so whatever.
Then I got a little bit mad at him and I said, “First of all, the owner didn't have time to come with me, because he had better things to do than to come with me to see his customers. This is something that doesn't go down with me very well.” And then I said to him, “How big do you think we are?” Because he probably has to sell many different shortlines and he starts guessing, 10, 20 million dollars or so.
And I said, ”You know that I own the company?” “Yes.” What would you think if we're more like 500 million plus?” And he was what is this? And he was going like, “Oh.” Then all of a sudden his thing changed and he was considering the road and he was not... you could say, for him, I was just another shortliner, another headache, another one who wants to sell his equipment, and now he's trying to talk me into this. Okay, I have a customer here, let's see if I can sell something. And my boss, okay, he's on other things as well, and blah, blah, blah.
So it makes me mad. This makes me mad in one way and in another way. You're seen basically as… and here I am, personally, going out there and traveling with the guys, the local dealer guys, and want to see the customers, and then they see me how I'm talking to farmers and so on. And sometimes they understand what's going on, sometimes they get bored because we hardly don't talk machinery with the farmers as well.
Then I say, “Guys, we're probably never gonna get to triangle relationship. It happens quite often. This “mom and pop” dealerships you call them here, and they're just overstuffed with all kinds of different shortliners, and they haven't got a clue for this. If you try to tell them this, they look at you and say, “What is this? Is this a new animal? What are you trying to tell me here? This looks like headache.” He's right, it looks like headache. No wonder you're selling out pretty soon. No wonder you all swing out.
In a way I'm not a good salesman for dealers. I can scare of dealers as well as I can attract dealers because I say, “Guys. Be very careful working with us. It's a long journey. It's a rough journey. It could be an expensive journey, but not always necessarily a win-win journey. If you're not understanding what we're trying to do here, this is not going to take us very far.”
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