Below is the full interview between Mike Lessiter, editor of Farm Equipment, and Marc and Ward McConnell of Art's Way Manufacturing. The McConnells talk about how they serve livestock industries through their company, which has grown to require 150 employees across three facilities and makes more than 20 million dollars in annual revenues.
Mike Lessiter: Pleasure to be with you guys here. I appreciate you taking the time out to be with us. Just first off, tell us a bit about what Art's Way does in the ag space, the type of products and the segment that you serve.
Marc McConnell: Okay. We're specialized manufacturers of farm equipment. Much of our product serves livestock industries, particularly dairy as well as others. We're also in specialized harvest equipment, the sugar beet industry and some other land maintenance type products. More to come.
Mike Lessiter: Are you guys about 20 million in sales now?
Marc McConnell: In ag it would be... In current times, it'd be some less than that. More normal times, it'd be over that so...
Mike Lessiter: Tell us about being publicly held. Why are you, and what does that do for your business?
Marc McConnell: The company's been public since 1971 and was taken public under different circumstances and different times. To this point, we've remained public because we've seen some value in having a tradable stock and it gives us access to public markets to raise capital if we were so inclined. It creates liquidity for shareholders and has benefits like that that aren't generally present in a privately-owned company.
Mike Lessiter: Yeah, what are some of the other ones?
Marc McConnell: We have two ladder manufacturing companies. We make step ladders and extension ladders, primarily for the telecom industry. We're basically the last fully domestic ladder manufacturer. We have an aircraft parts company where we do a lot of brokerage activity for large companies like Northrop Grumman. We fulfill a procurement function for them, essentially. We have a pressure vessel, heat exchanged, tank manufacturing company. We have a plumbing and electrical distribution business. We are very involved in Community Bank. That's been a really interesting venture. Within Art's Way there are other businesses that are not ag-related, modular building manufacturing company that primarily builds laboratory buildings. Art's Way also owns a tool cutting business where we make tools that go into precision machining, inserts and things like that. There are others but those come to mind.
Mike Lessiter: Nice diversification there, it sounds like. Ward, can you tell us a little bit about how you ended up in this business, your path to running …
Ward McConnell: In the farm equipment business, Mike?
Mike Lessiter: Mm-hmm.
Ward McConnell: Started on a dairy farm, and after military I came back to the farm. My father didn't need any help really so I…
Mike Lessiter: This was in New York?
Ward McConnell: In upstate New York, yeah. I think it was coincidence more than plan. Of course, I was brought up on a farm. My father had a WC Allis Chalmers which I hated to drive, but I did drive it quite a bit. I got out of the army after three years. I spent a couple years in Alaska and didn't know what I was going to do. I thought first maybe car dealerships were a good idea, but I couldn't get any car dealer company to talk to me. So, I went to the tractor side and they were glad to talk about it. It was the Olivers, in Harrisburg, Pennsylvania. I took the Oliver franchise on in 1956 and had it for about five years. I spent a year at John Deere dealer along with Oliver.
Mike Lessiter: That's when the tractor business was starting to go, right?
Ward McConnell: Yeah, coming off ... late '50s, '56, '57. In 1960 I took on John Deere for a year. That's the first year they had D-Day in Dallas, where they introduced the multi-cylinder tractors, and I went to that event on their chartered airplane. I was a John Deere dealer only for a year. They didn't like me much really. I was more of a menace to them.
Mike Lessiter: Cut a little bit different, were you?
Ward McConnell: Yeah, I guess so. We didn't agree to the same way. Then I decided that what I want to do is make farm machinery. So, I liquidated the two of those businesses and started manufacturing. At the beginning it was all potato equipment. It was for potatoes in our area of New York, where Iron Age had been making it. They had quit making their equipment, so I kind of picked up where they were, and made potato planters and harvester boxes and so on. I started selling in Maine where there were a lot of potatoes, and then I went to Idaho because, potatoes. I rented a building and put some equipment in it and tried to sell it. Then we ended up with a ranch in North Dakota and we did that for several years and that was pretty good, too. It got us going.
Mike Lessiter: You've had an affinity for not only manufacturing but acquiring companies over the years. You've done it numerous times now.
Ward McConnell: Yeah. That's been fun. I enjoyed buying some of them very much. Everything I bought had been in financial demise and it's fun, for me at least … it's a lot of fun to bring it back to profitability and get good companies out of bad ones. We still do that.
Mike Lessiter: What was it that drew you to manufacturing and farm equipment?
Ward McConnell: It was the thought that I could make more money than I could selling somebody else's equipment … but actually I started manufacturing early on, very early on, some very small pieces of machinery. They didn't operate the best. They weren’t very exciting but as they moved along … we made a potato planter that was very, very well accepted in the U.S. But the potato prices were up here one year and down here the next, and it was awfully, awfully hard to keep the company profitable. We would make a lot of money one year and lose it all the next. Moving along, we eventually got in the tractor manufacturing business.
That was many years later and that was a very, very good decision. We made tractors and shipped them all over North America. We had a tractor that we got very lucky with. Roger Penske kind of helped us get started. Cummins had made the tractor engines for the prior tractors that we made, but Cummins wouldn't sell to us because we were too small and under their radar. Roger Penske came along and said, "Ward, if you'll buy your engines from us and put them in your tractor, we'll build your prototype and test it on the GM proving ground in Detroit." My God, we jumped all over that. We said, "What do we have to do?" Roger said, "All you got to do is send me an engineer and a chassis."
We sent him an engineer and a chassis from a tractor, an older one, and it went to Detroit and they put in a new engine, new type of engine where they computer-controlled the horsepower. That had not been on the market yet but that was a God-send. We were so far ahead of the curve on that first tractor.
Mike Lessiter: Which tractor was that?
Ward McConnell: It was a 425-horsepower. We put our name on it, McConnell Marc tractor.
Mike Lessiter: Yeah, I was going to talk about that.
Ward McConnell: The first ones we made, we put Massey Ferguson on and they sold in Western Canada. It took off. The engine was so far ahead of its time at that time. Nobody could compete with our performance. That went along and it grew like crazy. It grew faster and our money grew. Very profitable. We just boomed and so AGCO came along and wanted to buy it. We made a deal and sold it to them.
Mike Lessiter: What year was that?
Marc McConnell: I think 1994.
Mike Lessiter: Okay. That gave you the resources to do some other things …
Ward McConnell: Oh yeah. I explain it this way. I don't know that it's a very good way to explain it, but I was kind of like a drunken sailor. I went out and bought all of the things I could find because I had money now to buy them with, so I bought all sorts of stuff.
Mike Lessiter: Marc, I think you're the only one that I've sat down with who had a piece of machinery named after him. What do you remember?
Marc McConnell: I think it all started when I was about seven years old, I think, that he bought product line from Massey Ferguson and I remember ... Yeah, 1986. I remember the grand opening of the plant and the governor was there. That was a big deal, him driving around the parking lot in the tractor … so that was interesting.
I remember probably when I was maybe 10, 11, going to an event at Detroit Diesel in Detroit with Roger Penske. It was a big employee appreciation type of event where they featured the wholegoods that their engines went into. So, we had a display there and he spent time with everybody and went to his office and met him. He was kind of a celebrity in his own right, so that was a big deal.
I also remember when AGCO came to negotiate with him. It was Bob Ratliff who put together AGCO and came to negotiate and actually pulled me out of schooled and I sat in the room while they negotiated it and I remember Mr. Ratliff asking if it was OK to discuss all these things with him sitting here. He said, "Yeah, he's here on purpose."
Mike Lessiter: Yeah. Wow, I see.
Marc McConnell: Those are a few of the interesting things. It was good many years later to run into Bob Ratliff again before he passed and revisit some of those things from ancient history.
Ward McConnell: He was a real gentleman, a great guy. It didn't take us long to negotiate. We just got along great. He spent a day with me and … what a day. It was wonderful.
Mike Lessiter: Did he negotiate quickly because a kid was kicking him in the shins underneath the table?
Ward McConnell: No. I don't think he did. I think he just was a very fair person to deal with and there was no funny stuff. I enjoyed it, I went to lunch with him and spent a day with him. It was a great day, one of those days of your life ...
Mike Lessiter: A defining day.
Ward McConnell: A defining day. I was glad to sell it to him and we didn't take any stock back. We just took cash. We hadn't seen much cash up until that time in our lives so cash came in pretty good. It's what kind of catapulted ... Like I said, I was a drunken sailor. We have a bunch of little businesses now.
Mike Lessiter: How many years were you in the tractor business?
Marc McConnell: I think '86 to '94. With that venture.
Mike Lessiter: You bought and sold a tractor company within, what was it, 24 hours once?
Ward McConnell: That was Marshall tractors. That was in England. I was chasing tractor deals. I heard of the Marshall tractor being sold at bankruptcy in England. I was at a farm show, so I extended my English time and went to look at it and I ended up buying it. Before I got it bought really, I had it sold. That was exciting as well … in England. A lot of fun. I ended up buying some little businesses in England also. We have a real estate business over there. We don't do much with it, but we still buy and sell real estate. We have a partner in England.
Mike Lessiter: Tell us how Art's Way came to be. I understand that you had sold a line to them and then served on their board. Tell us that story.
Ward McConnell: It was kind of easy to get into Art's Way because it was public. They were in financial trouble and they needed cash. I had a little cash and so I bought some stock on the premise that I become chairman and they agreed to that. So, I've been on the board or chairman since. Marc’s currently chairman and I was chairman for 13 years. Now I serve on his board. It’s been a very tough year this year, however, for Art's Way. It's changing, fortunately.
We did a lot of things that would commit and lead to growth during that period of time as well. We improved a lot of things that were not up to par, perhaps, and did a lot of improvements during that time. So now we're bigger and better. We're not much bigger, but we will be. We got more products and we got different products that were brought in during this downturn. We got a big forage box, a big one like we didn't have before. At the time we weren't doing very well, we were doing a lot of planning. Marc did a good job.
Mike Lessiter: Marc, what's your earliest memories about the company? I understand that you were always in the office with your dad on the weekends. Tell us about what you remember.
Marc McConnell: Before Art's Way? Yeah. From a pretty young age, I was always, every Saturday, going to the office. He'd spend much of the day there and I'd be there doing something, playing with the model tractors or that kind of thing. I was always around it and I wasn't really shielded from the harder business aspects of it. Growing up, I know FEMA was always a highlight for my parents. That was a can't mix thing in the calendar. That was a highlight for sure and growing up I worked in various ways with the business … as a teenager and sometimes before and that kind of thing.
Actually, one of those teenage jobs ended up leading to my first exposure to Art's Way. In '96 he had purchased the Logan Harvester Company in Idaho Falls, Idaho early in the year I think, and that was a turnaround project. I was 17, about to be a senior in high school and I went to Idaho for the summer and played on the local American Legion baseball team and all that, a couple thousand miles away from home. In any case, I worked there for the company. I went to see dealers, went-
Mike Lessiter: This is in high school.
Marc McConnell: Yeah.
Mike Lessiter: Wow.
Marc McConnell: From Idaho, I went to Western Canada to go collect money from dealers that owed to the tractor company years prior.
Ward McConnell: It was a good experience.
Mike Lessiter: Oh yeah.
Marc McConnell: Yeah. I remember being detained at the border with a lot of checks on hand and a lot of questions and my car torn apart and all that kind of thing. I literally was in a room with no windows for a few hours while they tried to figure out who I was.
Ward McConnell: He was only, how old were you?
Marc McConnell: In that case, 17.
Ward McConnell: He was 17 years old, had a new car, a new red Mustang so he was pretty proud here anyway.
Mike Lessiter: Proper swagger to go collect bills with, right?
Marc McConnell: Yeah, yeah. Not my first car, by the way. I should tell you about my first one…
Ward McConnell: That was one of his first assignments, was to collect money.
Mike Lessiter: Yeah. Hence being detained at the border. How'd they react to a 17-year-old coming to do a collection from them?
Marc McConnell: Not very well. I think they asked, "Do you have any financial instruments exceeding some amount of money?" I said, "Actually, yes I do. I had like 10,000 cash and 100,000 in checks and that was pretty suspicious, I guess.
In any case, I worked at that business during that summer and, again, it was a turnaround. As we started to shape things up, he called me from North Carolina and said, "I got somebody interested in that business we just bought out there," and it was Art's Way. Not long after, by the end of '96 I believe, he'd worked it out to sell Logan to Art's Way and, in doing so, took quite a bit of stock and became a board member also. There was that period from '96 to '02 or so where we were involved but not in a running-the-business kind of way.