Of all the executives interviewed for this special Farm Equipment feature article, Frank Anglin III, vice presi-dent, Case IH North American Agricultural Business, has been in the chair for the shortest tenure. Just one year ago, the 43-year-old Anglin arrived from a simi-lar position of authority for CNH’s ag business in Australia, New Zealand and Oceania and succeeded 40-year industry icon Jim Irwin. Anglin joined the firm in 1996 as vice presi-dent of operations for Case IH Credit and subsequently held senior management positions with Case IH Credit and CNH Capital.
Some observations on Anglin include a youthful energy, fast responsiveness (he prepared a PowerPoint presentation at mid-night following a casual dialog among news editors at a cocktail reception during a dealer meeting last winter) and a confident admission that he doesn’t possess all the answers. In fact, as a newcomer to the ag dealer networks in the states, he doesn’t carry historical baggage or longheld dealer relationships with him, which causes him to be out in the field more in a heavy listening role at this point in his tenure.
The interview for this article was held within days of the news of the CNH reorganization around brands. “We removed a
layer of management,” he says, noting that dealers will not feel material changes. “It should result in faster decision making, particularly with marketing programs. We’ll still have some shared resources between the brands where it makes sense, like precision farming, but the net change should be positive for the dealers and their customers.”
Despite Anglin’s easing of concerns, any announcement involving Case IH still brings about some anxiety pangs, as dealers and others wonder when the next shoe is going to drop. Anglin says, “You’ve got to remember that we doubled our sales from 2000 to 2005. And the short-term goal is an increase of another 25%.”
According to Anglin, today’s Case IH network consists of 674 owners operating a total of 1055 different locations. As much talk as there is about Darwinism at play in farm equipment dealer organizations of every color today, Anglin foresees only modest change for Case IH dealerships over the next 5 years.
“In fact, considering the under 40 hp sector in metro markets, we could see a small increase in the number of outlets.” Over the next 3-5 years, Anglin expects a 10-15% contraction in the number of dealership owners, but with a lesser decline in the number of outlets, probably slightly below the 1,000-site mark. “We’ll continue to have strong outlet coverage.”
While consolidation offers obvious economies to the manufacturer, Anglin points to some efficiencies that multi-store owners will realize through the consolidation. “There’s too much inventory spread around, too many onesies and twosies. When an owner has multiple sites, it’s easier to move that inventory around.”
An obvious next question is the future of Case IH and New Holland, and whether a tug-of-war will emerge should the dual dealership trend be “encouraged.”
The pain of the Case and IH merger in 1985 left some hard lessons learned, and the Case IH and New Holland merger in 1999 brought a different approach. “We all realized what happened with the Case and IH merger and the impact that it had on the dealers,” says Anglin. “The result was not X+Y; it was something less than that.
“We will be very analytical when dealing with locations that are underperforming…” – Frank Anglin III, Vice President North American Agricultural Business, Case IH
“The reason is the brand and the dealer. When you close a dealership, that’s a critical component that can result in lost market share. With the Case IH-New Holland merger, we’ve managed and supported both net-works. Today, we have 192 dual dealers, vs. 194 in 2002, so there hasn’t been any strong movement during that time.
“Our strategy continues to maintain separate distribution channels, but as dealers gain critical mass and economies of scale, we’re open to opportunistic, market-by-market assessments to figure out if it makes sense to promote both brands. But it must be for the right reasons: a pas-sion vs. acting so that someone else doesn’t get the territory.”
The R.G. Mazer Group in Manitoba is one example he shared of the right kind of dual dealership. Mazer purchased the New Holland and Case IH dealerships in Portage and LaPrairie, Manitoba. Dual dealerships are an opportunity that he expects some dealers to pursue, though gradually.
Conversely, Anglin says Case IH will take a tougher stance on underperforming, dual dealers. But according to Anglin, the net impact is that the number of dual dealers will remain about the same in the short-term.
Navigating Contraction & Consolidation
As far as the consolidation process goes, Case IH intends to play an active role. Anglin says, however, that his office’s process will be different moving forward.
“We will be very analytical when dealing with locations that are under-performing,” he says, referencing a page from the 2004 Case IH Dealer Review Book. “Part of it is using the right tools.”
Direct Sales Assistance for Targeted Segments
Anglin insists that he is committed to the dealer structure. “Any activity will go through the dealer network,” he says. That said, Case IH has added staff resources for some targeted agriculture accounts, including government business, which he says represents less than 5% of Case IH’s total business. “That’s a real opportunity to grow,” he says. “There are also a lot of large customers across state lines, some who might want one corporate contact rather than working with as many as 6-10 dealers.”
Another opportunity he sees is with targeted groups that Case IH has yet to penetrate, such as the Mormon church. Corporate-level attention can help with such relationships, says Anglin, cracking doors that would otherwise not have been opened for the local dealer.
Another area is additional dealer management. “We’ve also increased our focus in the field operations. We’re encouraging our Case IH Business Managers (CBMs) to think about the dealer footprint, reviewing all issues and constantly following up. We’re also training our entire field organization to be more astute and helpful in the dealership mergers and acquisitions process.”
According to Anglin, the 65 CBMs have been challenged to “make one material change in their area in 2005.” This could mean filling an open mar-ket point, putting an underperform-ing dealer on cure, determining if a location should be a parts center only, or identifying and facilitating a dealership acquisition.
Facilitating Dealership Mergers
“When you digest a dealer’s financial statements, it’s difficult to deter-mine the fair purchase price and how much should be paid in good-will,” says Anglin. “We are coming up with recommendations to help dealers in such evaluations, as required. A disconnect may exist now between the seller and the buyer, but we will be smarter in terms of valuations.
“The resolution, occasionally, may cost some dollars. Some dealers may want to expand, but don’t have the liquidity to do it properly. Sometimes additional resources are needed to bridge a gap. If the acquiring dealer will commit to the critical targets, including market share, we may be willing to contribute, to extend a loan to bridge the gap, contingent on mar-ket share performance.”
While multi-generational family dealerships continue to fret over the contract approval process, Anglin believes it’s less of a problem at Case IH than at other manufacturers. “We have a high degree of confidence in the dealer network to choose the right partner in the dealer transition process,” he says.
Instead, the problem has not been the approval itself, but the responsiveness with the application process. “Sometimes the cart has got-ten in front of the horse. The CBMs should own the market and manage the process. This, finding the solu-tion, is going to be front of mind with the CBMs.”
How Big is Too Big?
Too much geography is not the right answer either, from both the customer and the corporate perspective. “The farm customer needs to know the dealer-principal, or that store manager that’s empowered to make decisions,” says Anglin. “If he doesn’t, that can be a sure symptom of a dealership that expanded too much.”
When asked how big he would let a dealership get, Anglin says that the rule of thumb is not to let any single organization exceed 10% of Case IH’s revenue. “How much leverage do we want to let someone have over us?”
Profitability Tide Must Be Raised for Certain Case IH Ships
“The main challenge is for dealer profitability to grow,” says Anglin. While the Case IH balance sheets have remained stable for the past several years, and dealers have a solid equity position at 27.2%, Anglin wants to see better a bet-ter profitability position moving forward. “We must make sure that our dealer statements as a whole begin to look more like those that fall in our high-per-forming group.”
For instance, Anglin notes that the average Case IH dealer increased sales by 17.6% in 2004 (compared to 17.9% increase for high-performing dealers), but the high-performing group had more than twice the pretax income. The high-per-forming group took full advantage of this growth by maintaining good control over their margins and, compared to the average dealer, achieved higher gross mar-gins in the wholegoods, parts and service departments. They also did a very good job of managing operating expenses at 1.5% below the average dealer, says Anglin, which helped them maintain a pretax income level of 2.6% of sales.
Competitive Lines...A Question of Brand Passion
Dealership purity (or the majors’ push-back efforts when it comes to dealers carrying competitive lines) efforts register high on the list of concerns of all farm equipment dealerships. And while the concern is least among Case IH dealers among all the manufacturers (according to the recently completed Farm Equipment’s 2006 Dealer Business Trends Survey), the amount of time, energy and effort Case IH dealers spend on non-red colored equipment remains a present debate in Racine, Wis.
In the past, Anglin admits that Case IH didn’t always have the product offering to fill the unique cus-tomer need, opening the door for the Kubotas and McCormicks. “Now, with Farmall, which was up 40% in 2004-05, we do,” he says. “With pricing and technology, we have a compelling reason for our dealers to make that switch back to the Case IH brand. Rather than set-ting forth an edict, I like to think we’re earning that business back.”
“We’ve had a series of discus-sions with our dealers on determining the true cost of another line. It’s a fact-based, quantifiable view of 30 different data points. The rationale is that multiple lines impact the dealership’s opportunity cost, train-ing, wholegoods and service.
“We built a model that shows dealers what is involved in taking on other lines. Essentially, we say, ‘Let’s do the math and see what it looks like.’ This is skill-building program for our CBMs, equipping them to help dealers make the right decisions.”
When asked for his view on dealers and the shortlines they carry, Anglin reiterates that Case IH’s improvement will do the talking when it comes to getting a bigger share of the dealer’s business. He cited improvements from past problems in parts availability (an issue he said Case IH struggled with but has since overcome); answering phones fast enough (“we now get 97%of the calls answered within a timely manner”), and supply chain issues (“we have lowered lead-times on the previously problematic units by months”). “We also achieved significant improvement in MXM quality and reliability. We continue to address quality and reliability in all areas of the business,” says Anglin.
Farm Equipment’s 2006 Dealer Business Trends Survey showed that Case IH dealers possessed the biggest concerns among all manufacturers when it came to product reliability.
“Once we’re where we need to be, and we are improving rapidly, we can take a more forceful stance with dealers.”
A question that some dealers have begun to hear asked by Anglin is “Do you share my enthusiasm for the Case IH brand?” “If they don’t, we’ll both have to make some choices and maybe do something different.”
A New Era
Anglin has instituted new communication tools, and uses them on a regular, higher-frequency basis to make sure that he has the pulse of the dealer network and that they also know what’s happening in Racine. These include dealer satisfaction surveys (he polls one-third of his dealer universe every 4 months), a dealer advisory board that convenes via teleconference monthly, and teleconference Case IH updates open to the entire dealer network.
Dealer Expansion/Consolidation Issues
In helping his CBMs understand the issues involved with dealer expansion and consolidation, Anglin has highlighted the following for them to keep in mind.
- Performing dealers who want to expand may not have sufficient working capi-tal or the people to expand.
- History shows that success is not guaranteed
- When expansion fails, it creates a bigger impact to the business vs. a single-store failure.
- Expanding too soon may stretch a strong dealer to the point of failure.
- Aggressive management at the top and at each individual store must be in place for success.
- Economies of scale may not be effectively realized with the first expansion.
- Some are not willing or able to expand — generation of dealer-principals who do not want to risk what they have developed over time.
“Jim Irwin was known to be a strong dealer advocate,” says Claudia Garber, CNH director of strategic marketing, of Anglin’s predecessor, who retired after 40 years last year. “With Frank, there’s a difference in style and approach, but the end game is the same. Both know that you must take care of the dealer to take care of the customer.”
“Jim knew and grew up with all these dealers. He knew the business inside and out,” says Anglin. “It was-n’t as necessary for him to visit as much as I’m trying to do now to build relationships.” As a result, there are now fewer preconceived notions, more of a clean slate approach to try-ing new things or revisiting things that were attempted previously in a different time, with different people.
One thing that Anglin insists on is that he and his team evaluate business issues at the local market level, a case-by-case level, and do not make “sweeping decisions.”
Setting Sights on the Competition
Anglin insists that he’s proud of the dealer network. When asked of the dealer behaviors that he most wants to see changed, his answer would be characterized as seeking more evolutionary than revolutionary change. Absorptions rates could be far better, he says, noting that that they are in the 60% range company wide (vs. the aggressive target of 100%). Higher absorption rates, he reiterates, provide dealers with more flexibility regarding wholegoods.
“Value-added selling is another opportunity of low-hanging fruit, and one that we will continue to talk about.” He cited a good example of progressive thinking with Titan Machinery (see Is Titan Machinery Reshaping the Future of Ag Dealerships?, October/November 2005 issue), and how it has partnered with competing dealers to provide RTK GPS service at a minimal cost to the farmer.
“Now that we have gotten our house in better order, we want more aggressive targeting of competitive customers. We’ve shown we’ve improved ourselves as a supplier, and now can be far more aggressive. I’m talking about making multiple sales calls, knocking on the farmer’s doors many more times throughout the year. This involves proactive annual planning — identifying a number of targeted customers and calling on them several times to have the results that we need by the end of the year.”
The following “Special Report” was put together to give Farm Equipment readers the manufacturer’s perspective on these and other issues con-fronting ag machinery dealers.