It's clear that a shakeup in the compact tractor industry is starting. The first salvo was fired recently when Montana Tractors LLC and Branson Tractors Inc. announced plans to explore a merger and form a North American entity to distribute farm tractors in the region.
A letter of intent for the joint venture was announced by Saewook Chang, vice president of Dongkuk Steel Mill Co., the parent of Kukje Machinery Co. and Branson, and Ted Wade, vice chairman and co-owner of Montana.
Chang and Wade met recently in Seoul and signed the letter after a recent tour of Kukje Machinery's tractor production facility. Kukje makes tractors, combines, rice transplanters and diesel engines.
Two well-connected industry sources offered Farm Equipment different views of the proposed merger, which would create a network of 460 dealerships in North America.
E.W. "Swede" Muehlhausen, an industry consultant, was hired last year to assist Branson's Korean management in North America.
He says progress was being made but stalled after a change in top management this year at Branson. Muehlhausen's consulting contract with Rome, Ga.-based Branson came to an end this month.
"Korean management needs to understand the importance of supplying parts and service to the end users, and they must also strengthen dealer relationships," says Muehlhausen, who has served stints as president at Art's-Way Manufacturing and McCormick International USA.
Discussions about a business relationship between the two companies started last fall.
"Branson has manufacturing resources and Montana has financial resources," he says. "I am very optimistic, knowing Ted Wade and what he brings to the table in terms of management and financial resources. And the Branson product is a good one. I think it's a perfect marriage."
Not everyone is convinced. Because the companies are based in different regions of the world and have different business cultures, some question whether the marriage will ever work.
A tractor manufacturing executive told Farm Equipment off the record that he believes the new North American entity will go with Branson's product lineup, which he says isn't as extensive as the lineup previously supplied to Montana by LS Cable.
LS Cable confirmed earlier this year that it was entering the North American compact tractor market directly and would no longer supply Montana with tractors to sell in the region.
"The merger gives more strength to Branson dealers, but I think it's truly a loss for Montana dealers. They will have a much smaller product offering," the executive says.
It's also not clear where the tractors will be built, or how the new entity will offer a product that's both affordable and acceptable in the marketplace, the executive adds.
"I'm not sure how they can put all three of these companies together and make money," he says, referring to Montana, Branson and Farmtrac, which was acquired by Montana last year. "I don't see how this helps. The LS products are higher quality and they have a bigger variety of products."
As with any type of merger, there are some mixed feelings at Branson, Muehlhausen says, because some employees put considerable sweat equity into the company and would like to keep the status quo.
"But once you take the emotional part out of equation and look at it more logically," he says, "it's evident that this is the best way to proceed."
The reaction to the merger from equipment dealers has been mostly positive, he says, and most of them know the market is saturated with too many brands.
He doesn't know if the dealership networks will be consolidated once the North American entity is created, but some analysis of sales should be done in the near future.