Three years have brought a lot of change for Case IH. A near-total turnover of the senior management team, a restructuring of brand marketing, a number of new product introductions, and an announced closing, and subsequent announced reopening, of a major tillage equipment plant.
Three years have also brought change to Jim Walker. Jim Walker, who was brought in as vice president of Case IH North American Agricultural Business in July 2006, participated in the last "Major-Line Executive Interviews" feature article, but at that time representing AGCO (he also worked previously at Claas and John Deere).
Despite representing a new major and an entirely new set of dealers, Walker brings the same philosophies of running a successful dealer network that he cited back then — with ample talk about partnerships, strong statements that the dealer is the customer, and finding ways to add value to the transaction.
These words are in stark contrast to the recent past.
Judging from Walker's words, the pendulum in Racine, Wis., has swung in a different direction. But the ag business isn't about rhetoric; it's still a three-legged stool of good products, good manufacturers and good dealers. To hear Walker, it starts with the dealer. "When a dealer is trying to grow his business and the manufacturer has that same attitude, that's when the two work very well together on a daily basis. That's what's we're trying to do at Case IH right now."
What's Different Today
According to Walker, Case IH has seen growth rates that have exceeded that of the industry average in over each of the last 2 years. "When we look at it in terms of our core products, we've grown 50% in 2 years. That's phenomenal growth for any company. We're pleased and feel that we have processes, people and the dealers pointed in the right direction."
The changes that came in 2006 left little tenure among top management, which required the new Case IH leadership to do business altogether differently. "We had a newer management team with some fresh ideas and directions to pursue. More important, we realized we needed to build a close, strong and long-term working relationship with the dealer."
Noting that managers and directors are spending a lot of time in the field with dealers and genuinely seeking their input, Walker feels dealers have been receptive because "we didn't try and tell them we could do it better than them. Our aim is to be a partner and add value, not trying to replace what the dealer is doing. The dealer is our first customer, no doubt about it."
Among the changes was a restructuring in 2006. Walker emphasized a better utilization of field people to help dealers and their customers. The term "Case business managers" was retired in favor of territory sales managers (or TSMs). Case IH also doubled the amount of product specialists, who, along with the TSMs, now number well over 100 field people assisting dealers today.
With a more visible participation in the market, Case IH is more in tune with what dealers need in the way of programs, and is more active in the process of helping its dealers. "Here in the office, we measure ourselves by how many farms we've been on. If we're not out on a farm at least once per month, there's a price to pay. We need to be active in the marketplace."
Another change was the renewed commitment to the Case IH Dealer Advisory Board. "What had to happen was a movement from a business considered reactive to one that is customer-focused. We're beyond that now; I'd say that we've gone from one that is customer-focused to one that is customer-participative."
At its annual meeting in 2007, Case IH dealers elected a new Dealer Advisory Board, and now has a cross-section of dealers of various sizes, markets and geographies, says Walker. "The outcomes include a better understanding of what affects their business programs, promotions and ways of doing business. Through this forum, we can see what affects dealers — both positively and negatively."
Walker also talked about the "golden triangle rule" for decisions made by the Dealer Advisory Board. "Whatever decisions are made, there needs to be a benefit to dealers, company and customer. I can't say that all three will always have an equal victory, but each needs to win for us to proceed in implementing a new idea," he says.
"We're told over and over that there's been a dramatic change in 3 years. Instead of an organization seen as standoffish, I feel we're one that is seen as being out there with them in the marketplace."
Grading Its Dealer Network
When handing out grades to Case IH's dealer network, he's been generally happy with the ability to capture market share. "We talk a lot about how there are only certain number of customers out there, so if you're going to develop a long-term and stable machine population, you've got to grow your customer base. And that means taking it away from someone else. Our dealers are now clicking with that message, and we're giving them the services and the people, through our territory sales managers and product specialists, to help them succeed with that.
"Whether it's product support specialists, service techs, or TSMs, the dealer can use these resources to differentiate itself and add something the customer will see value in. When you sell the customer on the dealership and its after-sales service and provide technical expertise, you can break down those barriers," he says, noting that today's farmers are far more open-minded than previous generations.
He says the results have been there, too. "We're growing at a faster rate than the industry."
When it comes to his concerns for dealers, the things that Walker preaches most are stability with the customer base, diversification and a vision toward growth.
"The key is for the dealer to have a large enough customer base to allow it to sustain itself when times are bad. They first need to have a good machine population to have an absorption rate that will cover their overhead costs."
At the same time, he likes seeing diversification within dealerships so they aren't overexposed to either ag or consumer products. "Our dealers have seen a renewed commitment from us to all product bases."
As is the case with all the executives interviewed, the 80/20 rule is in effect: the majority of the business is done by the minority of dealerships. "We try to minimize our exposure to those that are not contributing, and do what we can to help the top-third that are truly best in class."
When asked to describe what the underperforming dealers look like, he agreed that the absence of a succession plan and aging ownership can be common threads. But he dispels the thought that the underperforming dealers are on shaky financial ground. "In fact, a lot have socked the money away and are continuing to run the dealership."
One thing is clear with Walker, however. "If you're a dealer that isn't growing, you're a dealer that's going out of business."
Dealer Numbers: Are We There Yet?
Back in 2006, one might have surmised that Case IH had the least amount of work to do on right-sizing its dealer numbers, as it had the fewest at about 1,100. Yet today, the size of the dealer network is down about 14% vs. 3 years ago to around 950. "It hasn't been by design, but by natural attrition," says Walker.
He sees stabilization in the number of dealers as a result of the dichotomy of equipment purchases. For the heavy horsepower equipment, farmers are continuing to consolidate, which means fewer dealers but ones who are capable of covering larger territories. On the other side, he sees increases in the number of the sundowner or rural lifestyle segment, which actually can provide dealer growth opportunities. "Even though the smaller equipment market is down right now, I don't think that'll be a long-term effect. This market will continue to grow in numbers and in dealer specialization."
Walker says he has no notion of what the right number of dealers is. "We don't talk in terms of numbers," he says. "What we do is look at the situation two-fold.
"First, there has to be a competitive economic base for that dealer. If he's doing business with a dealer across the street with the same customer base, we want to know there's not going to be an economic disadvantage. We also want as many stores as possible to take advantage of shared services to share fixed costs."
Because each local community is different, Walker says benchmarks are hard to assign. Asked to provide a profile for a Corn Belt dealership, Walker says a good target is 5-6 locations, each doing $10-12 million.
When it comes to mergers and acquisitions, Case IH can be "hands off," says Walker. "We don't need to do anything; this will take care of itself on its own."
Some industry observers have pointed out that the strong farm economy over the last 2 years has artificially kept weaker dealers in business. "We're trying to help dealers look at it from the other side. That if there's no clear succession plan, this is the time to sell because others are interested in expanding. It really is an opportunity as the sales multiple will never be higher. So, it's a chance for a dealer-principal to get the best value for the business they've built."
Walker sees the credit situation slowing the pace of dealer acquisitions. "Even though there's less risk in the farm equipment sector, acquisitions will slow down. Some operations will rest a bit after recent years and see where things go."
Titan Machinery and Rocky Mountain Dealerships are Case IH dealer organizations that have seen rapid acquisition and recently went public. Both are now the two largest dealer organizations of any color equipment in the entire industry.
Unlike his predecessors, a giant dealership entity does not faze him. "Continued contribution is what we're looking for; we don't have a preconceived limit on how big our dealers can be. We look at a dealer individually and its ability to sustain the plan long-term. We're comfortable with the model if it's handled properly."
Speaking of Titan, Walker admires the bold entrepreneurism of the group and credits the way they're approaching their business. "They're running it with the knowledge that their strength and stability long-term will come from same store, year-over-year sales. They're going after as many stores as they can right now with available capital but they realize they must generate stable returns."
Despite Titan and Rocky Mountain's having gone public, Walker hasn't heard of other dealers aiming to follow suit. "There's a lot of capital out there, and there are a lot of alternative ways of tapping it to grow the business."
Shortages & Capacity
All North American dealers wrestled with the question of "what might have been" in the way of sales had they been able to find more equipment to sell in 2008. Walker doesn't hide from the fact that international markets grabbed equipment last year.
"A year ago, we had a surge in the international business, so all of us had to learn how to share the available production and meet as much demand as possible. As a global company, we had to be fair and balanced. The true measurement is whether we grew the business, and we did in North America, Western Europe and the rest of the international markets, so I think we accomplished that."
While Case IH had forecast Eastern European and CIS markets to continue to grow, the credit situation's impact on global purchasing ability is something that could positively impact domestic availability.
In terms of its own efforts to increase shipments, Walker says that "when you're able to grow 50% in 2 years, you've already made some changes to increase output. We made major efforts in run rates and hours worked. The key was always staying ahead. Where everyone got caught was in the supply of components."
You can build space and add shifts, he says, but you still need tires, shafts and drivetrains. "While we're at the mercy of suppliers, you can't blame them, as the majors decided to exit this business and outsource it decades ago. One thing all of the majors can do is become better forecasters so suppliers can ramp up for higher utilization."
CNH's decision in late September to keep the Goodfield, Ill., plant open, was welcome news on the availability front. After announcing plans 2 years ago to close the 233,000 square-foot facility and transfer all production to its Saskatchewan facility, Case IH announced plans to keep Goodfield open and transfer tillage production back to Illinois while expanding production and employment at both facilities. The Canadian facility will be dedicated to seeders and planters.
Case IH's Turn
Walker, who was with John Deere for 10 years, recalls the 1970s when Big Green became the dominant player in the business. "They took advantage of the International Harvester situation to change the landscape and the business. This is our chance to forge ahead and change the landscape. We can let our actions be what drives the business."
To Walker, the defining moment will be within the next few years, when demand subsides and the victories are counted. "Within 4-5 years, small pick-ups in business can add up to be something big. We're looking for small, steady and consistent growth and believe we can do it with the dealers who are on board."
Filling the Product Voids
Case IH has been aggressive in new product introductions as a means to provide their dealers with a true full-line offering. Jim Walker, vice president of Case IH North American Agricultural Business, cited the following:
- Farmall tractors (30 models under 100 hp)
- Magnum mid-range row-crop tractors
- Smaller hay and forage equipment
- Tillage tools, including vertical tillage
- Self-propelled sprayers (selectively offered to dealers starting this month, previously offered only to distributors serving custom applicator businesses)
- Two new entries in the Class VII combine category and a new Class IX model in the industry's largest segment
- Sugar-cane harvester
A Gentler Path to 'All-Red' Dealerships
Like all the majors, Case IH wants to see its dealers put its energy and resources into selling red equipment. But, it is no longer using the direct language that it did several years ago, when previous management went on record saying "carrying shortlines is sinful," and even named the lines that it wanted its dealers to shed if they wanted to be viewed as committed Case IH dealers.
"Our approach with dealers is straight-forward," says Jim Walker, vice president of Case IH North American Agricultural Business. "We have different pressures than in the past. Unfortunately, we put a lot of dealers into these competitive businesses. We were in and out of different lines, and our dealers picked up other products because we didn't offer it or because we were getting out of it.
"But now, we have a consistent full line offering, and we want to earn that business back. Dealers would rather do business with one supplier, but it takes time for them to see our commitment and consistency. We don't have any right to demand what they are trying to carry, what they're trying to promote."
When told that dealers have shared with Farm Equipment editors that some shortlines have been shed as a result of the credit crunch, he agreed that the situation provides an opportunity for Case IH to demonstrate its leadership — not only in terms of products but aggressive marketing programs and financing. "We have the ability to spread costs across an entire line. Some suppliers with different structures could have difficulty providing adequate financing for their products."
GPS Opens the Window
While Jim Walker, vice president of Case IH North American Agricultural Business, is enthused by biotech genetics that will offer greater disease-resistance and yields, he doesn't see significant shifts in cropping practices nor the machinery that'll do the work. The opportunity he sees for equipment dealers is the window that GPS has opened for a dealer to do business with a customer of a different color.
"We're dealing with a different generation of farmer than 10 years ago. There's more open-mindedness and a willingness to look at what they need to remain in business over the long-term.
"The business of farming is becoming more technical all the time. GPS and autosteer are being widely embraced because it's evident how much more efficient they can be with their passes in the field.
"GPS technologies and the information systems needed to integrate these technologies — including variable-rate applied systems — which is the next big step, are providing a new opportunity for a dealer to pitch their wares out there. In this equipment sector, there isn't as much history with one manufacturer or a color loyalty that needs to be broken down."
Walker likes to see dealers adding GPS product support staff and securing the delivery of the signal to the farm, though he's wary of dealers building the towers all on their own dime. He favors the shared-expense model of what Titan Machinery and its local John Deere and Caterpillar competitors have done with the Rural Tower Network in the Fargo, N.D., area, where the three dealers pooled their resources to provide signal service to farmers.