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Allis-Chalmers

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Today, the name Allis-Chalmers is synonymous with the trademark orange colored tractors it produced starting in the early 1900s. However, Allis-Chalmers was also involved in many other small businesses during its years in operation. Nonetheless, the two principle revenue streams that would come to dominate and account for the majority of the company’s sales through the years would be construction and agricultural equipment manufacturing. Interestingly enough, it was not founder Edward P. Allis who spearheaded the company in this direction but a man named Otto Falk.

The gradual selling off of Allis-Chalmers' construction division to Fiat S.p.A and its farm equipment division to Klockner-Humboldt-Deutz AG (KHD) can be attributed to the fact that the company focused diversification efforts mainly through acquisitions and dependence on auxiliary equipment manufacturers rather than in-house product development. Tracing its extensive history back to the mid 1800s, the company never truly emerged as a market leader in any one field, including agricultural and construction equipment manufacturing where it continually lagged behind competitors Caterpillar, John Deere, and International Harvester.

Contents

[edit] History

The company’s roots date back to founder, Edward. P. Allis, an American born entrepreneur who started a leather tannery called the Empire Leather Store in Milwaukee, Wisconsin.[1] Eventually selling off Empire Leather in 1856, Allis purchased the financially struggling Reliance Iron Works at an auction. The company was a leading manufacturer of sawmills, flour milling equipment, and casting. The company was renamed Reliance Works of Edward P. Allis & Co., and got back on its feet under Allis’ leadership. Booming wheat crops made possible by the invention of the reaper and threshing machines created a demand for flour milling equipment and spurned growth. Eventually the company employed 40 people working 55 hours a week.[2]

In 1869 he purchased rival company Bay State Iron Manufacturing Co. His company was doing well, but in 1873 a depression forced Allis into bankruptcy. Able to stay in tact after negotiating his debt, Allis’ company quickly grew. By 1889 he employed 1,500 workers and shipped a total of US$3 million in equipment annually.[3]

[edit] Inventors Pave the Way

Allis was not an inventor, but an entrepreneur with a strong background in the areas of finance and marketing. He left product development to management and a number of gifted inventors in order to move his company forward in the manufacturing of sawmill and flourmill equipment and steam engines.

[edit] George M. Hinkley

George M. Hinkley joined Allis in 1873 as an engineer and salesman. One of his more significant contributions was the bandsaw that eventually replaced the circular saw in milling operations. This invention was said to have transformed the logging industry at the time. In his career, Hinkley was awarded 35 patents for a range of sawmill machinery and accessories.[4]

[edit] Edwin Reynolds

Edwin Reynolds came to Allis as the former general superintendent of Corliss Works, a leading producer of steam works. Reynolds designed massive blowing engines for steel works by using waste furnace gases. The company built the largest engines of this type, standing 40 feet (12 m) high with a 76-inch (193-cm) air cylinder. His single greatest accomplishment, however, was establishing Allis as a leading manufacturer in the heavy engineering field.[5]

[edit] The Merging of Allis-Chalmers

In 1889, Allis passed away. Part of his legacy was his exemplary leadership. Upon his death, shares of the company’s stock were split between his eight sons; however, none of them displayed the same leadership potential as their father. In 1901, a Wall Street promoter expressed interest in merging E.P. Allis and Co. with three other companies. These included The Fraser and Chalmers Co. of Chicago, a mining machinery manufacturer, Gates Iron Works, a maker of gyratory crushers and cement-making machines, and Dickson Manufacturing Co., a producer of compressors, sugar mill, and coal mining machinery. The new company was renamed Allis-Chalmers Co.[6] Though two of Allis' sons would act as president and chairman, Wall Street interests heavily controlled the newly established company.

[edit] Otto Falk

Perhaps the most influential person to guide the growth of Allis-Chalmers was not Allis himself, but a prominent businessman and retired brigadier general named Otto Falk. In 1913, reorganization of Allis-Chalmers led to the naming of Falk as the company’s new acting president and the incorporation of the company to Allis-Chalmers Manufacturing Co. He would guide the company until his death in 1940. One of the most influential decisions he ever made was getting the company involved in agricultural equipment manufacturing.

[edit] Entering the Tractor Market

The first piece of equipment the newly formed Allis-Chalmers Manufacturing Co. produced was a three-bottom model tractor in 1919. However, the 1920s marked a slow period of growth in the tractor market for Allis-Chalmers. As a relative newcomer, the company faced some stiff competition from other models like Ford's Fordson tractor and the Farmall tractor developed by International Harvester. Another significant drawback was that the Allis-Chalmers model lacked implements. In addition, the company had a weak distribution system. Tractor sales in 1927 accounted for only 6.8 percent of the company’s total sales of US$2.26 million.[7]

[edit] Track-type Tractors

One company epitomizing success in the 1920s in tractor manufacturing was Caterpillar. This caught the watchful eye of Falk who would, following Caterpillar’s lead, foray into the production of track-type tractors. At the time, the tractor market was already quite saturated. There existed a less likely opportunity for Allis-Chalmers to capture a substantial part of the market. Falk saw an opening in the less populated track-type tractor market and this led him to acquire Monarch Tractor Corp. in Springfield, Illinois for US$500,000 cash.[8] Monarch’s pre-existing models, the Six-Ton and the Ten-Ton would form the basis of Allis-Chalmers new track-type tractor line-up. Eventually, they would develop new models that included the Model 75/Model F and Model 50/Model H. These models were abandoned for the more favorable Model K, Model L, and Model M and in 1937 the Model S.

[edit] Gasoline vs. Diesel Engines

Up until 1937, all Allis-Chalmers tractors used gasoline engines. In 1937, the company offered two models with an optional oil engine. Both used a diesel injection system with spark ignition and a gasoline compression ratio.[9] It did not counter the success of competitor’s diesel engine models however. By the late 1930s, Allis-Chalmers began redesigning its track-type tractor line with General Motors' 71-Series Detroit Diesel engine. A nomenclature using the HD prefix was adopted and all gasoline engines phased out by 1943. The company introduced the HD-14 in 1939, the HD-7 in 1940 and the HD-10.[10]

[edit] Contributions to Tractor Development

Track Rollers

Allis Chalmers introduced the “Positive Seal Track Roller”[11] when it launched the HD-14. The undercarriage on track-type tractors was in constant contact with various ground conditions. This often resulted in wear and tear. Track rollers were particularly problematic as dirt often worked its way into the tracks, resulting in a short life span. Often tracks had to be replaced, sometimes prematurely. The Positive Seal Roller was a huge breakthrough for the company. After World War II it would evolve into the “1,000 Hour Roller”,[12] delivering a thousand hours of use between lubrications. The invention of a better roller by Allis-Chalmers had Caterpillar scrambling to introduce such a feature too. It would not happen until 1958.

Pneumatic Tires

Allis-Chalmers partnered with tire manufacturers Firestone and Goodyear to make suitable pneumatic tires available for farm tractors. Pneumatic tires were offered for the first time in 1933 as an alternative to the standard steel wheels of the time. Farmers were apprehensive about the change but by 1940, 95 percent of new farmer tractors possessed pneumatic tires.[13]

[edit] Motor Graders

In 1930 the company branched off into the manufacturing of motor graders. In 1928, Caterpillar, entering into the grader business with the acquisition of Russell Grader Manufacturing Co., precipitated Allis-Chalmers to make a similar move. Allis-Chalmers bought Ryan Manufacturing Co., a producer of road graders, and proceeded to offer a two-model grader line of “Speed Controls” in the 45 horsepower (hp) No. 42 and the larger No. 54.[14] Both models had a forward mounted gasoline engine.

After the war, in 1946, the company introduced two new motor graders—the 78-horsepower AD-3 and the 50-horsepower BD-2. Both graders had a unique tubular mainframe, mechanical controls, GM Detroit Diesel engines, and a “Roll-Away” moldboard that imparted a special rolling action to material being graded. The models were later upgraded to 104 horsepower and 78 hp as the AD-4 and BD-3. In 1949, the Model D with 50 horsepower was added to the line-up providing Allis-Chalmers with ample coverage in the motor grader market.[15]

[edit] World’s Largest Track-type Tractor

In 1947, Allis-Chalmers caught Caterpillar off guard when it launched the world’s largest track-type tractor, the HD-19. Powered by GM’s Detroit Diesel Engine, the tractor had a 163 horsepower engine and weighed more than 40,000 pounds (18,000 kg), eclipsing Caterpillar’s largest tractor the D8 in sheer size by as much as 20 percent.[16] The tractor’s most unique feature was a torque converter in the drive train. The hydraulic torque converter prevented the engine from stalling as the load increased. A drawbar pull would instantly increase as the tractor slowed down under a load. It proved to be quite a reliable tractor, despite criticism from competitors Caterpillar and International Harvester who had nothing similar on the market.

[edit] Wheel Loaders

In 1950, Allis-Chalmers partnered with Tractomotive Corp., an auxiliary equipment manufacturer, to bring out the TL-10.[17] The wheel loader was modeled after the success of Hough’s new wheel loader that featured a rear-engine design. The TL-10 wheel loader, however, was the first to incorporate torque-converter drive. Nevertheless, it still proved to be less sophisticated than Hough’s model. The partnership would yield a four-model line-up by 1955 but they failed to be a match for other models put out by Hough and Clark-Michigan. As a result, Allis-Chalmers never successfully secured a position in the wheel loader market. In 1959, it finally acquired Tractomotive Corp. and began to produce wheel loaders of a fully integrated design.[18] Allis-Chalmers launched a new improved line of 6 articulated wheel loaders beginning with the TL-645 in 1964. A prototype of a 500 horsepower HD-41 was a hit at the 1963 Road Show but production of the model would be put off for another eight years.[19]

[edit] Acquisition of Buda Co.

In 1953, Allis- Chalmers acquired the Buda Co., a manufacturer of diesel engines and gasoline engines and lift trucks. The acquisition was spawned when GM, the long time provider of Detroit Diesel engines for the company’s earthmoving equipment, decided to purchase Euclid Road Machinery Co. This positioned GM as a competitor and the partnership was halted when company shareholders decided to acquire Buda. Eventually GM diesel engines were phased out of all Allis-Chalmers earthmoving products.

[edit] Acquisition of Auxiliary Equipment Manufacturers

Similar to Harvester, Allis-Chalmers often tried to circumvent in-house development to enter new machine markets by instead acquiring auxiliary equipment companies such as LaPlant-Choate Manufacturing Co. in 1952 when it wanted to enter the scraper business. It incorporated the company’s two relatively unsuccessful scraper models, the TS-200 and TS-300, into its own product line.[20] Such an entry strategy was doomed to fail at the onset. By the 1950s other models that were much improved had entered the market and solidified contractor loyalty. This type of move would prove to be detrimental to the company’s long-term survival but a pattern Allis-Chalmers continued to repeat over and over again for such products as bulldozers, controls, towed scrapers, and track loader attachments. When it came to establishing a true market position, in-house design control would prove to be invaluable. Despite their strategy of acquiring auxiliary equipment companies and diversifying into markets that were not lucrative, they still ended up spending money on product development. Such rapid diversification also perpetuated hostile internal competition for product development funds that were not very easy to come by.

By 1955, Allis-Chalmers was worth a half billion dollars with company business constituting over 30 different divisions.[21] Not surprisingly, a generous bulk of the company’s core business was derived from the company’s tractor division that also comprised agricultural and construction equipment. In fact, it was third in construction behind Caterpillar and IH and third in farm equipment after Harvester and Deere.[22] What this meant in the larger scheme of things was that Allis-Chalmers was made up of a number of smaller businesses that were struggling for market share by trying to compete with larger, more specialized companies.

[edit] International Expansion

By 1957, Allis-Chalmers was renamed Allis-Chalmers International and decided to expand its operations internationally with the purchase of a small Italian manufacturer of crawler tractors in 1959 and a French company in 1960 that built generator sets and motor graders.[23] By the 1960s, the company operated a number of plants in Mexico, Australia, England, and several other countries. [24] The problem presented with these international expansion efforts was the company's lack of resources and funding needed to get such small operations off the ground and growing. Despite its efforts, it was never able to become a multinational company and overseas expansion only netted poor sales.

[edit] Volatile Times

The 1960s through to the 1970s proved to be a rather stagnant time period for Allis-Chalmers. With no new aggressive product development being conducted and insufficient resources, the company was fast losing steam in both the farm equipment and construction equipment manufacturing markets.

In 1971, the company became Allis-Chalmer Corp.[25] As a recession hit, the company struggled to remain an independent entity in the face of multiple corporate takeover attempts. It also was trying to keep its construction division as a viable revenue stream but sales were experiencing a steady decline. New competitors such as Komatsu were grabbing a bigger slice of the construction equipment pie with the production of hydraulic excavators that Allis-Chalmers did not produce. At the same time, Case and Deere were expanding into the medium and light range ends of the market.[26] The demand for farm equipment also dropped off in the 1970s[27]. The company would be forced to take some drastic measures in order to ensure the survival of the Allis name and its two principal businesses-- agriculture and construction equipment manufacturing.

[edit] The Fiat-Allis Venture

It was in 1973 that Allis-Chalmers pooled its construction equipment business with Fiat S.p.A in a joint venture, Fiat-Allis. In a highly fragmented Italian industry, Fiat was the largest producer of small to medium sized track-type tractors and track loaders. With Allis-Chalmers advanced technology and larger models, it could become a main contender in the European market. The deal was a huge boost for Fiat but did not benefit Allis-Chalmers nearly to the same degree. Aside from product name changes, Fiat’s products were merely incorporated with the Allis-Chalmers line at ConExpo in 1975.[28]

The merger created two new companies, Fiat-Allis Inc, headquartered in Illinois, and Fiat-Allis B.V. headquartered in the Netherlands. The former handled North American operations and the latter covered Europe. Ownership of the two companies was split 65/35 Fiat/Allis-Chalmers.[29] The partnership was faulty from the beginning.

First of all, Fiat’s product range did little to complement Allis-Chalmer’s product line in North America. It’s line of small and medium bulldozers and tractor loaders were largely redundant to Allis’ existing product line. In addition, Fiat insisted in installing its own engines into Allis-Chalmers products but the Fiat brand name held no special appeal with American buyers. The company continued to experience losses.

Over time, Allis-Chalmers’ share of the enterprise shrunk from 35 percent to just 12 percent.[30] Eventually, the company was forced to shut down its Springfield, Illinois plant and filed suit to liquidate the venture, arguing that Fiat had increased control of the venture to further their own interests without any regard for what was in the best interest of Allis-Chalmers. Litigation dragged out for three years until the partnership was finally dissolved in 1985 with Fiat buying out Allis-Chalmers for US$10.7 million.[31] After 57 years in the earthmoving equipment manufacturing business, the mark Allis-Chalmers left on the industry was simply expunged. Fiat-Allis was renamed Fiatallis.

[edit] Allis-Chalmers and KHD

Given fledging sales in its farm equipment division, Allis-Chalmers began looking for a way to bring capital back into the organization. By 1984, sales in farming equipment were so low that the company actually had to shut down its tractor and combine plants for three months and lay off long-time Allis-Chalmers employees, who were left stunned by the move. It was a sad day for the company. Within six months of the shutdown, Allis-Chalmers executives made a last ditch attempt to save the Allis-Chalmers Agricultural Equipment Co. by selling it off to Klöckner-Humboldt-Deutz AG (KHD) along with a related credit subsidiary for a reported US$132 million.[32] KHD merged the division with its already established Deutz Farm Equipment subsidiary renaming it Deutz-Allis Corp. In 1990, tired of dealing with its Deutz-Allis operation, KHD decided to sell if off. The head of Deutz-Allis in the U.S., Robert Ratliff, arranged purchase of the division by selling off receivables and then using the funds to finance a buyout. The deal went through in 1990, and Deutz-Allis was renamed Allis-Gleaner Corp., or as it is better known today, AGCO Corp.[33]

[edit] The Company Today

Following a complete dispersal of its remaining manufacturing businesses in 1998, Allis-Chalmers officially shut down its Milwaukee offices in January 1999.[34]

[edit] Equipment List

[edit] References

  1. History. AGCO. 2008-09-22.
  2. AGCO. Funding Universe. 2008-09-22.
  3. AGCO. Funding Universe. 2008-09-22.
  4. AGCO. Funding Universe. 2008-09-22.
  5. AGCO. Funding Universe. 2008-09-22.
  6. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 43
  7. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 46
  8. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 46
  9. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 46
  10. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 47
  11. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 47
  12. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 47
  13. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 47
  14. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 47
  15. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 123
  16. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 123
  17. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 124
  18. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 124
  19. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 173
  20. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 124
  21. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 172
  22. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 172
  23. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 173
  24. AGCO. Funding Universe. 2008-09-22.
  25. AGCO. Funding Universe. 2008-09-22.
  26. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 212
  27. AGCO. Funding Universe. 2008-09-22.
  28. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 213
  29. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 213
  30. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 278
  31. William R. Haycraft, Yellow Steel: The Story of the Earthmoving Equipment Industry, pg 278
  32. AGCO. Funding Universe. 2008-09-22.
  33. AGCO. Funding Universe. 2008-09-22.
  34. Allis-Chalmers Website. 2008-09-22.