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International Harvester Co.

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(Redirected from International Harvester)
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International Harvester Co. was named after the first product it ever manufactured on a mass scale, the reaper, now known as a harvester in the agricultural industry. Eventually the small enterprise branched off from agricultural manufacturing into trucks and construction and earthmoving equipment, growing into a multinational company over the course of its 150 plus years in operation. Descendants of founder Cyrus Hall McCormick managed the company up until 1946.

Contents

[edit] History

In 1831, 22-year old Cyrus Hall McCormick, a Virginia-based farmer, invented the very first reaper. After giving a successful demonstration of the reaper’s ability on a neighboring farm, McCormick made several changes and patented the machine in 1834. Demand for the reaper swelled in the local community of Walnut Grove where McCormick lived. Unable to keep up with demand, McCormick bought land on the north bank of the Chicago River in 1847 and quickly constructed a factory. The factory produced 500 of the reapers in time for the 1848 harvest and the McCormick Harvesting Machine Co. was born. The site would later become headquarters for International Harvester Co. Business at the McCormick Harvesting Machine Co. grew steadily and by the mid 1850s employed 250 workers who produced over 2,500 reapers a year at an estimated worth of $300,000.[1]

[edit] Establishing a Dealer Franchise

“Trying to do business without advertising is like winking at a pretty girl through a pair of green goggles. You may know what you are doing, but no one else does.” [2]These were famous words spoken by McCormick on the nature of conducting business. McCormick was well reputed for his understanding of marketing and finance. By 1879, when his son, Cyrus Jr., had joined him in the family-run business, McCormick Harvesting Machine Co. was the world’s largest farm implement manufacturer.[3]

McCormick was the first entrepreneur in the equipment business to establish an effective and highly successful distribution system with retailers that sold his products. At the time, it was common for retailers to sell competing brands. McCormick, however, introduced a contract that encouraged franchises to refrain from doing this and focus exclusively on selling McCormick products.[4] In essence, McCormick developed a dealer concept that is the retailing model that exists in the farming and equipment industry today.

[edit] Merger with Deering

In 1884 McCormick passed away and Cyrus Jr. took over as CEO. For the next two years the company would experience worker strikes and hostility with labor unions demanding an eight-hour workday.[5] During the same time period, William Deering established a rival reaper manufacturing plant in Chicago in 1880. The two companies knew that consolidation was inevitable and agreed to a merger in 1902 with three other smaller firms included in the picture. The combination of these companies would become the International Harvester Co. and represent approximately $110 million in net assets and occupy 85 percent of the harvest business in the U.S.[6] In the coming years, international expansion would be a top priority with plants being established in Sweden, France, Germany, Russia, and Canada.

[edit] Foray into the Truck Industry

One of International Harvester’s first accomplishments was its foray into the truck starting in 1907 with the launch of the Auto Buggy.[7] The introduction of the Auto Buggy would solidify a top spot for IH in the years to come as a premiere truck manufacturer. The Auto Buggy was later reintroduced as the Auto Wagon. The Auto Wagon was the first ever multiple use utility vehicle that had a removable seat that turned into a pick box. By 1912, IH had manufactured over 9,000 units.[8] Buses were added in 1914 and school buses in 1916.[9]

[edit] Farm Tractors

In 1909, the company would enter the tractor market with its Mogul line of gasoline-powered tractors followed in 1910 by the Titan line. These early models had a friction drive system and that gave them a 15-belt horsepower rating. In a move to keep their brands separate, Deering dealers sold the Titan line and McCormick dealers sold the Mogul line.[10] The tractor market was flourishing rapidly with over an estimated 186 companies involved in tractor manufacturing in 1921 in the U.S.[11] The proliferation in the number of companies involved in tractor manufacturing was fueled by developments in internal combustion engines near the end of the 19th century.

[edit] The Tractor Battle: Fordson vs. Farmall

Henry Ford’s tractor was the most successful tractor produced when tractors were first making their way onto the market. Since it was mass-produced on a scale other tractor manufacturers could not replicate, it was also made available to customers at a lower price point. No tractor manufacturer could parallel Ford’s success with the tractor and this wreaked havoc on the industry. Within two years, the Fordson dominated two thirds of the tractor market with sales capping 67,000 units. So powerful was Ford’s stronghold on the market with the Fordson tractor that by 1930, only 38 tractor manufacturers remained in business in North America.[12]

While International Harvester was affected, the company was able to rebound from its losses when it introduced the Farmall tractor in 1921. The company had been working on an all-purpose tractor prototype some years earlier. This development translated into the Farmall tractor that had a tricycle design and high clearance, and could also be used as a cultivator.[13] The Farmall tractor would be the first tractor to give the Fordson a run for its money forcing Ford to discontinue production in the U.S. in 1928. By 1929, the Farmall Works plant opened and soon catapulted International Harvester to dominance in the production of tractors with a 60 percent share of the market.[14]

[edit] Capitalizing on Crawler Tractors

In 1919, Cyrus McCormick stepped down as CEO and passed the reigns to his younger brother Harold. International Harvester decided to branch off into a third stream of the tractor business when it started developing crawler tractors. Its first crawler tractor was the McCormick-Deering 10-20 which carried the trade name “TracTracTor”.[15] The tractor existed as a tracked version of the Model 10-20 wheel tractor developed by IH. The company would introduce versions of the tracked-type tractor targeted primarily at the agricultural market. In a move to later compete with the likes of Caterpillar and Allis-Chalmers in the heavy, industrial tracked tractor market the company launched the TD-18 TracTracTor in 1939.

[edit] Laying a Foundation in Construction

By the 1930s International Harvester was one of America’s first multinational companies. It had already acquired over three decades of international manufacturing and marketing experience and was selling everything from tractors to milking machines. It was positioned well ahead of General Motors and Ford as a producer of medium and heavy trucks. The next logical move for the company was to tread new ground and establish a construction equipment division in 1944. The first piece of equipment out of the gate in the post-war era was the IH TD-24 track-type tractor introduced in 1947.[16] With a 130 horsepower engine it was developed to directly compete with Caterpillar’s D8. It outweighed the D8 by more that 3,000 pounds (1,360 kg) and had a distinctive feature—two-speed planetary power steering. The system permitted turns with power to be applied to both tracks.[17] With the TD-24, IH saw an opportunity to surpass Caterpillar but it wasn’t to be. A lack of insufficient field-testing of the new steering system proved it to be mechanically unsound. International Harvester had to purchase back and rebuild hundreds of tractors. The tractor was eventually reintroduced but the experience had taken a financial toll on the company.

Lack of capital to pool into product development led IH to take a similar approach to that of Allis-Chalmers with its Construction Equipment Division: a reliance on auxiliary equipment manufacturer products to fill out its existing product line. For example, it had used Bucyrus-Erie bulldozer blades, controls and scrapers since the 1930s eventually buying the company out in 1953. It also used an assortment of attachments produced by Drott Manufacturing in an attempt to convert over its crawler tractors into crawler loaders.[18] The IH Construction Equipment Division also tried to break into the wheel-tractor scraper market in 1953 when it purchased the rights to two models developed by Heil Company. The models were so poorly designed and powered that they never stood a chance competitively, giving IH a rather poor reputation for scrapers. Through the years, the construction equipment division would never really get off the ground, lacking adequate resources for aggressive product development. The division would merely exist as a third wheel product line to the company’s more successful farming equipment and truck divisions and never generate more than 18 percent of Harvester’s overall business.[19]

Through the 1950s, the company’s Construction Equipment Division would continue to struggle. In 1961 for example, IH launched the [TD-30] to compete directly with Caterpillar’s D9. It mirrored the same fate as the company’s earlier TD-24 of 1947. Lack of field-testing proved product failure out in the field and it was eventually pulled off the market.[20]

Other changes came in the trademark red color of IH’s products being switched from red to yellow in 1961. Yellow was being toted as the industry’s new standard color being eventually adopted by all manufacturers in the industry.[21]

[edit] Acquisition of Hough 

The most successful acquisition for IH’s construction equipment division was the buy out of Frank G. Hough Co. in 1952.[22] Hough was the inventor behind the Payloader, a rubber-tired, hydraulic, front end loader where the engine was installed in the rear end of the machine. This simple modification was effective as it did not impair the operator’s line of visibility. Positioning the engine at the rear of the machine also provided a natural counterweight to the bucket load. The Hough brand under IH ownership performed well. Hough was a household name and lacking little faith in its own construction equipment division, IH even established a separate Hough division with dealers to sell the machines. The Hough brand of wheel loaders would be the strongest performing line in IH’s earthmoving product line.[23] In 1955, the patented Z-bar loader linkage was available on the HU, HH, HO Payloaders. In 1958 a brand new nine-model line of wheel loaders became available. Articulated steering became available in 1965. Wheel bulldozers were added in 1961 including the giant D500 Paydozer.[24]

[edit] Acquisition of Solar

In the 1950s, the trucking and mobile equipment industries were exploring a new type of power source in gas turbine engines. This development led IH to acquire Solar, a leader of gas turbines already producing engines for the U.S. Navy.[25] The gas turbine engine held great promise as a mobile power source but it would prove unsuccessful for International Harvester—as a power source, the engine’s fuel demands where too high.

[edit] IH Struggles to Survive

During the late 1960s and into the 70s, IH did its best to keep its product lines updated. On the construction side the Hough Division was still going strong with the launch of eight articulated models and three small straight frame machines. Other pieces of construction equipment such as a line of loader backhoes did not fair as well against the growing competition presented by Case, Deere, and Massey-Ferguson.[26] IH also introduced a new line of wheel-tractor scrapers and made improvements to its off-highway trucks introducing the 300-Series in a three-model line. Hydraulic excavators were also in mass production by a number of manufacturers. Keeping abreast of the trend, IH acquired Yumbo, a small French excavator manufacturer, in 1970. The company’s small excavator operation was never successful with too much competition already existing in the European market. Oddly enough, the company’s Hough wheel loaders experienced more success being built in Europe forcing IH to finally merge Hough and the Construction Equipment Division together in 1974 to form the Payline Division.[27] Though the company had profitable years from 1974 to 1975, this was short lived as the company slowly sunk into greater debt towards the end of the 1970s and into the early 80s.

[edit] Divesture of Solar and Payline Divisions

The late 1970s marked the McCardell decade of management at IH when Archie R. McCardell, former CEO of Xerox, stepped up to the helm as IH’s new acting CEO. Under his financial leadership, IH sales jumped 26 percent and profits jumped up 98 percent to $370 million.[28] As the 80s neared, however, an assortment of fiscal problems plagued the company coupled with the renewing of contract agreements with the UAW that resulted in 35,000 workers walking off the job on November 1, 1979 in a strike that would last 172 days and cost the company dearly. It was to be beginning of the end for IH as wholly owned enterprise.[29]

In 1981, the company announced it was selling of its Solar Division to Caterpillar for $505 million cash. Surprisingly, Solar was the only division of IH to post a profit for that year. This was followed by divesting IH’s construction equipment business, the Payline Division to Dresser Industries in November of the following year. Both sales marked the end of a 54-year history of manufacturing earthmoving machinery.[30]

[edit] The Company Today

No amount of corporate restructuring and cost saving could save the company from the brink of fiscal ruin when it reported net losses of $1.738 billion in 1982.[31] Dwindling market demand for farming equipment through the 1970s and into the 80s left the cash-strapped International Harvester further vulnerable. In November 1984, the company’s agricultural division, along with the International Harvester name, was sold off to its competitor Tenneco, which at that time owned J.I. Case Co. [32]The company’s surviving trucking business was reorganized and renamed Navistar International Corp. In the 1990s, Navistar emerged as the U.S.’s leading truck manufacturer.

[edit] Equipment List

[edit] References

  1. International Harvester. Chicago History. 2008-09-23.
  2. Cyrus McCormick. Chicago History Blogspot. 2008-09-23.
  3. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 37.
  4. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 38.
  5. International Harvester Co. Chicago History. 2008-09-23.
  6. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 38.
  7. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 39.
  8. History of Navistar Corporation. PDF. 2008-09-23.
  9. History of Navistar Corporation. PDF. 2008-09-23.
  10. International Harvester. Antique Farming. 2008-09-23.
  11. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 39.
  12. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 39.
  13. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 40.
  14. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 41.
  15. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 41.
  16. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002.114.
  17. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 115.
  18. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 116.
  19. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 168.
  20. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 170.
  21. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 170.
  22. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002.116.
  23. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 170.
  24. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 170-171.
  25. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 168.
  26. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 215.
  27. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 217.
  28. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 281.
  29. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 281.
  30. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 283.
  31. Haycraft, William. Yellow Steel: The Story of the Earthmoving Equipment Industry. Scholarly Book Services Inc., 2002. 283.
  32. International Harvester Co. Chicago History. 2008-09-23.