The End of International Harvester

International Harvester's history has been marked by successive mergers and acquisitions, although the company remained largely controlled by the McCormick family well into the twentieth century. International Harvester itself was formed in 1902 as the result of a merger involving McCormick and Deering (the two largest competitors) as well as a number of smaller companies ("History," n.d.). This was at a time when anti-trust considerations were only beginning to take shape in the American market, and the federal government did not yet intervene in such mergers.

In the mid-1950s, International Harvester chose to focus on markets that required smaller tractors, such as cotton farmers. As a result, the company failed to gain a significant lead in the burgeoning large-tractor segment, and the John Deere company took a significant lead in that sector which it maintained for the next 30 years. During the 1950s and 1960s, International Harvester struggled to find a sustainable corporate vision, and expanded into gas turbine engines as well as medium and heavy trucks. The company still operated a steel business, as well, which it did not divest until the 1970s ("History," n.d.).

The 1970s and 1980s saw changes in the agricultural products industry that shaped International Harvester's future. When McCormick patented his reaper, farms were small and generally run by families.

Despite this poor performance, Tenneco, which owned J. I. Case at the time, was interested in buying International Harvester's agricultural business, so clearly Tenneco saw something attractive in the deal. To fully understand Tenneco's analysis, it is necessary to understand the J. I. Case position at the time. Case also participated in the farm equipment business, but with a much smaller market share than International Harvester, and with a much more limited product line. Its dealer network was not nearly as large or loyal as International Harvester. However, Case had a burgeoning large engine concern that would profit from having the additional "in-house" demand from International Harvester, and so additional synergy could be attached to the acquisition. While International Harvester might not have been attractive to many companies, it offered an attractive opportunity for J. I. Case (Nesbitt, 1986). At the same time, the divestiture would allow International Harvester to focus on its core strength, the profitable truck market.

From an internal standpoint, there was competition between the truck and tractor segments, but both enjoyed excellent relationships with their dealers. Once again, International Harvester's failure to lead the heavy tractor segment hurt it in that dealers typically carried products from other manufacturers to complete their selection, but the dealer network was strong both in the United States and abroad. At the same time, International Harvester's products were recognized as being of high-quality, resulting in good profits for dealers.

 

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