John Deere is undeniably a powerful company that now straddles the world with sales worth nearly $ 36 billion in 2020.
Its origins date back to 1830, when the first John Deere opened a forge in Grand Detour, Illinois.
A few years later he took a broken blade from a sawmill and fashioned it into a plow mouldboard, and so the business we know today was born.
Until 1918 the company was purely a tool maker and its entry into tractor production came with the purchase of the Waterloo Boy Gasoline Engine Company in that year, although it had already experimented with its own design beforehand.
From that date it gradually established itself as a popular tractor manufacturer who produced increasingly powerful models which, for the most part, were built around the proven horizontal two-cylinder engine arrangement. which he inherited from Waterloo Boy.
This twin-cylinder format lasted until 1960, when the company had settled into a regular rhythm of business life, with various transactions underway, the usual board of directors disputes over the management structure, etc. .
Radicalism was not encouraged and the Johnny Poppers, as these tractors became affectionately known, continued to sell in large numbers.
This serenity was not to last, however. In 1955, a young executive by the name of William Hewitt was appointed president, and he was determined to change the company and reinvigorate it with a new vision.
Scotland is calling
One debate that had taken place within the company was overseas expansion.
In the early 1950s, a plan to build a factory in Scotland to manufacture combines and mowers had reached an advanced stage before circumstances brought it to a halt.
The company had made a deal with the British government whereby the British would build the plant with public funds and then lease it to John Deere for the production of combines and mowers.
Unfortunately, the plan failed, mainly due to a Conservative government supplanting the labor administration in 1951.
Although the project was never officially canceled, John Deere was informed that funds for the construction would not be released.
Internally, the idea had also met resistance from the export department, which had instead lobbied for a factory in France, producing a much wider range of machines, including a 25-30 hp tractor.
Proposed merger with Massey Harris Ferguson
The attention of the board of directors was then diverted by other companies, in particular the idea of the production of fertilizers, and thus the idea of an expansion abroad was left out until for Hewitt to take over.
One of the first things that landed on the new chairman’s desk was an approach by James Duncan, chairman of the new Massey Harris Ferguson company, to consider a merger between the two companies.
It was quite a surprising development, and it is not immediately clear why Duncan came up with such an idea, although there may be clues as to where his business was at the time.
Massey Harris Ferguson (MHF) was embroiled in internal strife and hardship as competing executives wrangled over America’s sales slump, while the board hesitated to proceed with the core restructuring of the company that was necessary.
To this mix was added the upheaval caused in the Ferguson camp by Harry Ferguson who decided to sell without telling anyone first, a shock that many had not yet accepted.
It is likely that Duncan saw a merger with what was still an indigenous and rather conservative company oriented towards the domestic market, as a means of increasing the sale of its products in the United States.
John Deere himself took the idea seriously and invested time and effort in meetings with its rival in an effort to come up with a mutually acceptable plan.
Caterpillar decimates its dealer network
Although at first glance the plan seemed to recommend itself, the more the two parties delved into the details, the less attractive the plan became.
One attraction for John Deere was the breadth of the MHF branch network in the west, an area that had seen a sharp reduction in the number of Deere outlets due to a pre-war deal with Caterpillar to share. concessions.
It’s a story in itself, but the result is that many small California JD dealers were forced to switch to other brands, while Caterpillar dealers focused on the post-war construction boom, rather than worrying about selling a few tractors to farmers.
While this was of great mutual benefit to JD and MHF, who still had a large representation in this state, the difficulties of marrying the two companies with overlapping product lines and business needs. sourcing separate parts proved too difficult to contemplate.
With the mention of the Caterpillar case, it should be noted that as part of this link, some John Deere tractors have been sold overseas, but only through Caterpillar dealers rather than through the company’s own efforts. ‘business.
The need for a new plan
So John Deere management found itself again without any firm plan to export the company’s products in large quantities.
Yet Hewitt hadn’t forgotten that intention and it wasn’t long before another opportunity presented itself.
At the end of 1953, the company had been quietly approached by a West German banker who owned 30% of the shares in Lanz.
Lanz had been one of the two dominant German tractor manufacturers until the war, Deutz being the other, but the company suffered from a multitude of problems.
The famous Bulldog tractor was aging and the single-cylinder format had reached its design limits.
Sales had suffered from the division of Germany between east and west while the Mannheim plant had been rebuilt without giving much thought to future production techniques.
The price of 51% of the German company had been set at $ 2.5 million. A survey by Deere’s own accountants suggested it would need to invest an additional $ 13 million to bring it up to standard.
John Deere now faces a dilemma. There were two basic ways forward, either building a new factory, as had been proposed for Scotland, or buying an established manufacturer and using it as a base for development.
In the end, they avoided making that decision and the proposal was rejected in December of the same year, as was another proposal for expansion in South America.
John Deere succeeds second attempt
Despite this setback, the seed of the idea had been planted and it resurfaced in 1956 when a second group of much more powerful executives, including William Hewitt, visited Germany to take another look.
In the years that followed, Lanz had spent a lot of money on new machine tools, although the tractors remained the same.
It certainly increased the value of the business, and despite many contingencies, a deal was struck for a controlling stake for $ 5.3 million.
After purchasing the company, the first task was to completely abandon the Bulldog product line and set up the plant to manufacture the American-designed Dubuque diesel model line.
This is how John Deere established itself as an international manufacturer of tractors and agricultural equipment.
It was not an easy transition; There was a huge culture shock between the American idea of a business and the European idea of cooperation, even of using the tractor.
Still, the company stayed the course and Mannheim became the operations and manufacturing hub for Europe and beyond.