FarmTrac Troubles

[DavesTractor]

Dave,
Things must be different where you are most of the info I have received on Mahindra is that yes they are financially sound for now but in the tractor market as whole they are not doing so well. I know they have been practically begging for dealers in the Mid-west I really hope they stay solid because we definately don't need anoth FT issue. I have been looking for another brand to carry but from reports I am not sure if Mahindra is the one I would pick.

Blurr, I think you are not getting accurate info. Mahindra sold over 110,000 tractors last year, more than any of the "minor" brands by far. Of course most of that was not in the USA. They have a huge market share in India, and India is the single largest tractor market in the world, or so I have been told. I would suspect that is their most profitable location. As a global company that will soon be selling their pickups and SUVs in the USA, you have nothing to worry about with Mahindra. Even if the USA market is less profitable for them, they must be here as it fits with their ambitions. I think the mid-west, especially big acreage farm areas is going to be the toughest market for them. We don't have anything larger than 75HP (soon to be 82), and we don't have combines, etc. For the rural lifestyle type market and the smaller farm market, Mahindra is doing real well.

The Farmtrac issue is a wake up call, and it certainly is not the first time a company has pushed some tractors into the USA for a while then failed or bailed. We may see more of this if the economy continues to cool, but Mahindra is here to stay.

 

[MessickFarmEqu]

The Farmtrac issue is a wake up call, and it certainly is not the first time a company has pushed some tractors into the USA for a while then failed or bailed. We may see more of this if the economy continues to cool, but Mahindra is here to stay.

While they are very different companies... wasn't FarmTrac's US marketshare about the same size as Mahindra's? Your talking like 3-5% of the market. I just can't see how that can be profitable for these companies. Our dealership employees more people and does more business than some of these minor brands. I just wonder how they stay in business even with a strong market?

 

[DavesTractor]

While they are very different companies... wasn't FarmTrac's US marketshare about the same size as Mahindra's? Your talking like 3-5% of the market. I just can't see how that can be profitable for these companies. Our dealership employees more people and does more business than some of these minor brands. I just wonder how they stay in business even with a strong market?

Neil,

I don't have US market share numbers for each company. It would surprise me if FarmTrac had equal market share with Mahindra. Mahindra's sales in the USA are around 10,000 tractors a year, which is far less than Kubota, JD and New Holland. If your own dealership is selling that many per year, I'd be truly impressed!

Keep in mind that this is a global market for Mahindra (and all tractor companies), not just the USA. Some areas will be more profitable than others at various times. The larger companies have no problem dealing with this.

I know what you saying though, and it is often true. A couple of guys with a pocket full of money or a credit line can go to Korea/India/China (pick your country) and buy a couple containers of tractors and come over and start their own tractor line. They hire a few guys to put them together and set up a few dealers. They cannibalize one tractor for the "parts department". Then the reality of doing business in the USA hits and they are gone.

 

[a blurr]

Dave, I do realize Mahindra is a large company and they have numerous tractors out there but even the numbers in India are lower than Escort (Farmtrac). The tractor data shown is that Escort is the largest tractor co in India. The numbers shown to me by Mahindra over the last couple of years had Mahindra behind Farmtrac in total U.S. market. Again I hope that they do stick around but the data on India being the largest market is not in number of tractors but in MFG. Every major brand is now Mfg. tractors in India. What the numbers truly say is that labor is cheap and quality is questionable. The tractor market is just like the zero turn market, it is so flooded and keeps getting worse. Way too many players and the market can only handle so much. I am afraid that Farmtrac is just the begining of the fall or at the very least consolidation. I wish there was room for all of them and we could all have good market share. Normally the fact is that it is not so much the equipment but the management of the tractor companies. After a lifetime in this equipment market I do feel that it could get a little worse yet before it gets better, but I hope I am wrong. But after all, this is all just my opinion with exception of the data that these companies provide.

 

[DavesTractor]

Dave, I do realize Mahindra is a large company and they have numerous tractors out there but even the numbers in India are lower than Escort (Farmtrac). The tractor data shown is that Escort is the largest tractor co in India. The numbers shown to me by Mahindra over the last couple of years had Mahindra behind Farmtrac in total U.S. market. Again I hope that they do stick around but the data on India being the largest market is not in number of tractors but in MFG. Every major brand is now Mfg. tractors in India. What the numbers truly say is that labor is cheap and quality is questionable. The tractor market is just like the zero turn market, it is so flooded and keeps getting worse. Way too many players and the market can only handle so much. I am afraid that Farmtrac is just the begining of the fall or at the very least consolidation. I wish there was room for all of them and we could all have good market share. Normally the fact is that it is not so much the equipment but the management of the tractor companies. After a lifetime in this equipment market I do feel that it could get a little worse yet before it gets better, but I hope I am wrong. But after all, this is all just my opinion with exception of the data that these companies provide.

Statistics always seem to get us in trouble between brands as everyone counts different, but Mahindra has more market share in India than any other brand and has had for years. So I guess I am just saying not to put us in the same group as FarmTrac. Totally different, with the only commonality being a parent company based in India. And I mean no offense to FarmTrac and the dealers that sell them, just don't group us all together.

Will there be more consolidations, failures, etc? I suspect there may be. If you look at the history of tractor manufacturers worldwide for the last 100 years, it has been a pattern. Even some of the big brands have fallen by the wayside.

 

[a blurr]

Dave,
I can appreciate your loyalty to the brand and I was not trying to put them in the same basket but they are. Both are Indian conglomerates with ties to a U.S. Company in their roots. They both Mfg tractors and purchase tractors from other Mfg for resale. One has ties to the automobile industry and the other railroad industry. Both companies have nearly the same kind of quality control issues. I am not saying either are bad tractors but they are very close to the same branch on the same tree.
I will leave it at that. I am not trying to start a whos who or a good and bad conversation but alike they are just as the JD 5003 (I think it is that series)series is very close relative of both Mahindra and Farmtrac by design and look. I hope they all survive and sell sell sell.

 

[EFC]

California,
The Distributor(Farmtrac) is not owned by the MFG (escort). From my understanding Farmtrac is owned by a financial holdings company called S&S Holdings. Escorts of india is still biliding tractors and parts for all their tractors throughout the world.....except here in the U.S. I guess I should say there is not a network for them here in the U.S. until Farmtrac or some other company emerges and wants to play ball.
As for Mahindra they are supose to have money but then again so was FARMTRAC. I believe the ownership of Mahindra is set up similar to what Farmtrac is but I can not say for certain. There is a distributor of their tractors here in the states and they use the same name as the ones in the rest of the word but the ownership here is not a sole branch of Mahindra.
That is how it was explaind to me a couple of years ago.

Mahindra USA is a wholly owned subsidiary of Mahindra & Mahindra India. That is the big difference between Mahindra and Farmtrac. If it would have been Escorts USA I think it would be a different company and a different outcome vs. the current events. Some foreign companies like Mahindra, Kioti and Kubota for example want to be in the US and other companies like Escorts, LG, TYM, Mitsubishi, Iseki, Shibaura and Yanmar dont object to their equipment being sold here but avoid an outright front seat presence and instead take a backseat to a US bound customer/distributer. I cant really blame them since if the US distributer fails the liability is minimal for them.

At least two more of the short lines will drop off the map for sure and a third is on the fence, but I dont think it has anything to do with the economy, they were on their way down from the first day and like Dave said the harsh reality of the tractors business eventually sets in after the hype runs out. Mahindra is here to stay for sure, they started small and have been building in line with their customer base similar to the way Kubota entered the market.

I have sold tractor lines that have come and gone, but in the end we honored the warranties even when the companies wouldnt and I still support those customers today. It was certainly painful and expensive but really there was no other option.

Buck

 

[Ned Farlinger]

Hay Ned, it happened to green already "Oliver".

It's highly unlikely that an extremely successful, and one of the best managed companies on the globe like JD will go the way of The Oliver Farm Equipment Corporation. You may want to locate a backup source for parts for that orange tractor you have...you never know. I would guess your orange company would be closer to a Farmtrac like situation than JD would be. But that would be hard to prove, wouldn't it? When was the last time you read a Daedong financial statement? Let me answer that question for you...You have not and never have.

Well I know for a fact the JD is financially sound because I can read and understand their financial statement because it is available to me and anyone else who would like to do so. As a NYSE listed company they have to provide investors things like financial statements.

Maybe I'll go purchase another piece of JD equipment next week with my JD dividend check. It's great getting dividend checks...even from a shaky company like JD...

 

[EFC]

It's highly unlikely that an extremely successful, and one of the best managed companies on the globe like JD will go the way of The Oliver Farm Equipment Corporation. You may want to locate a backup source for parts for that orange tractor you have...you never know. I would guess your orange company would be closer to a Farmtrac like situation than JD would be. But that would be hard to prove, wouldn't it? When was the last time you read a Daedong financial statement? Let me answer that question for you...You have not and never have.

Well I know for a fact the JD is financially sound because I can read and understand their financial statement because it is available to me and anyone else who would like to do so. As a NYSE listed company they have to provide investors things like financial statements.

Maybe I'll go purchase another piece of JD equipment next week with my JD dividend check. It's great getting dividend checks...even from a shaky company like JD...

I don稚 think anybody said JD was a shaky company but it is not immune from poor management or the realities of the market. Not very many companies exist for 100 years, less for 125 and even less for a 150. JD is at the top of the wood pile which means they are the biggest target to shoot at. They have earned their right to be there no doubt but I am in a big tractor farming area and I see more red and Blue than green these days. The decades of devoted fans that paint themselves green from the waist down each morning like yourself are getting harder to find. Customers are asking about value and options and less about color. JD knows this if you actually do read there financial statement, they even talk about it. Properly managed they will be around for a long time, poorly managed and they are gone like everybody else.

My accounting teacher told me he knew which accountants would rise to the top in their field and which would just make a living. When asked the sum of 1+1 if they answered 2 it meant?just make a living. If they answered "what do you want it to be" they would go far. Guess who writes financial statements. I should go reread my Enron statement again or maybe even my Citibank statement, I am sure it mentions the end in there somewhere.

Buck

 

[chh]

Here's the link to Daedong's finacial statement.


Daedong Industries (000490.KS): Financial Statements - BusinessWeek

BTW for those interested in looking at the far east or India to invest don't forget Tata. They are the worlds 6th largest steelmaker and one of the worlds largest conglomerates. They are recently famous for the cheap car, but are also the preferred bidder for Ford's Jaguar division.

 

[DavesTractor]

Dave,
I can appreciate your loyalty to the brand and I was not trying to put them in the same basket but they are.

Clearly you are trying to put them in the same basket. I disagree.

Both are Indian conglomerates with ties to a U.S. Company in their roots.

That is true.

They both Mfg tractors and purchase tractors from other Mfg for resale. One has ties to the automobile industry and the other railroad industry. Both companies have nearly the same kind of quality control issues. I am not saying either are bad tractors but they are very close to the same branch on the same tree.

Mahindra manufactures a wide variety of vehicles. Quality conrol issues? While not perfect, Mahindra runs a tight ship at their factories. I've been to several of them and I am impressed.

I will leave it at that. I am not trying to start a whos who or a good and bad conversation but alike they are just as the JD 5003 (I think it is that series)series is very close relative of both Mahindra and Farmtrac by design and look. I hope they all survive and sell sell sell.

I think EFC has added some good information regarding the differences in structure between companies.

 

[a blurr]

Yes you did read correct I did put them in the same boat. Read a little further back and you will find that I said I was not trying to do that until you said they could not be compared. They do have quality control issues just as Farmtrac. I have close ties to both companies and I do know this because of the Mahindra & Farmtrac company people.
As for their corporate structure again in earlier post I believe I stated I was not aware of their ownership structure but thought it was similar to Farmtrac.
As for the economy I don't believe I ever blamed anything on the economy it was managment.
I think the economy is pretty good within the equipment business. It could be better but it can also get much worse.

 

[a blurr]

Here's the link to Daedong's finacial statement.


Daedong Industries (000490.KS): Financial Statements - BusinessWeek

BTW for those interested in looking at the far east or India to invest don't forget Tata. They are the worlds 6th largest steelmaker and one of the worlds largest conglomerates. They are recently famous for the cheap car, but are also the preferred bidder for Ford's Jaguar division.

CHH, Thanks for the link. I was wondering about Kioti. I have a few friends that are selling the Farmtrc, Mahindra, and Kioti. They really seem to like the Kioti of them all. One of them has TYM but has not moved much with them. But the link was nice to see. Thanks

 

[pete-mi]

Kioti isnt doing so well in my area. Five years ago I had three dealers within 80 miles from me now there is only one left. He is the farthest away from me. TYM makes a good tractor. I have a 330hst and have been very happy with it. They opened a new branch in North Carolina last month and they just introduced a new 100hp model at the National Farm Equipment show. Last year Farmtrac had a nice looking 70hp 4x4 tractor at the fair. Its sad to see what has happened to them now. I wish the US economy was better so all the brands could survive. But this isnt a new thing to have happen. I have three antique tractor brands that are not here like they were. I have a IH, MM, and a AC.

 

[DavesTractor]

Yes you did read correct I did put them in the same boat. Read a little further back and you will find that I said I was not trying to do that until you said they could not be compared. They do have quality control issues just as Farmtrac. I have close ties to both companies and I do know this because of the Mahindra & Farmtrac company people.
As for their corporate structure again in earlier post I believe I stated I was not aware of their ownership structure but thought it was similar to Farmtrac.
As for the economy I don't believe I ever blamed anything on the economy it was managment.
I think the economy is pretty good within the equipment business. It could be better but it can also get much worse.

Blurr, tell us a little about yourself. What are your close ties to both companies? You are obviously not new to the tractor world, but you are new to us. I think this would be helpful.

 

[cmuncy]

I sit here with my 05 300DTC and I'm not worried one bit.

If the engine goes, I can still get it warrantied through my dealer via Korea.

If I need to replace a busted part due to my own sheer stupidity, I know that my dealer can find me a part from a Montana that will fit.

Warranty issues? Well, I thank the tractor gods I have never had a warranty claim. Everything that broke on my tractor was my fault. But other than cosmetic issues ( tree on hood and a stick through the grill) I love my lil blue tractor. I do consider myself fortunate in that I do all of my own wrenching ( my wife would say that's because I do all of the breaking )



Stink happens. Those that need server work done I'm sure will be able to find the parts that are needed if this really does go south.

We just need to sit back and see what happens over the next couple of weeks.

 

[Builder]

I think the weakening dollar really hurt the Chinese, Korean and Indian imports. Their main selling point was a low price. As the dollar weakens, that advantage fades compared to brands assembled here with greater US input.

I just read an article in the Phila Inquirer that China is already feeling the pinch of enviromental and labor regulations increasing their costs of doing business. Some buinesses that located their for cheap cost of doing business are moving to Vietnam, malaysia, etc.

 

[a blurr]

Blurr, tell us a little about yourself. What are your close ties to both companies? You are obviously not new to the tractor world, but you are new to us. I think this would be helpful.

Dave, you can read my profile and that tells the big picture. As for knowing me better it has no effect on the facts of the equipment companies. However here you are: I am 44 have been associated with the equipment business in some form or fashion for my entire life and directly for about 20 years. I have farmed since the day I was brought into this world except for my time spent in the military. I am a certified diesel mechanic, have a degree in agri-mechanics, certified small engine mechanic, a really old certificate in computer programing (which most of what I learned is not in use now days), and certified SMAW (welding). I no longer do much welding, and programing is never. I am a Christian Consertative and do not believe in being politically correct. I believe that after Christ family is the most important thing. As for my company contacts they are friends. Most of them are dealers for the non- big 4 but some do carry one of the major 4 as well. So that is a little more info than I think you need but you asked.

I know you have a very successful business and I comend you for that and even stated I admire you brand loyalty. I feel you think I am attacking you but infact I am just opening eyes. All these companies have some major issues. When I worked for The "green" compay it was amajing what they can pass off as being "quality" and people can see the issue but refuse to admit it.
Again I admire your success and pray it continues and hope every dealer can be profitable. It is the consumer that needs to understand that regardless of the color most are pretty close to the same playing field. I always say the "green" has relied on their color for far too long and are now realizing that others (mfg) are right on their tail. Not so much in numbers but in QUALITY.

 

[DavesTractor]

Blurr,

Thanks for taking the time to tell us a little about yourself. If you lived close, we would surely be friends. We have quite a but in common. Thanks for the input.

Dave

Dave, you can read my profile and that tells the big picture. As for knowing me better it has no effect on the facts of the equipment companies. However here you are: I am 44 have been associated with the equipment business in some form or fashion for my entire life and directly for about 20 years. I have farmed since the day I was brought into this world except for my time spent in the military. I am a certified diesel mechanic, have a degree in agri-mechanics, certified small engine mechanic, a really old certificate in computer programing (which most of what I learned is not in use now days), and certified SMAW (welding). I no longer do much welding, and programing is never. I am a Christian Consertative and do not believe in being politically correct. I believe that after Christ family is the most important thing. As for my company contacts they are friends. Most of them are dealers for the non- big 4 but some do carry one of the major 4 as well. So that is a little more info than I think you need but you asked.

I know you have a very successful business and I comend you for that and even stated I admire you brand loyalty. I feel you think I am attacking you but infact I am just opening eyes. All these companies have some major issues. When I worked for The "green" compay it was amajing what they can pass off as being "quality" and people can see the issue but refuse to admit it.
Again I admire your success and pray it continues and hope every dealer can be profitable. It is the consumer that needs to understand that regardless of the color most are pretty close to the same playing field. I always say the "green" has relied on their color for far too long and are now realizing that others (mfg) are right on their tail. Not so much in numbers but in QUALITY.

 

[Ned Farlinger]

I don稚 think anybody said JD was a shaky company but it is not immune from poor management or the realities of the market. Not very many companies exist for 100 years, less for 125 and even less for a 150. JD is at the top of the wood pile which means they are the biggest target to shoot at. They have earned their right to be there no doubt but I am in a big tractor farming area and I see more red and Blue than green these days. The decades of devoted fans that paint themselves green from the waist down each morning like yourself are getting harder to find. Customers are asking about value and options and less about color. JD knows this if you actually do read there financial statement, they even talk about it. Properly managed they will be around for a long time, poorly managed and they are gone like everybody else.

My accounting teacher told me he knew which accountants would rise to the top in their field and which would just make a living. When asked the sum of 1+1 if they answered 2 it meant?just make a living. If they answered "what do you want it to be" they would go far. Guess who writes financial statements. I should go reread my Enron statement again or maybe even my Citibank statement, I am sure it mentions the end in there somewhere.

Buck

My accounting prof told me the same thing, but he also went on to talk about the cash flow statement. You're aware of the cash flow statement and how revealing that can be. Here are the remarks from the Daedong cash flow statement from the Business Week financial statements link provided by member chh.

From the Cash Flow Statement...

In 2006, cash reserves at Daedong Industries fell by 15.5B. As a percent of revenues, this was among the worst results by any company in the Machinery industry. By looking at the Cash Flow Statement, analysts can easily see the sources and use of cash generated throughout the year. Cash Flow from Operations (CFO) is the only sustainable source of cash and represents earnings from the day-to-day business of a company. In 2006, this company earned 12.7B from its operations for a Cash Flow Margin of 0.03%. Cash Flow from Investing (CFI) is a measure of the cash used to maintain and grow the business, also called Capital Expenditures, or CAPEX. In 2006, management spent only 0.05% of its revenues in attempting to spur growth in its operating business lines. That was among the lowest in the industry and indicates that this company either does not feel it is necessary to or is unable to invest as much as others in the group. Cash Flow from Financing (CFF) describes the inflows and outflows between a company and its owners or creditors (although interest paid is part of CFO). In 2006, CFF totaled 21.7B or 0.05% of revenues. This consistently positive value over the last 4 years, tells us that this company looks to the capital markets for fuel to help it grow.


Thanks for the link chh.

Not the rosiest of reports. Cash reserves are not looking good. The company is spending very little to grow the operating business lines of the company. A healthy company is not a stagnate company. The company looks outside, to the capital markets (selling pieces of the company or selling debt), to raise money for growth, if management is so inclined.

You would think a company doing business in the fiercely competitive compact tractor and diesel engine market would be doing all it could to develop new and innovative products to bring to market and to grow. Without new and better products a company will die a slow death. I'm not saying Daedong is on the road to death. But I like to see a company that is innovative, spending money to develop new products and growing.