Canceled Dealers Talking About Consolidation
A few weeks ago Mike Lessiter, publisher of Farm Equipment magazine, sat down with Michael Libbie, host of the radio program Insight on Business, to discuss the No Till Conference being held in Des Moines, IA that week. During the interview the subject turned to John Deere, dealer purity and the recent closing of yet another dealership. (If you have not yet seen the interview, we suggest you visit YouTube.com and do a search for “Dealer Purity”to watch the ten minute interview.)
Lessiter was upfront in the interview about the effects of consolidation on equipment dealers and the communities they serve. Once the interview was posted on Farm-Equipment.com, former dealers were quick to post their own comments. A dealer from Utah wrote, “Our customers were told by a rep… [they] did not want any mom and pop stores.” Another posted, “…purity issues are a bunch of B.S. Not only does it hurt the shortline guys it hurts business period.” (For all the posted comments go to: http://bit.ly/5icPVi.)
Following through with the story, the headline in the current issue of Ag Equipment Intelligence (AEI), from Lessiter Publications, reads, “Consolidation Continues as Cancelled Deere Dealers Try to Move On”. In their story, Willis Schmitt, of Schmitt Implement in Holy Cross, IA, told AEI that the 2009 closing was based on market share.
“We’re selling about the same as we did five years ago, when our market share was 41.9%,” Schmitt said. “But no one at John Deere can tell you how they define market share. It’s whatever they want to make it.”
AEI reports that Schmitt believes Deere wanted to close his location and manipulated his numbers to make it happen. Schmitt said he was consistently told that equipment he needed to order was not available, only to find out later that it was.
To further illustrate how nasty this business can be, Schmitt said that his Farm Plan financing was pulled without notice earlier that year. “Our customers got letters saying that we weren’t a qualified Farm Plan dealer. No one will call me back and it’s driving business away,” Schmitt, who intends to remain in the farm equipment business told AEI. “Most dealers don’t think John Deere would ever do this to them. And it’s a damn shame for those dealers who stay pure green and have nothing else when that letter arrives.”
Donald Nay with L&T Equipment, now an AGCO dealer, told AEI that his Deere dealership was also cancelled for market share. Nay said he’s glad that John Deere wasn’t involved in helping to finance his building, or L&T really would have had a real mess on their hands.
Charles Oliver, with Oliver & Son in New York, seems to agree with Nay. Oliver, told AEI that he believes the joining of the ag and consumer products divisions last year has given Deere more leverage in closing dealers, particularly as many dealerships continue to merge.
“It’s extremely dangerous when the dealer gets into these buyouts and turns to John Deere for financing,” Oliver said. “John Deere will get a percentage ownership in the dealership and then dictate to them. That’s what I think is going on.”
Not all of the cancelled dealers AEI spoke with are looking for a new tractor supplier. According to court records, Green Country Agricultural and Lawn Equipment Co. of Tulsa, OK, filed suit on December 28, 2009, against John Deere Co. and P&K Equipment for “Tortious Interference Contract” in Rogers County, OK.
While we can’t speak to the motives of any of the multi-national tractor corporations, one thing is clear, in the end, massive consolidation will not only hurt the small dealer and the shortline manufacturer, it will hurt the consumer, as it always does when there is a lack of competition for sales, service and parts.
Our question is: Where will farmers in small communities turn for access to the choice, value and innovation our members bring to the marketplace if “dealer purity” is allowed to continue at its current pace? (Subscriptions to AEI are available at Farm-Equipment.com.