J. I. Case Company

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J. I. Case Company

700 State Street
Racine, Wisconsin 53404
U.S.A.
(414) 636-6011
Fax: (414) 636-6432

Wholly Owned Subsidiary of Tenneco Incorporated
Incorporated: 1842 as Jerome Increase Case Machine Company
Employees: 18,600
Sales: $3.7 billion
SICs: 3523 Farm Machinery and Equipment; 3531 Construction Machinery

J. I. Case Company, a subsidiary of Tenneco, Inc., is one of the United State’s largest industrial companies with concerns in natural gas production, automotive parts, packaging, and chemicals. Case is the second largest maker of farm equipment, trailing John Deere Company, and third in construction equipment sales, following Caterpillar Inc. and Deere. After celebrating its 150th year in business, Case undertook an extensive restructuring to return it to profitability after the recession of the 1980s.

Case’s history is merged with the Industrial Revolution’s impact on farming. Jerome Increase Case grew up threshing wheat by hand on his father’s farmstead in the early 1800s. Wheat was cut with scythes, then beaten by hand to remove the grain. The blistering work meant that one person produced about half a dozen bushels a day, so farmers necessarily limited their acreage to prevent bottlenecks in production of their wheat. When Case was 16, he took his father to a demonstration of a crude, mechanized thresher patented around 1788 by Scotsman Andrew Meikle. His father was sufficiently impressed by the machine and applied for a franchise to sell them.

For five seasons, Jerome Case operated the machine for his father and his father’s clients. During that time, Case became aware of the machine’s flaws, as well as its indispensability to farming. In 1842, Jerome Case moved to Rochester, Wisconsin, then the growing heart of the wheat culture in the United States. He sold five thresher machines along the way, reserving one for himself.

Rochester was a village when Case arrived. That autumn, he did custom threshing and worked on his modifications of the machine. Case envisioned a machine that was both separator and thresher, constructed so that the straw would move to one end while grain fell underneath the machine. Such a machine had already been patented by inventors in Maine in 1837, but Case had not seen their invention. His machine differed in its operation. Case was helped by Stephen Thresher, a carpenter he met where he boarded in Rochester. The two were advised by Richard Ela, who made fanning mills and hailed from New Hampshire.

After a successful first demonstration of his new thresher-separator, Case decided to concentrate on manufacturing rather than custom threshering. When Rochester balked at his petition for water-power rights, Case moved to Racine, Wisconsin, in 1844, playing a part in that town’s explosive growth. Within three years, he had gone from renting a building to constructing his own factory. First named Jerome Increase Case Machinery Company, the name was changed to Racine Threshing Machine Works. By 1848, Case was producing 100 threshers a year and claimed he was meeting only half of the orders received. By 1854, water power was supplanted by a steam boiler and engine within the factory.

It was difficult to deliver such cumbersome equipment in the 1800s. There were no railroads in Wisconsin until the 1850s. Most roads were widened Indian trails, and rain could make them treacherous to wheels. Timely delivery of the heavy machines was not always possible and timing is as essential as rain to farmers. In addition, Case spent much time traveling to distant farms to collect back payments, credit being another necessity of his clients’ business.

Many complementary farming products were appearing around the same time that the wheat belt of the Midwest and the Great Plains was burgeoning. Around the same time Case’s business was growing, John Deere and Major Andrus were developing a steel plow in Illinois, and a reaper had been developed by Cyrus McCormick. Case purchased rights to the thresher and fanning mill invented before his, then he added improvements. Acknowledging that his own strength was business and seeing the applications of machines, Case often acquired and improved upon the inventions of others. Case was established as a leading thresher manufacturer by the early 1850s. The company has long been noted for leasing or buying the patents of inventions it recognizes as promising.

Business was steady enough to allow Case to pursue civic interests; he was elected three times to the State Senate and served twice as Racine’s mayor. The poor harvest and financial panic of 1857 did not prevent the company, then still specializing in threshers, from introducing new products. In 1862, Case began selling the “Sweepstakes,” a thresher capable of producing 300 bushels of wheat a day. Pressures, including the Civil War, drove Case to create a co-partnership by 1863, established as J.I. Case & Co. The partnership included Case, Massena Erskine, and Stephen Bull until 1880.

The same year that Alexander Graham Bell won a bronze medal at the Philadelphia Centennial Exhibition, Case’s new thresher, the 1869 Eclipse, also won a bronze and a commendation. The thresher took the gold medal at the World’s Fair in Paris two years later. With the Homestead Act of 1862, farming burst into a new era, requiring equipment that could keep up. In 1878, Case produced its first steam traction engine, and by the following year had sold 109 of them. Sales doubled in 1878, reaching the one million dollar mark by 1880. The partnership was incorporated as J.I. Case Threshing Machine Company in 1880. By 1890, Case was offering nine different horsepowers of steam traction engines, and continued improvements. Production peaked the same year the first gasoline tractor was introduced, 1911. Most steam engine products were eclipsed by the gasoline tractor by 1924. At that point, Case had built about one third of this country’s farm steam engines. But it took time for tractors to become standard farm equipment; as a power source on U.S. farms, draft animals outnumbered tractors until 1952.

Case died in 1891 at the age of 73. Leadership of the company was passed to one of his former partners, Stephen Bull, who was assisted by his son Frank. Between 1893 and 1924, the company expanded to Europe, South America, and Australia. Competition between thresher manufacturers lead to the dissolution of the Thresher Manufacturers Association in 1898 and increased rivalries. A depression between 1893 and 1897, a warehouse fire, and a Great Plains drought contributed to a decline in Case profits of nearly three quarters between 1892 and 1896. Stockholder dissatisfaction lead to new ownership, which resulted in Frank Bull as president. Bull became chairman of the board in 1916 and was succeeded in presidency by Warren J. Davis. The company name was changed to J.I. Case Company after further reorganization around 1928.

Case was advertising a full line of road machinery by 1912. The gasoline tractor became one of the company’s most important products. Since 1902, many firms were fighting to produce the gasoline-powered successors to steam-powered engines. International Harvester began making them in 1905, and Ford in 1907. The design and manufacture of lighter, smaller versions of the engines made Case a major player in the gasoline tractor market by the 1920s. By the late 1920s, Case had become a full-line manufacturer, aided by its 1919 acquisition of Grand Detour, a tillage equipment company. Case also made expensive automobiles from 1912 to 1927: roadsters, coupes, and sedans in 14 different models over the years. Because of low profitability, the auto lines were phased out.

The depression in the American economy in the wake of World War I greatly impacted the farm equipment industry. By 1929, only 18 of the 157 manufacturers of farm equipment operating 12 years earlier remained. Case’s profits fell steadily, despite the addition of a combine to its line in 1923. The company was especially challenged by the dealer network of International Harvester. Case did not keep up with competitors’ improvements while it was enjoying the sales of its steam traction engines and threshers. Between 1920 and 1922, annual gross sales plunged from $34 million to less than $16 million. In 1924, Case’s new president, Leon R. Clausen, assumed the reigns after leaving John Deere Company. He would remain president until 1948, and chairman of the board until 1958.

Clausen brought many ideas with him from Deere, including faith in aggressive marketing and the value of being a full-line manufacturer. He established three primary goals: improve trac tor designs, establish a full line, and modernize the factories. The Model C tractor was introduced in 1929, and a tricycle tractor appeared in 1930. A line of “Motor Lift” implements arrived in 1935. Lines were expanded by acquisition as well as invention: Case purchased through the Emerson-Brantingham Company a line of farm equipment that included binders, mowers, reapers, and corn planters. The Rock Island Plow Company was acquired in 1937, adding drills, spreaders, and plows to the company’s offerings.

Case also purchased that year a factory in Iowa to make small combines, sales of which had been growing steadily since they were introduced to the market. Case, Harvester, and Deere were responsible for three quarters of the farm machinery sold in the United States by 1937. Although Case had, since 1912, offered an array of road building machinery, these products were not promoted under Clausen and it was not until the mid 1950s that Case became serious about marketing its construction equipment.

Clausen set to work on revamping the sales department and restructuring manufacturing. He is credited with building Case’s dealer network. Although severe cutbacks were necessary to weather the Great Depression, Case managed to increase sales by 1936 on the strength of their tractor sales. In 1939, a new tractor line was introduced, as well as a small combine, hammer feed mills, and farm wagon gears.

With the start of World War II, Case’s tractors were in even greater demand. More than 15,000 of its tractors went to the military between 1941 and 1945. New tractors were designed and manufactured with war-needs in mind. Case was also producing items such as shells, aircraft wings, and gun mounts for the war effort. Case devoted much more wartime engineering to federal production than did Deere or Caterpillar, which left it at a disadvantage at the war’s end. Nonetheless, the postwar demand for farm machinery outpaced supply and Case’s lost wartime share soon seemed recoverable.

Regaining lost market share, however, was interrupted by a strike in 1945 that lasted 440 days. It was, at that time, the nation’s longest strike. Clausen’s animosity for unions—first noted when he was still with Deere—was mutual. Depleted by the strike and its aftermath, Clausen stepped down as president in 1948, staying on as chairman of the board. The strike hurt Case on every level: in its relationship with dealers, customers, and its union, and in its research and development, where it was already lagging behind its competitors.

With the Marshall Plan and the lifted export restrictions, devastated Europe’s hunger for working machinery became a fresh market for Case. In addition, stateside farm machinery was in disrepair. There was a shortage of manpower on farms, due to deaths in the war, which increased the need for machinery. Sales growth on the west coast led to a plant purchase in California in 1947. This purchase expanded Case’s range into a new tobacco harvester. These factors helped Case post a profit through 1949, despite its costly strike.

Profits declined between 1950 and 1953, in part because of outdated products. Competitors introduced lighter models of tractors in the late 1930s, and these units became popular after the war. Case, on the other hand, had at the end of the war roughly the same heavy series it had at the beginning. Poor engineering hurt Case during the early 1950s as well, as did a propensity to blame the dealer rather than the product. Items such as Case’s hay baler, which had topped the market in 1941, lagged to less than 5 percent of baler sales in 1953 because Case failed to respond to a competitor’s improvements.

All of these problems added up to a crisis in leadership at Case. According to Case’s own published history, J.I. Case: The First 150 Years, Clausen consistently made decisions opposed to change: he opposed diesel engines for domestic sales; he believed farmers preferred “dependability” to changes such as a foot-operated clutch, a cab, and an oil filter—all of which a 1946 survey of farmers specified as desired. When Clausen left the presidency in 1948, Theodore Johnson took over. Johnson was 66 and had never worked outside of Case. The company continued to drift, with a lackluster response to competition, and no notable innovations. Johnson was replaced in 1953 by John T. Brown.

Under Brown’s direction, Case released a multitude of new or improved implements, including the 500 series tractor, which would become a popular line. The 500 had a six-cylinder, fuel-injected, diesel engine, power steering, and a push-button start. Two manure spreaders were unveiled in 1956. That same year, however, Case reported its second loss since 1953. For the first time, bankruptcy seemed a possibility. Diversification seemed the only remedy.

Case launched its industrial equipment line in 1957 as though it were new, but it had been making industrial units based on agricultural models for three decades. Street and highway builders, national forests and parks, and others had come to rely on industrial tractors adapted from farm use. Case applied itself to expanding this sector of its line, and turned to Caterpillar Company for marketing assistance. To revitalize its industrial line, Case acquired American Tractor Corporation (ATC) in 1957. ATC’s volume around purchase time was $10 million, but the company was in debt due to recent rapid growth. Its assets included a vigorous president, Marc Bori Rojtman; a strong line of distributors and dealers; and a sturdy line of crawler tractors and loader backhoes—the company’s star product. Under Rojtman, Case’s manufacturing capacity improved, new retailers were attracted, and the company moved confidently into the construction equipment business.

Rojtman’s showman’s personality led to dazzling regional shows to promote new product lines. Deliberate showmanship in marketing resulted, despite criticism, in huge increases in orders. New product invention and marketing and overseas expansion proved financially taxing. But sales rose 50 percent in 1957, reaching $124 million. Income the following year was more than tripled. Clausen, head of the board, strongly opposed Rojtman’s presidency and his debt load, and resigned in 1958. An economic downturn in 1958 left the company in a precarious position. William Grede replaced Rojtman in 1960.

Case’s debt load in 1959 was $236 million. It had become the country’s fourth largest farm and construction equipment producer. Grede’s first order of business was to reduce debt and consolidate manufacturing. A new offering of accessories such as batteries, oil, and hydraulic fluid proved successful. Between the new offering and special discounts, Case sales were still strong in 1960. A six-month strike occurred that same year. Unable to met a $145 million bill due on short-term notes in 1962, a bank agreement was negotiated which called for reorganization and deferment of most of the interest until 1967, so Case could focus on paying down principal. Reorganization included the ousting of Grede. He was succeeded by Merritt D. Hill, who had previously worked in Ford’s Tractor and Implement Division.

Hill brought talent with him from Detroit, including a chief product engineer. He completely restructured Case. Separate divisions were created for marketing, manufacturing, and engineering. Hill also ushered in a new era of labor-management relations, being the first of Case’s presidents sympathetic to issues of labor and race. Money constraints impeded the development of new product lines, but Case managed to stay in the ring with competitors such as Ford and Deere, as the new head of its engineering department insisted. In 1964, Case introduced the 1200 Traction King, a 4-wheel drive, 120 horsepower giant that marked the company’s entry into the large agricultural tractor market.

Case’s operating loss had declined and its production levels were up. The company seemed on solid business ground by 1964, but was still not in a position to meet the terms of the 1962 agreement and have enough left over to fuel growth. Case shopped for a cash-rich partner to whom it could offer the use of its agreement’s tax loss carry-forwards.

In May 1964, the Kern County Land Company (KCL) of California acquired majority stock in Case. KCL was founded in 1874 and began as a cattle-raising venture that branched into petroleum royalties after oil was discovered. It diversified into hard minerals, real estate, and businesses such as its Racine, Wisconsin-based parent company, the Walker Manufacturing Company. KCL was cash-rich and agreed not to dictate Case’s growth or internal decisions. These circumstances allowed Case to expand between 1964 and 1967, in accordance with a booming demand for existing products and the itch to produce new ones. Around 1965, the 450 crawler and a 1150 dozer debuted. A new series of loader backhoes were introduced around this time also, among them Case’s mainstay, the 580. By 1966, Case’s income decline had been reversed. Hill became chairman of the board and Charles A. Anderson became president. Anderson had been with KCL and Walker.

Suddenly KCL, under threat of a hostile takeover by Armand Hammer, wooed a friendly buyer instead, and ended up being acquired by Tenneco Company of Houston. Gardiner Symonds, Tenneco’s president, was familiar with KCL’s natural resources but had no experience with manufacturing. Tenneco was a holding company. The deal closed in 1967. It was thought that Tenneco would quickly sell Case.

When investors began inquiring about Case’s stock, Tenneco decided to run an analysis of the company and found it well-run, but too low on liquid assets to grow. This shifted Tenneco’s plan. Case would prosper from a shift to construction equipment, so Tenneco decided not to sell it. In 1968, Tenneco acquired Drott Manufacturing Company in Wisconsin and leased it to Case. Case had been buying loader buckets from Drott for years. That same year, Tenneco also bought Davis Manufacturing Company of Wichita, Kansas, a producer of crawler and rubber-tire mounted trenchers and cable-laying equipment. Tenneco allowed Case to expand by two product lines: log skidders for timber harvesting, through Beloit Woodlands of Wisconsin, and a “skid steer” loader, manufactured by the Uni-Loader Division of Universal Industries.

James Ketelsen succeeded Anderson as Case’s president in 1967. Tenneco deferred to Case’s manufacturing experience, but both agreed that the company’s future was in construction equipment. The agricultural market had slowed to replacements and larger machinery to accommodate fewer, huge farms. Case essentially exited the farm implement business by 1970. And though Case dropped its combine business in 1972, an acquisition in 1985 returned harvesting equipment to Case’s line.

After dropping so many of its lines, Case thought it could survive without being a full-line company. The farm economy was dire in the early 1970s, especially for smaller farmers. Case shifted its focus not away from agricultural implements altogether, but toward the large tractor market. Tenneco “loaned” Case $60 million from 1969 to mid 1970, giving the company enough fiscal strength to deal with healthy competitors such as Deere. Even Deere did not have access to such resources. By 1971, Case’s entire construction equipment line had been replaced and that year it unveiled more new machinery than any of its competitors. Tenneco’s faith was repaid, as Case led all of Tenneco’s companies in earnings gains the following year.

In 1972, Case bought David Brown, Ltd., a British agricultural equipment firm founded in 1860. Brown had a large distribution system in Britain and Case concentrated its small tractor production in Brown. Thomas Guendel took over company presidency in 1972 and commanded a chapter of unprecedented growth until he left Case seven years later. Sales quadrupled during that time and earnings improved more than 600 percent. The phenomenal growth was due largely to increased success in construction equipment and overseas markets.

The company reentered the military market during the 1970s. It was awarded a $55 million contract with the Army and Air Force in 1978. The economy was improving after the recession between 1974 and 1975, and Case was the country’s third largest producer of construction equipment by 1975. By the late 1970s, 45 percent of Case’s sales were overseas, while 80 percent of its production was domestic. France’s Poclain Company, the largest manufacturer of hydraulic excavators in the world, was purchased by Case in 1977. Because Drott’s excavators could not be sold in Europe due to trade restrictions, Poclain was a savvy purchase; it was a recognized world-wide market leader.

When Jerome K. Green replaced Guendel in 1979, Case passed the $2 billion mark in revenues. Case started the 1980s with 28,000 employees, but it did not anticipate the recession that would shatter the farming community. Shifting to the construction product line was no rescue, as that industry was equally hard hit. New general purpose tractors had been introduced in 1983 and were languishing. Four more 94 series tractors were unveiled in 1984, but by that point, farms were in a real crisis. Case cut production to 55 percent of capacity and it still exceeded demand. Although overseas sales of construction equipment remained strong during the 1980s, Case’s overseas sales did not balance the wounds of the recession in the United States: in 1983, Case lost $68 million, and followed that with a deficit of $105 million in 1984.

Case acquired International Harvester’s production facilities, product line, and distribution system in 1985. The history of Harvester was as long and as distinguished as Case’s. Harvester retained and renamed its trucking business. Case shut down its own factories for the start of 1985, reducing production to 45 percent of retail sales, and went on to close several Brown plants, and to retire the oldest and least efficient of Case’s home plants. Trimming its agricultural product line to such things as tractors, tillage equipment, crop production, and combines, Case was prepared to compete head-on with John Deere, domi-nator of the farm equipment market.

Losses in 1986 were down to $1 million, despite the deepening farm recession. And Case was among the top three farm equipment manufacturers in Germany, France, and the United Kingdom. Nevertheless, Tenneco was unhappy with Case’s bad financial showing and unacceptably tardy production in 1987. Green was replaced by James K. Ashford that same year. About 35 new agricultural products were introduced in 1987, while nine factories were closed or closing. Case was assisted by Fortune’s listing of its combines, planters, and loader backhoes as among the best U.S. products in 1988. Ashford oversaw aggressive cutbacks and revamping, including the elimination of 300 jobs in Racine and an intended worldwide cut of 3,000 employees.

By 1989, Case had gone from a $142 million loss to a record profit of $228 million. The recovering farm economy and improved construction equipment sales were cause for celebration. Case’s confidence was sufficient to announce a new headquarters complex, but the recovery was short-lived and sales began to weaken. Though John Deere was cutting back production, Ashford gambled that the recession was over and that Case would gain from a preparatory inventory.

This decision was disastrous. The market did not rebound. In the fourth quarter of 1990, Case’s earnings were off by nearly $100 million and the year ended with a $42 million decline in operating profits. Part of this decline was due to a weakened dollar, which raised imported parts costs. Though Ashford was credited for Case’s turnaround in 1989 and for replacing 80 percent of its divisions’ managers and reviving a sluggish management, he resigned suddenly.

Losses continued in 1991 as Case scrambled to cut personnel by 5,000 and production schedules by as much as 23 percent. Sales were up, but discounts cut deeply into profits. Case ended 1991 with a $618 million operating loss.

Case had become a serious problem for Tenneco when Robert J. Carlson assumed the presidency in 1991. Carlson had spent nearly 30 years at Deere and inspired confidence at Case. The company announced extended factory shut-downs at all of its 10 domestic plants and closure of some of its European facilities. Case had restructuring charges variously reported from $461 to $522 million in 1991. Added to Case’s operating losses for that year, the loss was a staggering $1.1 billion. While Deere and Caterpillar had suffered from the extended recession as well, their trimmed production left them in better shape than Case.

Talk of further reducing the workforce by 4,000 employees started in 1992, when Edward J. Campbell assumed the presidency of Case. Campbell’s approach to downsizing was different: he didn’t just slash, he reorganized and he cut from the top, dismissing 21 of the company’s 43 officers. Various European factories were closed or sold, including the Poclain plant at Carvin. An agreement was made with Sumitomo Heavy Industries of Japan to make mid-sized excavators for the North American market. Japan was an increasing presence in the agricultural and construction equipment industries.

These measures helped reduce losses for 1992, but revenues were also down. Operating losses were reduced by about 75 percent while agricultural equipment sales were down by about 30 percent. The year closed with revenues of $3.8 billion, and operating losses of $260 million, not including restructuring charges. From a high of 30,000 in 1990, Case’s employees now numbered 18,600.

The farm economy appeared to have stabilized at the end of 1992, but construction equipment sales were sluggish. All manufacturers suffered from weak pricing, lower unit volume, the economic slump overseas, and cautious dealers. Caterpillar had a sales increase, but Deere and Case both reported losses. Though Case’s performance improved, its progress was uneven, with profits in the second quarter of 1992 and losses in the third. Tenneco announced a $2 billion restructuring plan to revamp Case into three divisions: sales and marketing, manufacturing, and engineering. Jean-Pierre Rosso became president and chief executive of Case in 1993.

Case launched a $920 million restructuring program in March of 1993, to be completed in 1996. Proposed were further plant closings and consolidations and new product development. Some of the changes included plans to privatize the 150 Case dealerships owned by Tenneco. Sales of farm equipment were up by the summer of 1993, especially large tractor sales. Most farmers hadn’t purchased new tractors or combines since the farming boom in the 1970s. Case announced that its 1993 combine production was sold out by June, but its Racine tractor plant was closed for 17 weeks following a $17 million loss in the first quarter of that year. The heavy equipment markets were proclaimed healthy by the end of 1993, but it remained to be seen how healthy Case was. The year ended well for Case: operating income was $82 million in 1993, an improvement over its operating loss of $260 million the previous year, and revenues were $3.7 billion. Case was aided by a vast reduction in inventories, higher retail pricing, and increased demand for new products late in the year.

Case’s first quarter of 1994 was strong, with production up 14 percent over the first quarter of 1993. Rosso appeared committed to Case’s comeback, and to developing markets overseas. In addition, Tenneco appeared committed to Case.