Ford Will Buy Sperry’s New Holland Subsidiary

In another sign that the shakeout in the crisis-ridden farm equipment industry is continuing, Ford said Thursday that it is buying Sperry Corp.’s New Holland farm tool subsidiary and plans to merge it with its Ford Tractor operations.

Ford’s acquisition of the world’s largest producer of specialty farm equipment, for $330 million in cash and the assumption of $110 million in New Holland debt, will mean that the nation’s second-largest auto maker will also become, by some estimates, the third-largest farm equipment producer in North America.

For Sperry, which acquired the New Holland, Pa.-based unit in 1947, the sale gets it out of the troubled farm equipment business and allows it to concentrate on its core computer and electronics markets, officials said. But Sperry said it will still take a $220-million write-off as a result of the sale, a sign that the electronics giant sold the New Holland operations at a deep discount in order to pull out of the business.

The Ford-New Holland deal is just the latest in a string of recent mergers and acquisitions in the farm implement industry, as American and foreign firms try to cope with the disastrous decline in equipment sales that has resulted from the ongoing farm crisis. Between 1979 and 1984, U.S. tractor sales fell 37.5%, while combine sales declined nearly 65%, according to the Farm & Industrial Equipment Institute. And industry officials and outside analysts agree that there is almost no chance for a sales recovery in the near future.

In response, many of the biggest producers have been merging in order to provide broader product lines for their dealers and to eliminate some of the excess manufacturing capacity that still plagues the industry.

Last November, for instance, International Harvester sold its agricultural implement operations to Tenneco Inc., which merged them with its JI Case tractor subsidiary to form the second-largest farm equipment company in the nation behind giant Deere & Co. Earlier this year, Allis-Chalmers sold its farm equipment business to Klockner-Humboldt-Deutz, enhancing the German farm implement producer’s presence in the United States.

Ford Tried to Sell Unit

Ironically, Ford, which has made tractors since 1917, had until recently been trying to sell its farm equipment subsidiary because of the dismal outlook for the industry. But once it decided to stay in the business (perhaps because it couldn’t sell Ford Tractor at a reasonable price, analysts said) Ford became determined to broaden its product line beyond tractors to compete with the new giants in the industry.

Although officials stressed Thursday that Ford Tractor and New Holland are not money losers, separately they were threatened with getting squeezed out of the market by the larger manufacturers. Now, with the New Holland acquisition, Ford’s farm equipment business will have annual sales of more than $2 billion and more than 18,000 employees worldwide.

“The players in this game are getting so large that you have to be a full-line manufacturer to compete,” said Philip E. Benton Jr., Ford’s executive vice president for diversified products. “Our job is to strengthen this business and to broaden our product line, and New Holland complements our product line very well.” He added that there is almost no overlap between the product lines of the two firms.

Integrate Dealer Networks

Benton said there are no immediate plans to consolidate or close any of New Holland’s operations but noted that the dealer networks of the two firms are likely to be integrated in the future.