Red and blue go for green
Proposed Case-IH New Holland merger would rival industry leader John Deere in worldwide iron sales Fresh from a winter of dickering at the dealerships, with the plastic factory wrap still clinging to the seat, and the bill for the first payment on the kitchen table, farmers across Ontario headed for the soybean fields in their new six-figure tractors. Some opted for red tractors, others for blue, but mid-May they discovered that the two colours go quite well together after all.Three weeks after Amsterdam-based New Holland announced intentions to purchase Wisconsin-based Case-IH, their farmer customers are asking hard questions about how a US$4.3-billion decision made in the boardroom will impact their recent tractor purchases and the local dealership where they purchased it.
"Farmers are calling up, wanting to know what's going on. Rumour and innuendo are the order of the day," says Arkona Machine Shop New Holland Dealer Jerry Beernink.
Company bosses were careful to put a positive spin on the deal, announced in Chicago mid-May, which would create a US$12-billion company that rivals industry leader John Deere, at US$13 billion in total sales, agricultural and construction. In farm equipment sales, the two would be neck and neck at US$7.2 billion for Deere versus a combined US$7 billion for Case and New Holland. "We both needed to grow if we wanted to meet the economy of scale enjoyed by industry leaders," said New Holland CEO Umberto Quadrino. "From a cost point of view, it will be the largest manufacturer in agricultural equipment."
Case IH CEO Jean-Pierre Rosso, who will head up the as yet unnamed merged company at current Case IH headquarters in Racine, WI, said the red and blue brands and distribution networks would be maintained separate.
Further details, however, are sketchy. Rosso cited up to US$500-billion in savings from the merger in all areas over the next four years, including manufacturing, but didn't elaborate. While Rosso insisted that "Case tractors will be red and New Holland will be blue," his colleague Quadrino hinted at shared facilities, with "a new generation of products from common platform."
While the two men were confident the deal would be cleared by government anti-trust regulators by the third quarter, some Wall St. analysts speculated there would have to be some divestment of assets. In Ontario, both companies compete head to head in the tractor, combine and haytool market.
Meanwhile, the approximately 80 Case and New Holland dealers in Ontario, former rivals in the highly competitive, low-margin tractor market, now wonder how many of them would be needed if they worked for the same company. Dealer attrition, said Quadrino, is a fact of life. Both companies are working on upgrading dealer standards, and dealers who do not comply "will gradually be eliminated."
On the other hand, AGCO, which would place a distant third at US$2.3 billion in the new iron pecking order, has made a habit of buying up companies and keeping brands such as Massey Ferguson and White tractors separate without major dealer carnage. In the auto business, GM has carried multiple brands such as Chevrolet and Oldsmobile with similar success. In Arkona, New Holland dealer Beernink is seeing red about the New Holland-Case deal - in more ways than one. He is surrounded by a red sea of five Case dealers within a 35-mile radius of his Arkona, northern Lambton county, dealership: Exeter, Alvinston, Forest, Stratford and London.
"I'm halfway between being mad as hell and scared as hell," says the outspoken dealer, who has been highly critical on issues such as so-called dealer purity, or ability to sell other brands. "I have a real hard time thinking anything positive's going to come out of it," says Beernink, adding that dealers who have already invested up to $200,000 to meet new company standards now face an uncertain future.
Seaforth Case IH dealer Bryan Vincent, however, is happy the new company would have the size to compete in the green leagues. The merger creates a "strong company that really makes it do what it wants to in the marketplace," says Vincent, who lived through the last major Case merger, when Case bought International Harvester in 1985.
"We're talking a company that's quite large to rival Deere, not only in North America, but in Europe," where New Holland is the industry leader, says Vincent. Part of the Italian auto multi-national Fiat, New Holland also has a "major presence" in Brazil, Japan, the Middle East and Southeast Asia, said Quadrino: "If you look at the map of the world, there are not many open spots now." In March, New Holland signed a joint venture with a machinery plant in China, and in April delivered 363 160hp tractors there. Case, meanwhile, is strong in the U.S. Midwest, Latin America, Eastern Europe and the former Soviet Union, said Rosso.
Vincent, who competes with the New Holland dealer Brian McGavin 15 km north at Walton, sees the deal as "positive" for farmers if it cuts out expenses at the "top end" during the current industry downturn. "It will make this company a lot more competitive, [and] benefit the customer [and] put us in a position to remain cost-competitive in the market," said Case boss Rosso.
Farmers could also see changes at the invoice level. Quadrino said both companies' financial divisions will combine forces. Case Capital Corp. is the company's crown jewel, posting a record US$6.8-billion portfolio last year, up one-third over 1997.
However the merger shakes out on the concessions, Wall St. analysts remain lukewarm, citing the current slump in world iron sales projected to last into 2000, and possible grief from U.S. and European anti-trust regulators. While there was money to be made for investors, news of the merger wasn't enough to push Case shares to the level of the the New Holland offer - US$55. Case shares topped out at US$48.50 following the announcement.
© copyright 1999 Agricultural Publishing Company Limited.
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What's new in diesel engines
Diesel engines' reliability and performance have improved greatly since we started using them on Ontario farms in the 1950s. The old engines with indirect injection were slow running and could accept almost anything for fuel - including small amounts of water. The indirect injection systems, massive components and the lack of technology to adjust injection advance angle kept early engine speeds below 2000 rpm, with many below 1000 rpm.Those old days are gone - as are most of those old engines. Some are maintained for sentimental and historical purposes - worthwhile in providing a benchmark to measure technology improvements. Responding to environmental concerns, engine manufacturers have begun producing environmentally friendly engines, designated by such titles as "elite," "low-emission" or "emissionized" engines, with totally redesigned combustion chambers and fuel injection systems. As with any new technology, these changes must be supported by high-quality fuels, lubricants and maintenance procedures.
Newer electronic injectors have precision-drilled orifices in the tips to ensure that exact quantities of fuel are delivered for optimum power and minimum emissions. These small orifices are hydraulically ground to round the corners of the inlet. Flow-rate calibration is done during this grinding process. Similarly, the injector needle and the seat each have double-angle contact surfaces to provide a very precise ring of contact. Clearances are no longer talked about in thousands of an inch. It's microns, now, one of which is one millionth of a metre. (One inch covers 25,400 microns or one thousandth of an inch equals 25.4 microns.) The critical tolerances in injectors are consistently held to +/- 0.5 microns. As a result, the days of reconditioning injector tips are fast coming to a close.
The smaller orifices and precise tolerances in injector tips, as well as greatly increased injection pressures, highlight the need for quality diesel fuel. It must have a high Cetane number, low sulphur content, a low enough cloud point and be free of contaminants such as water. Reduced sulphur content levels have been legislated. In the past, high sulphur content created significant engine oil contamination as well as air pollution. Fuel
Most fuel suppliers in Ontario are providing a quality product. It must be kept free of contaminants such as water. A good starting point is to refuel diesel-powered units at the end of each day to prevent condensation in the tank. On-farm storage tanks must be checked for condensation accumulation on a regular basis.
When diesel engines first came to Ontario farms, the old standby crankcase (mineral) oils were used. They had to absorb the compounds of sulphur and large quantities of soft carbon and did a reasonably good job if you changed them often enough. Crankcase oils
Along came turbochargers in the 1960s, and the scramble was on. The old oils weren't up to the challenges of high heat and run on that occurred in the turbochargers. Oil companies, engine manufacturers and the U.S. military all jumped into the oil specification business.
Confusion prevailed until the American Petroleum Institute (API) came to the rescue and established generic service ratings.
The Society of Automotive Engineers (SAE) had established viscosity ratings. SAE viscosity numbers and the letter W are not indicators of suitability for service conditions. The viscosity (thickness) of the oil is indeed important. Engine manufacturer's recommendations for viscosity should be followed to ensure lubrication during cold weather starts and film thickness when hot. Both are critical for engine life.
During the 1970s and 1980s, the API service designations were divided into two distinct categories: S for service station (gasoline engines) and C for commercial (diesel engines). As lubrication technology developed, many of the better quality oils had a rating in both the S and C service categories. The double ring API/SAE logo appears on sealed containers from all reputable engine oil suppliers.
Service ratings designations have literally exploded since 1990, to the extent that many oil companies have now separated the oils into either the S or C category. This is prudent, as fuel injection in cars has also created unique engine oil demands. Most auto manufacturers are now requesting that only oils with the special API "certified for gasoline engines" seal be used.
The new low-emission diesel engines created the need for a new oil-industry standard. CG-4 is the new API service rating introduced in 1997 to meet the latest industry standards for four-stroke diesel engines. The most recent gasoline engine service rating is SJ.
What makes the new diesel engines demand a higher oil service rating? The needs are twofold. One, piston design for the new engines brought the compression rings higher up on the piston. This move brought the engine oils closer to the intense heat of the firing zone in the combustion chamber.
The second one results from the nature of the soot. In earlier direct injection engines, injection pressures of 5000 to 7000 psi were considered high. In the new engines, the injection pressures have been increased into the 20,000 to 25,000 psi range. (You may have noticed a return to in-line injection pumps on the new engines.)
The resultant finer spray droplets burn cleaner. However, the resultant quenched soot scraped from the cylinder liners by the piston rings is much harder. Many of these small, hard, abrasive soot particles go directly to the crankcase. The resulting soot load must be handled by the crankcase oil. Ideally it will be transferred directly to the filter.
As always, change engine oil and filters at the intervals recommended by the engine manufacturer. Use quality oil and filters. Both are much cheaper than engine repairs.
Agricultural engineer Ralph Winfield farms at Belmont, Elgin
county
© copyright 1999 Agricultural Publishing Company Limited.
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