With this newsletter, we begin a periodic series, “Whatever Became of?”  As students of business history, we learn much from both success and failure.  About 80% of the largest companies of America in the mid-twentieth century are no longer with us.  Some of these enterprises were huge, employing tens of thousands of workers for decades.  Some were household names.  Here we present a very short history of one of those fallen giants, International Harvester. It is a story about the company that revolutionized American agriculture, but then was surpassed by a more agile, smaller competitor, Deere and Company.

Cyrus McCormick

Cyrus Hall McCormick was one of the greatest industrialists of the 19th century.  Born in Virginia in 1809, he followed in his father’s footsteps as an inventor of farm machinery, though the father’s inventions did not meet with commercial success.  At the age of twenty-two, McCormick invented a better reaper for harvesting grain, and patented it three years later, in 1834.  Success came gradually as McCormick added elements to the reaper and improved it.  But the Panic of 1837 drove his business into bankruptcy, and he spent the next seven years paying off debts.

Recovering from the loss, in the 1840s McCormick discovered greater needs for his machines on the bigger farms “out west” – in Ohio, Indiana, and Illinois.  In 1847, He moved his business to Chicago, then an insignificant lake port, with a population of less than 30,000.  (By 1900, Chicago reached 1.7 million people, probably making it the fifth largest city in the world.)  McCormick continuously improved his machines, added other agricultural equipment, and expanded his factories.  He and his brothers also developed the best marketing and distribution system in the industry, with over 10,000 dealers.

In the same era, wealthy Maine textile industrialist William Deering had founded Deering, Milliken and Company, still today an important company today.  But he invested in a farm implement company in Illinois, and by the 1870s had left the textile business and moved to Chicago, where he built the Deering Harvester Company.  His innovations sometimes leapfrogged the McCormick machines. 

With dozens of smaller competitors, the 1880s saw intense competition for the farmers’ money.  By the 1890s, both McCormick and Deering had massive Chicago factories.  McCormick’s plant on the south side covered over one million square feet and employed over 5,000 men.  Deering’s factory on the north side employed at least 7,000, though McCormick was a larger company in total.

After Cyrus McCormick died in 1884, his widow (twenty-six years younger than Cyrus) and his son Cyrus, Jr. took over the company and continued to build the business.  William Deering was getting older and wanted to sell.  The rise of trusts and attempted monopolies was all the rage in the 1890s, and the two companies made several efforts to merge, hoping to abate their deadly competition.  But they could not agree on the value of the two companies and who would run any merged enterprise.  Finally, in 1902, George Perkins of the House of Morgan was able to work out a compromise, and McCormick, Deering, and three smaller companies merged to form the International Harvester Company, with 85% of the U.S. market for harvesting equipment.  The McCormicks owned 42.6% of International Harvester, the Deerings 34.4%, while Morgan and the smaller companies’ owners held the balance.

(The McCormick fortune spawned many enterprises and philanthropies.  Cyrus’s brother Leander sold out to Cyrus, Jr. and his mother for $3.5 million around 1890.  His grandson Colonel Robert McCormick took over the weak Chicago Tribune newspaper, ultimately making it into the newspaper with the highest advertising revenue in the world, with Sunday circulation reaching 1.5 million.  The namesake McCormick Place is one of the world’s largest convention centers.  Deering’s son James built a home near Miami, Vizcaya, now a beautiful art museum.)

Under the continuing management of the McCormick family in the first decades of the 20th century, the company entered the embryonic gasoline-engine tractor business and then the farm truck and highway truck businesses.  The company continued international expansion, begun in the prior century.  By 1909, International Harvester was the 4th largest industrial company in America, measured by assets.  In 1917, it was larger than General Electric, Ford, or General Motors, and as large as all its farm implement competitors combined (four times the size of Deere).  By the 1930s, “IH” had 44% of the U.S. tractor market with its Farmall brand, twice the share of competitor John Deere.

International Harvester had a reputation for building great, durable products, and an outstanding dealer network.  Nevertheless, after World War II, the company began to rest on its laurels.  The more agile and innovative Deere & Company passed it up to become the biggest U.S. maker of agricultural equipment in 1958.  Even so, IH remained a strong #2, a giant Fortune 500 company, and the top American maker of heavy trucks.

By the mid-1970s, the company was no longer growing, was not as profitable as its competitors, and had a heavy debt load.  It was ingrown and too satisfied.  Xerox President Archie McCardell was hired – the first outsider chief executive in the company’s history – to reinvigorate the “sleeping giant.”  The company spent heavily on new plants, innovative technologies, and new products.  But IH’s leaders did not listen to its customers, and even to its own experienced executives.  The company took on more debt. 

Then McCardell and his management team tried to convince the United Auto Workers (UAW) Union to accept concessions on work rules – IH had a tradition of agreeing to Union demands to avoid strikes, but now had less-favorable contracts than companies like Deere and Caterpillar.  The workers called a strike and it drug on for five months, one of the longest strikes in UAW history.  At the same time, inflation and interest rates zoomed, the economy collapsed, and farmers stopped buying.  International Harvester lost about $500 million in six months, one of the biggest losses in corporate history at the time.  Bankruptcy was narrowly averted.

McCardell was out, and his successors struggled to fix the broken company.  In the mid-1980s, they sold the core farm equipment business, now ironically combined with long-time competitor J. I. Case and part of CNH Industrial, a Dutch-incorporated company controlled by Italy’s Agnelli family.  Their empire includes Fiat Chrysler and Ferrari.

The truck operations continued, and International Harvester was renamed Navistar, which continues today as a public company.  Navistar makes heavy trucks and school buses, but has had its own struggles and the stock has remained essentially flat for years.

The lessons of International Harvester are manifold, including:

  • No matter how many big companies are merged into a giant, leadership is never permanent.
  • There are always agile, smart competitors ready to come along (the 182-year old Deere Company has only had nine chief executives in its history!).
  • Being the largest in an industry and a long history of success can be the greatest enemies of future success (look at General Motors and Sears, Roebuck).
  • Long-term success requires knowing your customers and your employees intimately, listening to them, and caring about them.

Gary Hoover
Executive Director, American Business History Center

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