Few things symbolized the changes that have taken place in the International Harvester Co. during the last year better than the two long-haul highway trucks on display outside the Art Institute of Chicago for today's annual stockholders meeting.
Since the stockholders last met a year ago, IH has cut itself in half by selling its money-losing farm tractor-making operations to Tenneco Inc. The sale has enabled IH to concentrate on more profitable truck and diesel-engine manufacturing.
The move, according to both company officials and industry analysts, removed IH from the brink of bankruptcy after five years of huge losses.
"We have emerged as a much more focused, cost-effective organization that is positioned to effectively compete in today's highly competitive marketplace," IH Chairman Donald D. Lennox told shareholders today. "The truck and engine businesses are poised to take full advantage of the excellent sales results they have been posting for well over a year."
Harvester, which traced its legacy in farm equipment back to Cyrus McCormick's invention of the mechanized reaper more than 150 years ago, sold its troubled farm-equipment business to Tenneco last year for $488 million. In doing so, the company conceded that the agricultural equipment industry once dominated by Harvester tractors and combines showed no signs of near-term recovery.
Lennox described the sale of the farm equipment business as a "momentous step" and attempted to rationalize it to the audience of shareholders, many of them IH retirees or dealers.
"Management and the board of directors knew the psychological impact that the sale would have on employes, retirees, customers, dealers and in fact the entire agricultural community," Lennox told the shareholders. "They knew, too, that they were interrupting a longstanding tradition. But there was really no other choice."
Losses from the farm-equipment business had been bleeding Harvester dry -- over the past five years, the company has lost $2.6 billion. But the company's desertion of the field allowed it to turn a modest profit in the fourth quarter of IH's fiscal year, which ended last Oct. 31. It was the company's first profit in five years.
In the first quarter ended Jan. 31, IH posted a $42 million operating profit on $840 million in sales, although writeoffs connected to the sale of the farm-equipment business left the company with a $534 million net loss in the quarter.
IH is the United States' largest producer of heavy trucks, and company officials believe its truck and engine business will continue to gain strength and increase profitability for some time. "We are positioned to aggressively compete in the marketplace," IH President Neil A. Springer said. "We intend to strengthen our position as the No. 1 name in trucks."
The return to profitability will enable the company to pay down its still-massive $800 million debt and position itself for further expansion.
"Our No. 1 priority right now is to get our balance sheet back in shape," Lennox said at a press conference after the stockholders meeting. "Then we would have access to borrowing should we find an interesting opportunity to diversify."
Lennox said he hopes that diversification could include a move into services businesses. Lennox has spoken with admiration of Chicago neighbor Borg-Warner Corp.'s diversification several years ago from auto parts into financial services and other service industries, and indicated he would like IH to emulate that example.
Lennox has one other change in mind for IH -- its name. Feeling that the International Harvester monniker no longer accurately represents what the company does, Lennox hopes to announce in the near future a new name for the company. The International Harvester name is to be adopted by Tenneco for its tractor line.
Plans to rechristen the company International Trucks at today's meeting were scotched for legal reasons, but Lennox promised an announcement of the new name in a few months.