Massey-Ferguson’s operating performance from 1976 to 1980 wasn’t very profitable. As it can be read in table 3, Massey’s values in operating profit decreased massively as the years went by, until they were very much negative. International Harvester and Deere & Company, the key competitors of Massey, both had increasing operating profits, until 1980. Which was a bad year for the entire industry, as the North American market for farm machinery crashed in the fall of 1980 due to high interest rates, an economic recession, the Soviet grain embargo and a severe drought during the summer of 1980. The ratio operating profit/sales for Massey decreased and became negative in the years from 1976 to 1980. This ratio was pretty much stable for Massey’s competitors in this period, except again in 1980. So as Massey was already having financial difficulties, its competitors were having fairly stable outcomes. Then the crisis of 1980 came around and Massey suffered more than the others. It is obvious that restructuring of Massey in inevitable. The outcome of continuing business ' as usual' would lead to a default on debt payments, and would eventually bring company operations to a halt. When constructing a restructuring plan, it is important to analyze the following aspects: biggest source of cash generation, underutilized assets, use of the most preferable location, refinancing debt to reduce interest payments, and improving the efficiency and R&D. The biggest source of cash generation for Massey-Ferguson is the sale of farm machinery. As seen in table 2, even though times were tough for all manufacturers in the industry, net sales were still increasing in 1980. The president of Massey, Viktor Rice, stated that the sale of tractors even increased in 1980, by 1%.
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