Massey-Ferguson Ltd.

Topics: Finance, Stock, Debt Pages: 5 (1290 words) Published: December 12, 2012
Executive Summary


Massey-Ferguson Ltd. (formerly Massey) was a multi-national company which produced and distributed farm machinery, industrial machinery and diesel engines throughout the world. However, with advancements in technological innovations rendering Massey’s product lines outdated, if not obsolete or overpriced, the company had continuing operation problems in the late ‘70s and early ‘80s. These operation problems resulted in losses which made the company lose confidence of its shareholders. Shareholders then were not willing to infuse additional equity into the company, putting Massey’s in danger of defaulting on several loan covenants. The next few years saw further deterioration in Massey’s operations, such as the misguided prioritization of product research and development, which was focused overseas instead of in the North Americas where the capital opportunities and funds were.

The financial problems of Massey came to the point that the Canadian government was contemplating on extending financial assistance to the company. A deadline was set for Massey to honor its commitments to its many creditors, and it was only able to do so with the help of Argus, a shareholder-company which donated its 16.5% controlling interest to Massey. Further, the governments of Canada and Ontario extended financial assistance to Massey, now Massey-Ferguson, in order to protect jobs and to help the incumbent politicians in the upcoming Ontario elections.

* Institutional

Massey was unable to develop its agriculture-based product lines to adjust to an industrializing world. The technology was not developed; instead, the company focused on the production and distribution of such machinery and equipment in major continents. This practice burdened the company with labor requirements and a highly diversified system, eventually leading to operation losses.

* Operational

The operational problems of Massey stemmed from the production and distribution units, which were too widely placed. There were no sufficient research done to put into context the agriculture and industrial needs of the specific countries to which Massey produced and distributed machinery and equipment.

Areas of Consideration

Massey should have taken into careful consideration the agricultural and industrial requirement of the countries where they put production lines and distribution routes. This could be seen in the case of Massey neglecting the North America clientele; the company focused on exporting farm tractors and machinery outside, while forgetting about the client-base they have in the North Americas. Had they focused on the United States and Canada, it would have eliminated shipping and transportation costs and miscellaneous expenses, such as exportation taxes.

Environmental Opportunities and Threats

Massey can undertake product research, design and production in order to modernize and keep up with competition; these modernization programs should be contextualized per specific country-clientele. Massey should also consider innovating their existing product lines through product research and development, as well as adopting the latest technological innovations which would increase efficiency in production and assembly lines.

A possible threat to the expansion and modernization of the business is the highly-diversified system of decision-making, production and distribution; this system, scattered all over the world, makes the company susceptible to operating losses through lack of centralized accountability.

Macro-Economic Indicators

* Political

The government of Canada extended financial assistance in order to protect the jobs created by Massey; the Canadian government always had a protective stance when it comes to the employment of its citizens and residents. On the other hand, the Ontario government extended financial assistance on this pretext too, with the underlying...
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