Bob Benedetti
Staff Writer
April 25, 2008 11:46 am
—
On the heels of an auction to liquidate a large surplus of storage items, Farmtrac dealers from around the country gathered Thursday night at a Tarboro hotel to learn more about the status of the struggling tractor manufacturer and what the future may hold for them.
Approximately 40 of the nationwide 280 Farmtrac dealers assembled at the Comfort Inn on Western Boulevard to have discussions with court appointed officials, export liquidators and implement distributors in a five-plus hour meeting that eclipsed the midnight hour.
The dealers and company employees have been negatively impacted by the Jan. 18 closing of Tarboro-based Farmtrac North America (FNA), who is more than 180 days behind on its debt of approximately $11 million to secured creditor Textron Financial.
Since the closing, dealers have only been able to provide very limited replacement parts, out-of-pocket costs for service and no warranties. By statute, many states in the U.S. require a warranty with any new motorized vehicle sold. Tractor retailers report living off of their savings due to an inability to make farm equipment sales.
Worse yet, creditors are beginning to breathe down the neck of some tractor retailers.
According to a dealer, "One guy called me up and said 'I'm going to have everything you own.'"
Tarboro attorney Jim Marrow, the Edgecombe County Superior Court-appointed receiver, assured the group that he and manager Doug Gurkins of Greenville are "doing everything possible to create a best-case scenario" and paralleled it to a child adoption. "You just want to find the appropriate parent for the child."
Marrow assumed receivership duty Feb. 27 to ensure payment of debt to creditors. As the present owner of Farmtrac, part of his job is to repair the company's reputation and prevent the embattled firm that "approaches $50 million in total debt" from perishing.
According to Marrow, there is hope. Unable to provide an in-depth disclosure of negotiations that are still in progress, Marrow said that negotiations are under way with "two or three U.S.-based buyers and one buyer outside the U.S." and although not an odds maker, he'd estimate a "50-50 chance" of landing a prospective buyer.
He hopes to have a response in "about three weeks."
Meanwhile, Marrow and Gurkins will liquidate 19 tractors, a host of farming implements, tires, surplus parts, random old materials and salvage. The auction began at 10 a.m. today at 411 Hope Lodge St., across from Stocks Elementary School.
The auction proceeds will go toward maintaining operating costs of the 14-person work crew with remaining funds put toward the companyís debt.
Lack of warranty and parts support has created major handicaps for Farmtrac retailers, which are unable to sell a bulky inventory of tractors nor are they able to support current customers. Both are critical sources of revenue necessary to keep doors open.
Dealers agreed that procuring warranty and finance programs will be keys to selling tractors ñ and subsequently working out of their present financial funk.
Different warranty programs were discussed. Instead of the default "fail safe" plan, a more restrictive that would charge seven percent of tractor cost and operate under narrower guidelines, ad hoc dealer leader Tim Cook of Drakesboro, Ky., suggested a "three-point protection" plan that would permit a smaller percentage cost and place the funds into an escrow for added flexibility of use.
Jae-Yong "Joey" Sim of Korea, a senior manager with prominent tractor supplier LS Cable was in attendance. Like Farmtrac retailers, LS Cable, also an unsecured creditor who is owed money by Farmtrac. Sim said that LS Cable is "almost in the same situation" as the dealers and hoped that "dealers can convert this into a positive."
According to a court document dated Feb. 27, Farmtrac owes LS Cable an account balance "of approximately $11,096,879, of which more than $8 million was past due."
Sim vowed that LS Cable is "seriously considering" how his corporation can remedy the situation and is in "discussion with the receiver" and will figure "how to give support."
An alternative to selling the tractors to customers is selling them to a liquidator. LewPack International co-owners Richard Lewis and Bobby Pack, both of suburban Atlanta, offered their services to the struggling dealers.
"We want to make ourselves available to help in any way we can," said Pack.
Lewis reassured the group's dealings would be 100 percent safe.
"The buyer pays for the shipping and you will be paid in full before goods are taken from your property," Lewis explained.
The statement created a buzz of interest from the room full of farmers who sported Farmtrac-branded baseball caps.
"You can have mine. Take 'em all. Every one," said a dealer from Louisiana.
Dealers and hardware suppliers arenít the only ones who've taken the Farmtrac closure on the chin. Approximately 180 former Farmtrac production line employees have been on temporary layoff status for more than three months.
Marrow reported that although workers have "been offered the ability to buy COBRA (Consolidated Omnibus Budget Reconciliation Act) health benefits, many declined," explaining that "high costs associated with the advanced age" of Farmtrac's workforce. More than two-thirds of its staff had given more than 20 years of service.
COBRA health insurance is designed as a stopgap that gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan.
The workers have also been unable to utilize an estimated $300,000 worth of unserved vacation wages that are not available for use.
A combination of continuing costs and approaching growing season are indicators to dealers that time is of the essence.
"If they (dealers) don't act before too long, the season will be too far in," said Pack, a logistics specialist "and the opportunity to sell their tractors will be just about gone."
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