Matt Bewley, Published September 23 2009
Fosston Implement closing leaves community at a lossFOSSTON, Minn. — Fosston Implement, a mainstay business serving farmers in the area very likely will be closing its doors in October after 90 years in the community, a victim of its own small-town size.
Roy Dufault, whose family has owned the John Deere dealership since 1969, said the decision is not of his making and that there appears to be nothing he can do, since John Deere is discontinuing his dealership agreement.
And his customers are not happy.
“The community is angry,” Dufault said. “Everywhere I go — to church, to a ball game, to the golf course — anywhere I go in the community, people come up to me: ‘What are we going to do?’”
They are concerned about being able to have their John Deere equipment serviced nearby. Without Fosston Implement, they will have to drive 35 miles away to the John Deere dealer in Mahnomen, Minn.
Fosston Implement is not a huge outfit, but it has served the farm community surrounding Fosston for several decades. Many customers have invested in John Deere equipment, both new and used, for many years, partly because they knew they would have parts and service available nearby.
“John Deere has been telling us for some time that the business model for their ‘Dealer of Tomorrow’ is going to be a dealer account that can sustain $50 million in business,” he said. “Well, I’m a small (single-location) dealer and we are a long ways away from $50 million.”
Dufault says his dealership typically brings in $3 million in gross sales and that roughly $1.2 million of that goes to John Deere. From the rest, he pays his 10 employees and the rest of the business expenses. He sells more new and used equipment than parts and service.
“I would say 60 (percent) to 70 percent of gross dollars was probably new and used goods, and then the other 30 (percent) to 40 percent was parts and service,” he said.
John Deere wants to switch gears and provide customer service through the more distant high-volume dealerships. Dufault has heard the company’s reasoning, but does not agree.
“What does it hurt, having us here?” he asked. “We have our own niche up here with hay and cattle people and small ag products. And 90 percent or more of our customers could care less about global AMS, automated control systems and self-steering. They’re hay producers feeding cattle.”
Barry Nelson of John Deere’s North American public relations declined to offer an explanation, saying only, “We are trying to build a dealer organization with our dealer partners because they are independent business people in providing the best products and services for our customers.”
But Dufault doesn’t buy it. He’s had multiple conversations with John Deere representatives regarding this, trying to find a way to keep his dealership.
“One fellow said, ‘For the large dealers in your area to continue to grow their business,’ he told me, ‘it’s time you get out of the way because you’re a hindrance to their profitability,’” he said.
News of the new direction for John Deere’s North American dealerships has not been a secret. Dufault has been getting strong hints of the coming changes for several years, he says. A John Deere representative told him three years ago at a dealership review meeting that, if McDonald’s, for example, suddenly should take an interest in his property, Dufault should not hesitate to sell.
“They’ll make statements that, ‘We no longer see the need to have brick and mortar (a location) in Fosston,’ ” he said. “If you’re not going to have brick and mortar, somebody can cover your trade area without having a business there. They can cover it remotely from their location.”
One way through all this would have been to merge his dealership with others. He remembers going to a John Deere meeting and being told, “If you’re a John Deere dealer today, you better be working on a merger, selling out or closing.”
These larger dealers may be able to make the $50 million required to stay in business with John Deere, therefore, with the company’s permission to approach the other dealers, he participated in two meetings to discuss merging.
He thinks the discussions were insincere.
“We just had some general conversations, but it never went beyond that. They never asked how many customers I have, how many dollars in business I do, or ‘Can we see your financials?’” he said. “They got back to me in several days and said, ‘Thank you for thinking about us. Good luck, but we’re not interested in you.’ I feel John Deere had set up the meeting just to pacify me, because all along they’ve been telling me, ‘We don’t see Fosston Implement as a viable location.’”
That leaves Dufault and his customers with a slim chance at Fosston Implement’s remaining an independent parts and repair shop, and possibly signing on with another equipment manufacturer. He has considered putting together a “top 100” list of John Deere parts most often needed by his customers, and hopefully expanding that to a “top 200” list.
But there may be trouble there, too. Access to John Deere parts as an independent may not be possible. He has spoken with another dealer who once had sold John Deere parts to a smaller repair shop.
“John Deere prohibits selling parts to a re-seller,” he said. “This dealer told me they had to end their relationship. They could no longer supply parts to that independent repair shop.”
This leaves his customers, the farmers around the Fosston area, with a lot of miles between their fields and a service and repair shop. Even the retired folks are upset, because it looks like the servicing on their John Deere lawn mowers and snow blowers may not be available in town.
As a result, when his customers come to him and ask what to do, he hasn’t got much to offer. He says he’s going to advise some of them to get a good trailer and find a new dealer.
“Sorry that I have to pull the rug out,” he said. “Mine’s been pulled out and now I have to pull theirs out.”