"Never Come Due?" (re. Farmtrac)
Please, tell us more.
When the tractor is initially shipped from the company to the dealer, most dealers do not just write a check for the tractor. If you stock 30 tractors, it can consume a lot of cash if you had to pay up front. Normally it is financed by a company like GE or Textron or Agri-Credit until a certain time, like 6 months perhaps or until the tractor is sold, whichever comes first. During that time, a dealer generally will not have to make any payments on the tractor nor will interest accrue. But at a certain point in time, the tractor is "due" and the dealer must pay for it. The idea of course is to always sell it before it comes due. And that is why you will occasionally see a big sale on a particular tractor on a dealer's lot, it is coming due and he'd rather not pay interest.
If a tractor company is in dire straights, they will sometimes load up dealer credit lines as much as possible and promise, despite written contracts, that the tractor will not come due. They promise to re-invoice with a fresh date or move it to another dealer or whatever if it is about to come due. You see, when a company pushes out 400 tractors in this manner, they get paid immediately from GE or whoever the floor planner is. It's a great cash flow for the company. In essence, they have sold the tractor and they get paid, even though it is not retailed. Now the tractor, unsold as of yet to the end-user, belongs to GE and the dealer. And if that company flees the USA, the dealer then has tractors to sell that are not very valuable as they have become orphans, and all rebates from the company are gone, all salesman bonuses are gone, all great retail financing is gone, etc. It's a
huge problem and the tractors will come due and when you need to write out a check for $500k it is the undoing of most family businesses, and many a larger company as well.
Now a disclaimer; I am not declaring that Farmtrac took advantage of their dealers in this manner. Some say they did, some argue otherwise. I do not know where the truth lies, so take this as a generic chat about floor planning and possible issues when things go astray. And I certainly would not want to say all the Farmtrac business managers pushed inventory with corrupt intent. Maybe it happened, maybe it did not, but this scenario has played out before with certain brands and may play out again. To the hard working honest folks with the previous Farmtrac company, please do not take offense.
There is actually much more to all of this regarding how discounts work and how that affects floor plans, but that goes beyond the subject at hand and is really more of an advanced dealer topic.
