by Richard Stuhlbarg and Adele Karoum

A growing number of states are passing legislation creating a “lemon law” for farm equipment. Under these statutes, an owner of farm equipment, and sometimes a lessee of farm equipment, has a legal remedy when the farm equipment has a nonconformity which has not been repaired within a reasonable number of attempts. Most of these lemon laws provide for recovery of attorneys’ fees too.  

Historically, farm equipment for commercial and agricultural use was not covered under federal consumer warranty law. The federal Magnuson-Moss Warranty Act, 15 U.S.C. §2301, only covers warranties for products normally used for personal, family, or household purposes. Most farm machinery and implements are used in the business or occupation of farming, rather than for personal use or household gardening, so they are not covered by the federal Magnuson-Moss Warranty Act. 

Due to consumer complaints, lawmakers in several states have passed legislation to create state lemon laws covering farm equipment. The basic structure of a farm equipment lemon law is similar to a motor vehicle lemon law. All lemon laws mandate re-purchase or replacement of the product if it has a nonconformity that has not been repaired within a reasonable number of attempts. Some states provide a presumption of the reasonable number of attempts to repair, or they limit the repair attempts to a specific number of days out of service. Some lemon laws require a consumer to give the manufacturer notice to make a final repair attempt before the consumer can seek legal relief.  

While some states like Virginia and Minnesota passed farm equipment lemon laws in the 1980s, a growing number of additional states have passed farm equipment lemon laws. States with farm equipment lemon laws include:

Georgia (1991) (Ga. Code § 10-1-811 et seq.)

Illinois (815 ILCS 340 “Farm Implement Buyer Protection Act”)

North Dakota (2001) (N.D. Cent. Code § 51-26 et seq. “Farm Equipment Nonconformity Remedies”)

Missouri (1987) (Mo. Rev. Stat. § 407.592 to 407.592)

Minnesota (1986) (Minn. Stat. § 325F.6651 through 325F.6659)

New York (2009) (N.Y. Gen. Bus. Law § 697-A “Express Consumer Warranty on Farm Equipment”; § 697-d “New farm equipment bill of rights”)

New Jersey (2016) (N.J. Stat. § 56:12-29 et seq); and recently,

South Dakota (2019) 

Arkansas is the latest state to pass a similar law. In late March, the state legislature passed its farm equipment lemon law, which has since been enacted. (See Arkansas Act 588, 2019 Senate Bill 450.)

In states with a lemon law, a farm equipment manufacturer may have a duty to repair that extends beyond the express warranty period, as long as a consumer has provided notice of the non-conforming condition prior to the expiration of the warranty period, also known as the “lemon law rights period.” The limits on exactly how long a lemon law will extend a manufacturer’s requirements to repair farm equipment vary by state.

At first glance, manufacturers might envision a flood of litigation resulting from these laws. However, many lemon laws require an independent dispute resolution mechanism, such as mediation, be used to encourage resolution of equipment issues before filing a lawsuit. For example, the new law in Arkansas requires a consumer, in good faith, to attempt to resolve all issues and claims through a third-party mediator prior to filing a legal action in court. (See Arkansas Act 588, 2019 Senate Bill 450 (to Amend Arkansas Code Title 4, Chapter 96, § 4-96-308(b)(1).)    

Many farm equipment lemon laws impose certain requirements on sellers, such as a disclosure of lemon law rights at the time of sale. For example, New York requires a “New Farm Equipment Bill of Rights” be provided in conspicuous 10-point bold type to consumers. The law in Arkansas similarly requires the seller of farm equipment, at the time of purchase or lease, to provide a written statement that adequately discloses and explains the consumer’s rights and obligations under the law.  

Importantly, many farm equipment lemon laws allow for the consumer to recover attorneys’ fees and costs if a lawsuit is necessary. This puts teeth into consumer laws, because it encourages consumers with cases they believe will be successful to pursue legal relief without regard for their financial ability to hire an attorney or to pay other expenses such as court filing fees. 

It also increases the cost to manufacturers if a lawsuit is pursued and the manufacturer does not prevail. A manufacturer may end up responsible for a judgment of not only the cost of the farm equipment but also thousands of dollars of fees and costs incurred during litigation.  

The law in Arkansas includes both purchased and leased equipment, as long as the leased equipment is “leased for the first time from a manufacturer, distributor, or an authorized dealer.” 

The new law in South Dakota, on the other hand, does not include leased equipment, but only covers purchasers of new farm machinery. The new law in Arkansas includes farm machinery that is propelled by power other than physical power, but specifically excludes off-road vehicles, all-terrain vehicles (defined by statute), equipment under twenty-five horsepower, lawn tractors, or lawn mowers. (SeeArkansas Act 558, 2019 Senate Bill 450, Arkansas, 4-96-302(5)(A) and (B).)  

Like many states with a lemon law, the new law in Arkansas provides for a refund or replacement of the non-complying equipment after a designated number of repair attempts, and provides the buyer has an “unconditional right” to choose a refund rather than a replacement. However, if a consumer chooses a refund, the refund is typically not for the full purchase price but includes a reasonable offset allowance for the consumer’s use and for any physical damage to the farm machinery while under the ownership of the consumer. 

The offset calculation, where available, varies from state to state. For example, New York calculates the deduction for use by multiplying the days in use by the purchase price and dividing by a useful life of 1,825 days (five years). 

It is important to understand which lemon law applies in the state where the equipment was purchased or leased, because these laws vary.

Defenses under farm equipment lemon law also vary by state. Some states consider the following as manufacturer defenses:

1) the alleged nonconformity does not substantially impair the use, market value, or safety of farm machinery;

2) the nonconformity is the result of abuse, neglect, or unauthorized modifications or alterations by a consumer; or

3) the claim was not filed in good faith. (See, e.g., South Dakota HB 1103, Section 7; N.J. Stat. 56:12-40; MO Rev Stat § 407.589.) 

The differences in these state laws can be substantive. As a result, it is important to understand the applicable jurisdiction and its law and to have legal counsel experienced in defending lemon law and warranty litigation, as there is little farm equipment or tractor case law currently available to provide guidance. 

Rick Stuhlbarg and Adele Karoum are attorneys in the Los Angeles office of Bowman and Brooke LLP, practicing in the areas of warranty and product liability law. Stuhlbarg concentrates his practice on defending some of the world’s largest automotive and consumer product manufacturers in product liability claims and commercial disputes. Karoum concentrates her practice handling advanced motions and appeals.

President Donald Trump has fulfilled promises he made during his 2016 campaign to address inequities in global trade. He has done so by imposing additional tariffs on a host of products from China, which has sparked retaliation.

Before we explore strategies to cope with the added costs of these tariffs, let’s look at how we got here. 

In March 2018, the administration imposed tariffs of 25 percent on steel and 10 percent on aluminum imports. The EU, Argentina, Australia, Brazil, Canada, Mexico and South Korea were initially exempt, but the tariffs were extended to Canada, Mexico and the EU at the end of May. Australia remains exempt, while steel from Brazil and South Korea, and steel and aluminum from Argentina, are subject to quotas instead of tariffs. 

The first round of tariffs against China took effect in July, with 25 percent tolls on $34 billion of Chinese goods. The tariffs affected products such as machines, auto parts and other industrial goods. A second round of tariffs in August imposed 25 percent levies on another $16 billion of Chinese goods, including plastics, more auto parts and additional machines.

A third round in September resulted in the imposition of a 10 percent tariff on an additional $200 billion of Chinese goods. The tariff on these latter products was scheduled to increase to 25 percent in January, but the administration postponed the increase, citing progress in negotiations. 

In mid-May, negotiations with China grew tense, and the administration increased the tariffs to the previously threatened 25 percent and warned of tariffs on another $325 billion in Chinese goods.

China, the EU and other trading partners have retaliated over several months by imposing tariffs on U.S. goods. The EU’s tariffs apply to agricultural goods, motorcycles, and boats, among other products. China cancelled purchases of U.S. soybeans and imposed tariffs on $60 billion of U.S. exports. Canada and Mexico also imposed retaliatory tariffs.

These tariffs resulted in unexpected and substantial increases to the cost of goods imported by many U.S. companies. The common short-term strategies to deal with these additional costs were to absorb them, renegotiate price agreements with customers, or a combination of the two.

Companies may also employ these four longer-term strategies to mitigate the impact of tariffs:

Request exclusions;

Confirm the tariff classification of imported goods;

Tariff engineering; and

Modify supply chains.

Exclusions

Except for the tariffs imposed by China in September, the government established a process for importers to request exclusions. Requests for exclusion from the steel and aluminum tariffs have been the most successful. Of the 51,345 requests submitted by this spring, more than 25,000 have been approved, more than 7,000 have been denied, and the rest are pending. Requests for exclusion from the steel and aluminum tariffs may be submitted any time.

Nearly 14,000 requests for exclusion from the first two rounds of China tariffs were submitted before the filing deadlines. Of these, only 1,442 exclusions have been granted for the first round, while more than 5,000 have been denied. The remainder of the requests for the first round, and all those for the second round, remain pending.

An exclusion process for the third round has not been established. 

These statistics indicate that exclusions from the steel and aluminum tariffs are not a sure thing but worth pursuing, given that the process remains open. 

The China exclusion process was far less rewarding but also worth the effort; the possible benefits far outweighed the potential cost. Unless the process is reopened for the first two rounds, or initiated for the third round, additional exclusion requests will not be accepted.

Classifications

A second mitigating strategy is to confirm the classification of imported goods in the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS classification of a product establishes the general duty rate and whether the product is subject to the additional tariffs.

The confirmation of a product’s tariff classification is a highly recommended exercise for two reasons. First, a product may appear to be subject to the tariffs, but a review may reveal that a product is not appropriately classified, and its revised classification is exempt. For example, a steel tube product from Canada that has been further manufactured for use in an exhaust gas recirculation system is not classified as a steel tube, but as a heat exchanger part. The former is subject to the steel tariffs, while the latter is not. 

The second reason to confirm the tariff classification is the inverse of the first. That is, a company may be importing a product under a classification that is not subject to the tariffs, but if this classification is incorrect, the importer may be assessed the additional tariffs, as well as penalties, if Customs discovers the error. Customs penalties range from two to four times the underpaid duties if the error results from simple negligence or gross negligence, respectively. If the violation results from fraud, the penalty can be up to the domestic value of the merchandise. 

Engineering

Tariff engineering is also an effective strategy to mitigate the impact of high tariffs. It is an established practice dating back to a Supreme Court decision in 1881. In that case, the Supreme Court affirmed an importer’s right “to manufacture his goods as to avoid the burden of high duties.”

A recent example of tariff engineering involved Ford Motor Company’s imports of its first-generation Transit Connect vehicles. Light trucks, including cargo vans, were then and still are subject to 25 percent tariffs, while the duty on passenger vehicles is 2.5 percent. The high tariff on cargo vans was the result of a chicken war between the United States and Europe. This trade war started in 1962 when imports of poultry from the United States caused prices to collapse in Europe. France, then Germany, increased tariffs on U.S. chickens. The U.S. retaliated by imposing 25 percent tariffs, which is often referred to as the chicken tax, on brandy, light trucks, and other products. The tariff on light trucks drastically affected Germany’s exports of the vehicles, as well as those from Japan and other countries.

The Japanese and German automakers soon began to utilize tariff engineering to avoid the chicken tax. The Japanese shipped truck chassis to the U.S., which were subject to a 4 percent tariff, and added the beds after importation. Mercedes shipped its Sprinter vans to the U.S. in kit form for assembly in South Carolina with a proportion of U.S. sourced components. The missing components were strategically selected to ensure that the kits were not classified as unfinished light trucks. 

Ford’s strategy pushed the concept of tariff engineering even further. The company imported its Transit Connect vans with a second-row seat and second-row sliding doors with windows. After the vans cleared Customs, Ford removed the second-row seats and, in some cases, replaced the windows in the second-row sliding doors with a solid panel.

Customs concluded that Ford’s strategy was not valid tariff engineering but was intended to disguise the true nature of the vehicle at the time of importation. Ford challenged the decision, and in 2017, the Court of International Trade held that the condition of the vans at the time of import controlled their classification, and the motive of the importer in designing the merchandise is not relevant.

The government has appealed this decision. While the appellate court may determine that Ford pushed the boundaries of tariff engineering too far, it will not overturn the long-standing precedents recognizing the legitimacy of tariff engineering.

Supply Chain Changes

The final strategy is to consider modification of existing supply chains. The central question is whether a product’s sourcing can be shifted from a country subject to the tariffs to one where it is not. An obvious example of this would be to shift the source for imported products to domestic sources. 

Another possibility is to shift sourcing from one foreign country to another. For example, aluminum foil imported into the U.S. from China is subject to the aluminum tariffs, as well as antidumping and countervailing duties. Some companies with existing production capacity in other countries have adjusted their supply chain so that the foil is shipped from China to these alternative production facilities, where the product is manufactured and then shipped to the U.S., where it will not be subject to the tariffs. The analysis of such supply chain modifications involves both cost considerations, as well as application of U.S. laws governing the determination of a product’s country of origin. 

Each of these strategies can be used successfully to reduce the impact of the tariffs. Consider each as it relates to company’s supply chain configuration. 

R. Kevin Williams is a member in Clark Hill’s International Trade Law practice group. His practice focuses on governmental regulation of imports and exports. Williams spoke at the 2019 Supply Summit & Showcase.

Look at Oklahoma on the FCC Broadband Map (broadbandmap.fcc.gov), and you see a digital divide: a concentration of broadband internet clustered around urban areas and sparse coverage in rural areas. Beyond Tulsa, Oklahoma City, Stillwater and cities in neighboring states, much of the rest of Oklahoma lacks high-speed, fixed internet access—with an exception.

The FCC map also shows a dark blue circle in the rural northeastern corner of Oklahoma, which indicates broadband availability. That is largely the result of BOLT Fiber Optic Services, a division of Northeast Oklahoma Electric Cooperative.

“They have fiber running to a lot of rural households and have seen businesses saying, ‘now that broadband is available, we’re going to expand,’” said Brian Whitacre, an Oklahoma State University economist who studies rural broadband impacts and policies.

Bringing broadband to rural areas can be a tough business case for internet service providers, including electric co-ops, who often tap federal and state programs to justify establishing high-speed networks in areas of lower population density. But broadband is increasingly an essential tool for rural businesses. 

Here is a look at the state of rural broadband, including recent policy changes, anticipated benefits and potential impacts from expanded rural broadband service.

The State of Rural Broadband

Rural broadband was a big winner in the 2018 farm bill. Funding through the main USDA program for rural broadband networks rose to $350 million, which is 14 times the funding amount in the 2014 farm bill.

“The Agriculture Department’s latest effort to boost broadband services in rural America could not come at a better time,” said American Farm Bureau president Zippy Duvall after the farm bill passed. “We are confident companies and cooperatives that apply for these grants and loans will find an overwhelming demand for broadband connectivity.”

Government support for rural broadband goes beyond USDA. The FCC, also in December, expanded access to its Connect America fund for rural broadband providers. That fund is an even bigger pot for broadband infrastructure development, and more funds for rural areas are now available for providers meeting the present FCC definition of broadband: access to 25 Megabytes per second (Mps) download speed (about enough speed to stream two Netflix videos) and 3 Mps upload speed.

Fixed broadband that meets the FCC definition usually comes through hard-wired lines, like fiber optic-fed DSL or cable modems. Wireless cellular connections are not yet a possibility for widespread fixed broadband, especially in rural service areas. But fixed broadband also includes satellite connections and the emerging fixed-wireless category, where a broadband provider sets up a tower and shoots a signal to a customer through a wireless internet service provider (WISP). These fixed wireless connections deliver the FCC definition of broadband and can provide possible solutions for rural manufacturers, farms and agribusinesses seeking broadband connections.

Rural electric cooperatives getting into the broadband business are helping fuel rural broadband expansion.

“Over the past two years, we’ve seen just an explosion in two categories of (rural broadband) providers,” said Whitacre. “There’s a lot of smaller companies seeing the need in these rural areas and setting up towers for fixed wireless broadband. The second category is a lot more rural electric cooperatives providing broadband internet access.”

Federal programs, along with some state initiatives, are helping bring more service to rural areas. Plans are in the works to formalize a federal rural broadband office, although there is some debate inside the Beltway on whether that office will be housed at FCC or USDA.

Broadband=Economic Strength?

Broadband is often touted as an economic development tool, which undergirds the case for government subsidies and programs designed to build such networks. 

In fact, the USDA released a report at the end of April saying broadband availability in rural areas would boost the U.S. economy, generating an additional $45 billion to $65 billion a year. Agriculture Secretary Sonny Perdue said achieving that availability also would “take a lot of money.”

The shows nationwide broadband would allow more farmers to adopt precision ag technology that would expand production and income. 

“When we talk about infrastructure,” Perdue said, “this has to be one of the top infrastructure needs of America.” 

While the precise cost and benefit of greater high-speed internet access is unclear, there is broad agreement that potential exists. For farm equipment manufacturers, there are two primary benefits of expanding rural broadband: It serves as an invitation for business investment, and it supports increasingly connected farmers.

Researchers at Iowa State University linked greater broadband service to new businesses in rural areas of Iowa and North Carolina, but it did not establish a clear cause and effect. Researchers also noted that broadband has more apparent impacts in rural areas with higher population densities, such as rural regions closer to cities. That is because of agglomeration economies, or “the economic advantage firms can obtain by being located in bigger towns,” said Younjun Kim, who authored the study with Iowa State economist Peter Orazem.

“For example, firms in bigger towns might be closer to input providers, like lower transportation costs, which can be a big benefit for the firm,” explained Kim, now an assistant professor of economics at Southern Connecticut State University. 

State and local governments are buying into the narrative that broadband is good for business. In Indiana, for example, the state’s Next Level Broadband program will provide grants of up to $5 million to broadband providers establishing high-speed service in rural, underserved areas.

“The internet is just as essential to Indiana’s prosperity today as highways were a century ago. By expanding access to affordable broadband, we’ll ensure more Hoosiers can use this business and personal necessity,” said Governor Eric Holcomb, in his program announcement.

Manufacturers in rural Indiana are important when developing rural broadband, says Roberto Gallardo of Purdue University, who co-authored a rural broadband report for Indiana’s electric cooperatives. He thinks broadband helps foster machine-to-machine interaction, and machine-to-human interaction, that could change the face of manufacturing. Online learning, input from product specialists—both on- and off-site—and other benefits for manufacturers could be tied to broadband.

“It also provides a venue to solve problems from the bottom up by entrepreneurs, do-it-yourselfers, artisans and tinkerers,” Gallardo wrote.

But shortline manufacturers know better than anyone that rural areas have long fostered entrepreneurs, do-it-yourselfers and tinkerers. They also know that providing availability to broadband is a first step. The next: productive use of it. One such productive use for manufacturers is online diagnostics, which helps businesses troubleshoot machine problems and often prevent them through early detection.

Less certain is broadband’s impact on the farms and agribusinesses that farm equipment manufacturers serve. Broadband certainly improves precision agriculture applications, for example, but as investment among row crop producers has slowed in precision technologies, the on-farm impact is less clear.

Still, mainline equipment companies, crop input companies and precision agriculture firms are some of rural broadband’s most vocal advocates. The USDA and the Agricultural Retailers Association recently placed rural broadband deployment alongside transportation infrastructure as a policy priority, and most other farm groups also prioritize broadband.

“The majority of rural Missourians lack access to affordable, reliable, high-speed internet,” noted B.J. Tanksley of Missouri Farm Bureau. “Broadband access isn’t just about entertainment for rural Missourians; it is a link to the best education and healthcare available.”

It could be perceived, in fact, as a link to prosperity.  

Matthew Ernst is an agricultural writer based near St. Louis. He grew up on a commercial crop-and-livestock farm on the East Coast. His writing focuses on farm business management, marketing, and policy.

More than 250 shortline farm equipment executives gathered in Myrtle Beach, S.C., in April to cultivate partnerships between suppliers and manufacturers, gather industry knowledge, and reconnect. We look forward to doing it again in Albuquerque, N.M. Save the dates for the 2020 Summit: March 24 to 26.

Shortly before I retired from General Cable Corp. (now Prysmian Group), I reminisced about the best leaders I’d had the opportunity to work with—or for—over my 35-year career. It didn’t matter if they were a CEO or a first-line supervisor, I wanted to capture the most critical traits of great leaders who had played a key role in my development. Of course, you may have such a list of your own. Here’s mine.

The best leaders:

#1 Have a healthy dissatisfaction with the status quo. 

If you’re truly committed to continuous improvement as the career-long driver of your mindset and behavior, then this becomes who you are. Not sometimes. All times.

#2 Are relentless in their quest for continuous improvement and
expect the same from everyone. 

This trait sorts out the doers from the pretenders. Expose the pretenders and make every effort to train them up so they’re capable of delivering to expectations. If they are incapable or unwilling, then it’s time to get them out. Naysayers, if left unattended, are a cancer to the entire CI effort. If leaders don’t do this, we’re collectively communicating to the best performers every day that CI is really not that important. Culturally the masses are likely to withdraw and lose interest in the larger goals of the company and find the work a lot less gratifying.

#3 Have high expectations and hold people accountable for results. 

See No. 2. A granular set of aligned metrics at each level of the organization is also necessary. It’s like any game, really. Everyone has to understand where the goal line is and what their role is in getting there. How do we know if we’re winning or losing?

#4 Have a vision of excellence that is communicated broadly and frequently.

One of my early mentors liked to say, “If you don’t know where you’re going, any road will get you there.” All your people need to understand leadership’s vision and their role in making it reality. The lack of comprehensive training and communications plans are at the root of many, many disconnects.

#5 Communicate a clear priority set. 

There’s nothing more frustrating for our people than to have a leader who wants everything done now. This is abdication by the leader, who owes his/her team a priority set from which to assign scarce resources. Resources are not infinite in spite of leadership exhortations. The first thing leaders should do is decide what will not receive the company’s scarce resources. These are things that, when compared to the real priorities of the business, are not that important, can be handled routinely by others or simply don’t need to be done at all. This kind of prioritization by leadership clears the way to hold people accountable for doing the right things, which moves the needle on the company’s most important business objectives.

#6 Don’t pass the buck when there is bad news. 

If it happened on our watch as leaders, we own it. Sure, there may have been a disaster that happened a couple of levels below, and surely we’ll be addressing corrective action through the structure of the organization. But make no mistake, we own it. As a constant reminder of this, I gave a notecard to all my new plant managers that said: “The corporate organization structure is one that requires strong plant managers. Each must be a self-starter with his or her own continuous improvement agenda; with an in-depth understanding of the business such that the right structure and the right people are deployed; with an energy level and an attention to detail that delivers the expected results; with the mental discipline, persistence and confidence to be effective; and with the vision and leadership skills to achieve and sustain manufacturing excellence in our culture of continuous improvement.”

#7 Run to the problems and deal with them. 

Notwithstanding the need for prioritization, running to problems is what leaders should train their people to do instinctively. The temptation for some in leadership roles is to “let it ride for now.” That is the wrong mindset. First, the best leaders don’t sweep issues under the rug or procrastinate and tell themselves, “I’ll deal with this later.” If it’s a problem, but not yet priority enough to claim scarce resources, leaders at least should be sure the issue is recorded so it doesn’t get lost in the shuffle. The proper level of the organization should communicate these problems to the keeper of the “parking lot” for items that do not require scarce resources. It’s a great opportunity to solve problems at the lowest level in the structure capable of solving the smaller, nagging issues.

#8 See opportunities others don’t. 

This is often why leaders are in their leadership roles and others aren’t. Of the many factories I’ve been in, there are very few where I didn’t see issues—some of them glaring issues— that others walked by simply because of their familiarity with the area, their lack of attention to detail and a basic lack of curiosity. Curiosity may have killed the cat, but it’s a critical skill that leaders use to cut through to the core issues. Something as simple as training on the “5 Whys” is a great way to help people develop a sense of curiosity. Those who are innately curious can demonstrate and train their people as each opportunity presents itself. Engineers and maintenance people are often great examples to observe as well. They’re always trying to understand how things work and why. It’s in their DNA.

#9 Are the ones who care the most and make everyone around them better. 

Leaders are always under observation. They live in a fish bowl. Are they approachable? Are they confident and comfortable in their own skin? Are they fully competent? Are they innately helpful? Are they often in “mentoring mode” and providing “the why” behind what’s being discussed, or coaching others how to think about certain issues? For example, early in my career, the company converted salary administration to the Hay System (a job evaluation system). There was much work to be done, and it was being administered through what then was the personnel department.

In a very mechanical way, the specifics of how to fill out forms and such were communicated well. However, the training was primarily intended for the staff that would have the administrative responsibilities for implementing the system. Maybe more senior managers understand, but in my first department manager position I was missing the big picture. Fortunately, my boss and mentor at the time called me to his office and explained in a one-on-one setting how the whole system tied together. As a new manager, this was invaluable counsel and insight. Understanding the thinking behind those kinds of systems, the direct linkages to position descriptions, salary administration, succession planning and how to most effectively use the processes, served me well throughout my career. My boss didn’t have to do that, but he did.

#10 Know when it’s time to tell someone goodbye. 

Those who aren’t excelling in their roles know it. Those who supervise them know it. The best leaders deal with these situations head on, but with a mindset of finding a path where both the company and the employee can win if that’s possible. Usually the disconnects can be resolved in six months or so. If it’s a successful outcome, great. There’s now a solid business and personal relationship into the future that is a win-win. Both the associate and the company have a good outcome. The employee is finally in the “right seat on the bus” according to Jim Collins, author of Good to Great. If the efforts are not successful, then the leader and, hopefully, the associate know all parties tried to make it work but it simply was not meant to be. A generous separation package and a firm handshake for good luck is a great outcome for all involved.

I close with this line from Sal Marino, chairman emeritus, Penton Publishing, from a 1997 IndustryWeek article (Is ‘Good Enough’ Good Enough?): “If management lacks the courage to eliminate mediocrity wherever it exists in the company, it has demonstrated to its employees that they work for a company that considers mediocrity acceptable. And that should be totally unacceptable.” 

Larry Fast is founder and president of Pathways to Manufacturing Excellence and a veteran of 35 years in the wire and cable industry. He is the author of The 12 Principles of Manufacturing Excellence, A Lean Leader’s Guide to Achieving and Sustaining Excellence, 2nd. Edition. Copyrighted 2019. Informa.

Shortline manufacturers know the numbers: The world population today is 7.5 billion—roughly double what it was in 1960. That number is projected to be 9.7 billion by 2050. This means farmers need to produce more with the same amount of land, and that puts pressure on the agriculture industry to make dramatic gains in food production.

Fortunately, we are experiencing a technological revolution that makes such a task less daunting.

GPS technology has facilitated precision agriculture techniques that led to greater efficiency through auto-steer, variable rate application, prescription application, overlap control, and more. Precision agriculture technology based on GPS has laid a foundation of precision control in the industry. The potential of the technology is vastly expanded with tools such as the Internet of Things (IoT), machine automation, and big-data technology.

Farmers typically are willing innovators of new technologies, especially when that technology is proven to bring gains in efficiency and is compatible with existing infrastructure. Because of that willingness, farmers today enjoy greater crop yields while reducing use of seed and fertilizer.

That willingness also helps position agriculture as the ideal industry to be the first major adopter of autonomous machines. There is a solid business case for increased profitability. The high cost of equipment and shortage of skilled machine operators makes autonomous systems an economic option. And, those three previously mentioned technological developments  are now ready to come together to make autonomous farm machines a reality. Let’s look at each one.

IoT and Connectivity

IoT describes embedded electronics that have internet connectivity capability. The meteoric expansion of the internet, combined with cost-effective electronics that can be built into any device, have resulted in connected objects for a vast variety of purposes: refrigerators, fitness gadgets, industrial machines, cars, and more. IoT technology has resulted in a huge amount of real-time information provided by advanced sensor systems that can be used to improve business and operations.

In agriculture, this means the connectivity between moving machines such as tractors and implements and standing objects such as grain bins and dryers. By connecting the two, farmers have real-time, sensor-driven data about farm operations. The advancement of IoT has resulted in reliable, robust, and secure ways to share data in real time between machines and remote users, paving the way for remote operations and the ability to monitor autonomous machines.

(Note: Rural America faces a unique problem with internet connectivity. It is often not available on farms. The response to the problem has come from both local and federal resources, and we are moving quickly toward fully connected farms.)

Big Data (Data Analytics)

With the data now available through IoT technologies and advanced sensors, the emerging challenge is for farmers to get the most out of it. The millions of pieces of data available through live sensors is potentially enormously valuable, but that value diminishes if farmers have to analyze it in a spreadsheet. The next step is to automate the analysis of this raw data to drive decision-making on the farm.

Data analytics technologies have evolved rapidly in recent years. There are three main types of data analytics: descriptive analytics, predictive analytics, and prescriptive analytics. Each provides distinct value to the end user.

Descriptive analytics presents the data in a form that can be readily understood. This answers the “who,” “what,” “when,” and “where” questions. Examples include showing crop yields for each field on a farm, or tracking the location of grain in carts, bins, and trucks.

Predictive analytics, as the name suggests, forecasts what will happen. It supports farmers seeking tomitigate challenges and seize opportunities. Predictive analytics can be used to schedule preventive maintenance on machines based on operating data that anticipates a breakdown.

Prescriptive analytics pursues answers to the questions “why” and “how.” This is a deeper analysis that seeks to understand what’s driving certain circumstances and how to adapt. Agronomists use prescriptive analytics to develop detailed understandings of growing conditions, which helps them set application prescriptions of seed and fertilizer based on soil conditions.

Farm management systems have grown quickly to meet the demand for data analytics in agriculture, but the market has been fragmented. Tractor manufacturers have developed connected farm solutions, but most of them are compatible only with a specific brand. GPS companies have provided special-function options for precision farming, but they work only with GPS-enabled devices. A third group of companies has focused on overall farm management solutions independent of specific equipment. The challenge facing this group has been gaining access to machine information, specifically information from implements, which are critically important to data collection.

While none of these systems provides the complete and integrated solution farmers need, the openness of the third group—the farm management solutions—presents an opportunity. Farmers want to link together third-party systems, and they need a way to combine the data analytics generated by the control systems that drive their machine functionality with the farm management software. This has resulted in standards such as the ISOBUS FMIS and Task Controller, but the missing piece is the software and equipment databases, like JCA’s Cumulus Farm API, that links it together.

It is essential that these various system components work together. Only then can we achieve the complete autonomous farm.

Machine Automation

Across industries, highly automated machines are growing in number. The automotive industry has contributed to the growth with a build-up of technology such as vision systems, object detection, and autonomous driving technology. These tools are proven, robust and ready to be applied in agriculture.

What farmers need, however, cannot simply be replicated from the auto industry. Autonomous farm equipment technology requires not only movement but also automation of the implement function, such as seeding, spraying, and harvesting. This requires integrating precision ag functions based on GPS systems with other automated systems, and even automating movements that today are operator-controlled. The industry has arrived at a moment in its history in which the technology is there to support autonomous equipment.

A Vision of The Future

As production of autonomous machines gains traction, the cost will drop, and small machines will make more economic sense than large ones, since machines will no longer be limited by available operators. These smaller autonomous machines can provide more flexibility.

Farms of the not-too-distant future will consist of more (but smaller) machines that run as directed by the farmer. Farmers’ decisions will be based on real-time data and analytic tools that transform the data into digestible information about the state of the farm. The farmer’s role will shift, and the farm will operate with a new level of efficiency.

Past decades have focused on the advancement of the tractor, but with the build-up of technology toward autonomous vehicles, and the continued focus on precision agriculture, the focus shifts now to the advancement of implements. These developments bring a radical shift and call into question the future of the tractor.

For roughly the past century, the tractor has been a key part of farming operations, and its existence has been taken for granted. It has provided not only the horsepower needed to pull implements through the field and supply those implements with adequate hydraulic, electrical, and in some cases, pneumatic services, but it also has provided a home for the operator. As a result, implement manufacturers have had to make their equipment work within the controls, displays, connections, and power provided by the tractor. Autonomous technology changes this dependency.

Autonomous vehicles can work around the clock, and a network of vehicles can get the job done concurrently without additional labor. This means that vehicles can be smaller, which reduces the reliance on high horsepower and eliminates the need for a machine operator. So why is there a need for a tractor? Function-specific agricultural machines can be developed that will include their own smaller drivetrains at a lower system cost. 

The Path to Autonomy for Equipment Manufacturers

If manufacturers of agricultural equipment are not nervous about where they fit in the emerging technology landscape, they are not paying attention. Implement manufacturers have been building more smart technology into the machines they manufacture, which provides more precision control, and real-time data increases farm efficiencies. Equipment is evolving with more automation, hence the capacity to coordinate complex operations: more sensors to monitor all aspects of the machine operation, and greater connectivity, control, and analysis.

The path toward autonomous systems will happen naturally by adding intelligence to the machine in value-added steps. Implement manufacturers need to be diligent in identifying ways these technologies can be added to the machines they build to add immediate value to farmers. They will likely need technology partners like JCA Electronics to help them navigate this way forward. The technology will move forward quickly, because its value is indisputable. 

Darcy Cook is VP of engineering and general manager at JCA Electronics, and John Anderson is president of JCA Electronics, a member company that offers expertise in advanced control systems and autonomous technology, as well as electronics and wire harness manufacturing for the farm equipment industry.

by Kristi Ruggles

About Montag
Year Founded: 2005
Products: Fertilizer application systems, liquid tanks, steerable carts
Generations in Business: Two
Siblings employed by the business: Six of eight
Employees: 38
Locations: Emmetsburg, Iowa and Milford, Neb.
Leadership: CEO Anthony Montag
Member Since: 2006

When Anthony Montag entered the world in 1981, he was born into a story that, while uniquely his family’s own, resembles other families’ stories in the shortline industry. The Montags, however, may be among the last families in the industry that will have such a story to tell.

“I feel like Montag is at the end of a line of shortline manufacturers,” Anthony said. “Ours isn’t the type of story that was untellable in past generations, but it is one that is challenging to duplicate going forward. Culturally, from a business risk standpoint, it’s not impossible, but it’s challenging.”

It’s because there are chapters in this story in which the founder’s children pop wheelies in golf carts on the plant floor. A story in which nephews promise an uncle $5 if he can get himself out of a nine-ton tank the company has built without using a ladder. In this story, children are assigned work responsibilities long before they are of working age, and when those children become adults, they assume leadership positions on the floors they once roamed on scooters.

Above all, it is a story of a man with a knack for designing and building equipment and a spirit of entrepreneurism, who brought his family along in the founding and evolution of a company that has defied everyone’s expectations of what it would become.

Roger Montag, the patriarch of the Montag family, began as a farmer and blacksmith. In his shop class as a high school junior in West Bend, Iowa, he built a skid loader for scooping manure out of chicken coops. For his senior project, he built a machine for moving government grain bins. (That design launched a roughly 15-year side business during which Roger moved about 2,000 bins.)

Shortly after Roger finished high school in the late 1960s, he built a 60-by-40-foot shop on the farm and started a blacksmith business. In 1979, Roger married Theresa, and in 1981, Anthony was born. He was the first of eight children, all of whom would be home schooled through high school. 

Until 1998, Roger farmed and raised livestock. Until 2006, he built grain wagons, meter systems and products other farmers suggested.

In 1986, Roger and two business partners started NewMatics, which built air-powered systems. Anthony joined the business after high school, which was the beginning of a shift in a new direction for the Montag family.

“We were looking to bring some new ideas into the market,” Anthony said. “NewMatics didn’t really have an appreciation for research and development, and the market was changing to more automated systems. So, the partners said, ‘Go for it,’ and we did.”

Montag Manufacturing incorporated in January 2005. Roger and Anthony were the only full-time staff. Rachael and Rebecca, Roger and Theresa’s second and third children, worked part-time.

“When we started, we were just giving a name to what we were doing,” Anthony said. “It was very much still the model of a blacksmith shop.”

The new company’s first machine order was one Anthony will never forget. The farmer lived near Valentine, Neb., about 300 miles from the Montag farm. The drive to the farm gave Anthony time to think.

“The anticipation of wanting to do it sort of drowns out the fear,” he said, “but this was a monster machine. It was a 24-row, nine-ton machine behind a planter. He wanted to pull dry fertilizer behind the planter. He was doing some very light tillage ahead of his planter. He was spraying the field. That was our first machine out the gate, and it was years before we did anything close to that again.”

That is not to say that quiet days were ahead for the Montags. In 2006, farm equipment dealers approached the family about selling their products, which led to a growth spurt. Sales in 2006 quadrupled sales in 2005. The next year, sales more than doubled again; Montag added a bigger cart to its lineup and built its Generation 1 fertilizer system.

In 2008, the shop on the farm would not suffice for the company’s workspace. They moved into a 72,000-square-foot building in Emmetsburg, Iowa.

Midway through 2009, after longer than four years of growth at a dizzying pace, Anthony said the phone stopped ringing at Montag Manufacturing. The company’s sales slid by 20 percent in 2010.

“We assessed our resolve to continue,” he said. “We were in too deep to go back. Our only option was to come out the other side. We had to let a few people go, which was tough, but it made us grow up, and we came back stronger.”

Until that slowdown, work arrived at Montag unsolicited. (“All we had been doing was answering the phone,” Anthony said, “and it had worked better than any of us could have imagined.”) The drop-off in sales prompted the family to hire sales professionals and think about customer engagement.

Then, much like the invitation from the dealers brought the business to a next level, the Montags bumped into an opportunity that would again dramatically accelerate growth.

“We had some OEs (original equipment manufacturers) who came to us and wanted to partner with us,” he said. “The first was Kuhn Krause. They were just coming to the market with the Gladiator, their new strip-till product, and our machine fit like a glove in their machine. To be chosen as the fertilizer equipment on the most successful strip till equipment on the market was phenomenal.”

The partnership was a success. Montag started hiring engineers and adapted its operations through lessons it learned working with Kuhn Krause.

“We had about a dozen companies come to us over a roughly three-year period wanting to develop OE partnerships,” Anthony said. “It was a huge shift to work on OE development in addition to dealer relationships.”

The success with Kuhn Krause and other OEs set up Montag Manufacturing for a series of changes in operations and management that brought it to the current decade. The company became certified as a Deere supplier and transitioned to more sophisticated software systems to manage inventory, engineering, and business operations. Montag would no longer rely exclusively on what Anthony characterizes as “tribal knowledge.”

“Quality was in the hands of the operator,” he said. “We had high expectations of our employees, and they didn’t let us down, but it wasn’t sustainable. It had been tribal knowledge, which has value. It supports that maverick style, that innovation and agility. But it needs to be tempered.”

As the company has expanded and matured, so has the family presence in the business. Roger continues full-time. His brother Dan—the uncle who had to ask for a ladder to get out of that nine-ton tank, then hand over the $5 he’d wagered—helps with deliveries, trade shows, and whatever comes up.

Seven of the eight of Roger and Theresa’s children work in the business today. Anthony is the company’s CEO. Rachael is in accounting. Rebecca manages the office. Benjamin is in manufacturing. William manages marketing. Joseph works in parts and also helps on the development side.

Margaret, the fifth child, is a Catholic religious nun. The youngest Montag, Mary, graduated high school in 2018 and works part-time in the office. Anthony’s wife, Jaimie, works on the company’s web site.

With the exception of the daughter who entered religious life, every member of the family lives within 15 minutes of one another. When they are together for a Sunday brunch or birthday, business does not dominate their conversation. When they are at work, they succeed by communicating with candor and kindness.

“Having a family-run business is not an easy endeavor,” Anthony said. “It takes open, honest communication. It takes charitable listening. There’s a lot more emotion that can come into a small family business. My hope is that the relationships among family members create a culture in which everyone who is part of the business feels connected, feels like they belong.” 

Quotables from Anthony Montag

On the Ag Economy

Montag’s profit margins aren’t as great as we’d like them to be. We’ve been competing in the market, but they are hard-fought sales. It’s not like the glory years.

Our customers are facing real challenges. We can jokingly say “It’s nothing that $5 corn wouldn’t fix,” but $5 corn isn’t coming soon. The value-shopping customer is real. The earlier days of buying the best regardless of cost are over. We hope our customers see it’s not all about price. We hope they look for that balance between cost and quality.

On Winning the Water Quality Initiative Award from the Iowa Department of Agriculture and Land Stewardship

It was quite an honor. It was a validation of a lot of things we believe and work hard to achieve. We do what we do with the intent to help farmers save money, be better stewards of the land, and raise more product. We do it to make agriculture better.

On Innovation in the Shortline Industry

There is something about ag shortliners. You just have to innovate. You wake up in the morning and think “How can we do it different?” You see that in other industries, but it’s not quite the same. There aren’t a lot of mavericks, for example, in the aerospace industry.

In March, the Department of Labor announced its latest proposed rulemaking regarding the salary threshold for exemption from overtime. If you haven’t kept up with the status of the rule since changes were proposed in 2016, you are not alone. We’ll start with a quick review.

To pay an employee a salary without overtime, the employee must:

(1) meet a salary threshold

(2) be paid on a salary basis, and 

(3) perform certain white-collar job duties

In 2016, the DOL announced it intended to restrict this test and reduce the number of employees eligible for exempt status. In particular, the DOL sought to raise the salary threshold from under $24,000 a year to $47,476 a year. This would mean that an employee earning a regular salary of less than $47,476 could not be treated as exempt from overtime, regardless of his or her job duties—management, administrative, or otherwise.  

Just days before the new rule became effective, a Texas federal district court judge entered a nationwide injunction blocking the DOL from implementing the rule. This meant that the salary threshold did not go into effect while it remained tied up in the courts. The Texas court concluded that Congress gave the DOL the discretion to define the duties that qualify employees for white-collar exemptions but not to increase the salaries for these exemptions to the level set in the new rule. Basically, the court found that the DOL did not have the power to increase the salary threshold as much as it did.

The DOL ceased its efforts to implement the old rule, and turned its attention to developing a new proposal, which brings us to today.

This time, the DOL is proposing a more modest threshold of $679 a week ($35,308 annually). This figure is based on the 20th percentile full-time income in the lowest-income region (the South). Notably, this is the same metric the DOL used in 2004 to set the current threshold, which gives the new rule a greater chance of withstanding judicial scrutiny.

The DOL anticipates making the new rule effective on the first day of 2020, though that appears flexible. In the meantime, the proposed rule will undergo a notice-and-comment period and almost certainly renewed legal challenges. However, by relying on the principles guiding the 2004 rule and reducing the 2016 proposed increase by about 50 percent, this rule stands a good chance to avoid the fate of the 2016 version.

Even though we do not have the final regulations, we have enough of a sense of what DOL plans to do that we recommend companies start preparing for this change. In particular, as you turn to your projected labor budget for 2020, keep in mind that you may have salaried employees who will either need to convert to hourly employees or receive a raise (possibly a substantial one) in order to meet or exceed the new salary threshold.  

We will continue to monitor these developments closely. As always, please let us know if we can be of assistance as you assess the impact of the DOL rule on your business. 

David James and Joe Schmitt are shareholders in the labor-and-employment group at Nilan Johnson Lewis. Association members are entitled to no-cost, 60-minute consultations with James and Schmitt. The benefit renews with each legal question. Call the firm at (612) 305-7500.

My experience of these meetings has changed over the past 14 years. I meet new people every year and strengthen relationships with folks I’ve met before. The results are new ideas and increasingly candid conversations, hence more productive meetings.

This year as president offered me a new and interesting vantage point. I saw more behind-the-scenes preparation. I talked to more folks attending their first meeting. I heard more feedback from members about what worked and what didn’t.

While plans are preliminary for Supply Summit 2020 in Albuquerque, N.M., the Association is working with feedback to establish a series of appearances with Jamie Flinchbaugh on lean manufacturing and Violet Sullivan on cybersecurity. This would allow for a deeper dive into these issues through successive sessions, perhaps linked together by webinars. Stay tuned.

I want to note another change afoot at meetings. There is renewed energy around committee work, and that provides outstanding opportunities for members. You can influence the content of meetings and publications and shape Association services through work on these committees:

Convention: Supports staff in developing topics and speakers for the Supply Summit & Showcase and Marketing & Distribution Convention.

Dealer Relations: Seeks strategies for strengthening relationships between shortline manufacturers and dealers; monitors legislation affecting that relationship.

International Relations: Provides information to members regarding import/export issues and opportunities.

Education: Seeks to identify the informational needs of members and provide learning opportunities beyond those offered at conventions.

Membership: Builds the membership base through outreach efforts and suggests strategies for recruiting and retaining member companies.

Communications: Pursues opportunities to raise the Association’s visibility and better serve members through online and printed communications.

Standards:Informs and represents members in regard to the guidelines developed and enacted for the manufacture and use of farm equipment.  

Consider this your invitation to join a committee and help steer the direction of this Association. To get involved, send me an email at the address below. I am convinced that stronger committees will lead to more members and improved member services, which ultimately raises the value for everyone. That is why your membership matters. 

Nick Jensen
Association President
njensen@thurstonmfgco.com