SLIDESHOW: Inaugural Farm Equipment Hall of Fame Class of 2024: Paul Wallem, Wallem International & Central Sands International

Wallem recalls it was 1973 that an argument was being made about pushing smaller, less effective dealers to get better. “I was president of the National Dealer Council that year, and that was the subject of the council meetings the first couple of years. The XL program came after that,” he says.

“With his background with IH and being metrics driven,” recalls Johnson, "he applied a lot of what he'd learned on running a business to our dealer world. He said, ‘Here’s a set of metrics and if you attain success in these metrics, your dealership will survive and prosper. And if you don't, you probably won't.’ He understood that way before most anybody else.”

Silberhorn says IH had to “drag some dealers kicking and screaming into the modern era. Not all dealers like the programs that OEMs come up with, but this one was different. And Paul told other dealers to get behind it. He was a good spokesperson, he was a dealer advocate, and he was positive for the company."

Wallem walked the talk. “Paul embraced the program and ran with it and the requirements – the facilities, the signage, the inventory management, the parts inventory management, the service, the training and so on.”

Silberhorn says that many second- and third-generation dealers were still operating the same way their grandad did. “So, embracing that program and its computerized accounting and inventory management, succession plans, the service management was huge.”

Wallem was the first to jump all-in on the XL program and champion a much-needed program to get the network into the 20th century, says Silberhorn. “The XL group was considered the most well-managed and most forward-thinking dealers in the business.”

“I believed in the program very strongly and we were the first one in Illinois. Our employees were all recognized by the company as being XL employees. That's probably a highlight of the years with the dealership,” says Wallem, calling it the proudest moment of his career.

XL Impact

Pointing to sales standards, turns and computerization, Wallem says the XL dealerships were doing better in the late 1970s than IH itself was. “That's where IH fell short, too. They didn’t start the improvement processes quick enough. When things were going wrong, they'd fix one thing and something else would go wrong.”

While earning XL status wouldn't guarantee a future with IH, the byproducts of the program — a better business — gave dealers a fighting chance, says Silberhorn. “They didn't all survive, but the ones who did survive — at least in this area — were the ones who were on the XL program. If they didn’t modernize their structure, business and management, they weren’t going to survive.”

The movement toward business sophistication was going to come regardless, says Silberhorn, but Wallem fast-tracked an initiative that may have otherwise faced an uphill battle. “Paul had the leadership style and the ability to communicate with dealers, and the credibility with dealers that helped it succeed, to pull them along into it.”

Incidentally, Johnson Tractor was one of the last dealers to achieve XL status and the accompanying plaque, within months of the merger. Johnson remembers the Tenneco people saying, “Throw out all your awards, all your old awards. That was then, this is now. We’re in a new era.” 

He adds there were many IH dealers, like Wallem’s operations, that didn’t survive the merger, just as some Case dealers were also eliminated. 

Wallem’s Belvidere dealership was an IH showcase not only domestically but globally. With his Belvidere store’s proximity to O’Hare Airport, it would host visitors from nearly 30 nations over the years. 

“We even had some large ag delegations from China. It was fun. Our employees gained a lot from visiting with them, hearing about their experiences.”

Incidentally, the FBI showed up after noticing visitors from Russia and China converging on Belvidere. “They came out and asked what we’d talked about. I said, ‘Hey, we were talking about agriculture and there was not much secret sharing going on about anything but agriculture."

Rental & Leasing

Another area that demonstrated Wallem’s inventiveness was in renting and leasing. He started his program with Green Giant after seeing Orhan “The Turk” Yirmibesh's success with his Badger Farm Store in Clinton, Wis.

“I did a great amount of leasing — rental may be the better word — when few dealers were doing it. People thought we were nuts; that it would get in the way of new sales.”

Wallem pointed to Green Giant, which was located in Belvidere, as an example. “We’d lease 15 tractors at a time until they got 200 hours each on them and then we’d bring them in. We’d clean them up and put them on the lot in the fall and get $3,000-4,000 out of them. We could beat everybody to pieces on a 200-hour tractor because there weren’t many out there.”

It succeeded because of Wallem and his team’s diligence in the clean-ups. “I had one man who did nothing but detail those tractors to look like new again, even paint the tires,” says Wallem, pointing out the poor state of half-million dollar combines he sees on dealers’ lots today. 

“If you completely restored them to look like new again, you could get any price you wanted. So many of our competitors would rent or do a demo and just park it on the lot and it’d sit there forever because it was dirty. The difference was making them look brand new.”

He also leveraged the concept on his trucks. “We were the biggest grain truck dealer in the Midwest. We’d rent 20 of them each year to the canneries, and then sell them in the fall. We’d never carry them a second year. That was our most profitable thing and gave us a huge amount of volume.

“More than anything, leasing and rental is what allowed us to grow as big as we were and profitable — up until the bad years. It worked like a charm.”

A 2nd Dealership

Wallem’s path to his second store arrived via an unusual opportunity — center pivot irrigation. It was very uncommon in the Midwest for a machinery dealer to go all-in on irrigation, but Wallem seized the chance.

A farmer on sandy ground in Belvidere asked if Wallem could find him a center pivot system. He reached out to Zimmatic and secured the pivots.

That transaction led to a call from Zimmatic asking if he’d consider opening a dealership in Plainfield, Wis., to help a farmer put 2,100 acres of land that had never been farmed and who needed the water to make it happen.

“I took the dealership up there in 1978, rented a gas station for an office, and helped sell 18 center pivots. About the same time, IH asked me to take over the franchise there and then we added Butler to what became Central Sands International.” 

Former IH export colleague Bill Kleckner took a class B ownership stake, ending up with the operation when Wallem exited the business in 1987.

Fierce Inline Competition

Newcomers to the industry would be surprised by the amount of inline competition that existed in the 1970s.

“Inline competition was staggering at the time,” notes Johnson, who had joined his father’s then-named Clinton Implement & Hatchery. In 1978, “We were 20 miles from Paul, and the Illinois-Wisconsin border separated us, but that didn't matter. Guys from Illinois would come up and buy from us, and I'm sure that we lost a few deals to Paul over the years. 

Shortly after Wallem opened his store, Andy Anderson of Harvard, Ill.-based A.A. Anderson showed up and asked what in the world he was doing with a dealership in Belvidere — his territory. “I said, ‘Andy, there must be way we can stay out of each other’s hair. And that did or didn't work very well.”

So there were a few blood enemies in those competitive days, and even face-to-face sit-downs to work things out, or at least intimidate.

Wallem recalls a call from fellow IH competitor Jim Walker of Rochelle, Ill., about arranging a sit-down meeting in Clinton, Wis. The agenda was about a young whippersnapper by the name of Leo Johnson, who Walker said was “in my hair.”

The pair met with Johnson’s boss, Bruce Lucas about the young Johnson venturing too far south and into their AOR. Lucas didn’t give an inch. Wallem says the meeting ended with Walker saying, “My god, if he gets anywhere near Rochelle, Ill., I’ll send him home with his tail between his legs.” (Johnson was told to “keep it up,” and ironically, Johnson ended up with the bankrupt Rochelle location in 2006).

Wallem and Walker would become fierce competitors as well, even enemies. But they did patch up their friendship 10 years ago before Walker passed.

A Decade of Success

Wallem got off to a good start in what would become a roaring 1970s for ag. “In 1974, after $11.5 bushel soybeans, we bought our house — it was a great year.”

His peak year was 1979. “It was just an awesome year because the Axial Flow combine was brand new. We sold more Axial Flow combines than any dealer in Illinois; 12 in the month of October alone. And then the 400 Cyclo air planter was doing great; we had 30 that spring that went out. 

“That was an exciting time. Everything looked great. We were so busy and firing on all cylinders — sales, parts, service, we couldn’t keep up.”

But things would start to change in December 1979, starting with the IH strike. “Everything went from roses to ‘down the tubes’ for a coming year with no parts flow. The company started having all kinds of problems in 1980 and obviously kept on having problems.”

Worst of Times

"None of us guessed that the IH strike, which Archie McCardle started in the fall of 1979, would last 6 months and basically bust the company and a lot of us," Wallem recalls.

IH didn’t help matters. “The company kept the factories going full blast from November 1979 until April 1980, and the inventory buildup hit dealers hard. Sales started plummeting in January 1980 when interest rates soared past 20%. President Carter’s grain embargo with Russia hit, inflation pushed farmland prices sky-high and IH just kept building more equipment.

“Once the strike was over, IH pushed us to buy more wholegoods because the company couldn’t afford to finance them. Over the next 4 years, with new tractors forced on me, I sold some at a $6,000 loss just to get rid of them. That was a huge IH mistake, and it hurt dealers for a long time.”

Interest rates were the other hammer that fell, Wallem says. “Running a dealership in the early 1980s was about managing how much you could lose. I had $1.5 million in unsold inventory. I was a director at the Belvedere Bank, and bank directors had to pay 1% above prime rate for loans. So I was paying 22% interest on inventory that we couldn’t sell. That’s what ultimately busted me.”

As conditions worsened, Wallem knew his fate rested in the service department, and kept his 17 techs — more than half of his staff — employed. We were living on service and getting rid of our techs would’ve meant cutting our own throat. I hated to let them go because they didn’t have other jobs to look forward to anywhere else.”

Wallem recalls the weekly “Thursday night reviews” of the bankruptcy filings, and a time when the dealership would lose $10,000-$15,000 a month on bankruptcies from farmers that wiped out accounts receivables; mainly in the service department where Wallem pinned his hopes.

The bankruptcies started in 1984 and accelerated through 1985. “When farmers came into my office and closed the door, I knew what was coming next. A good friend, a dairy farmer, shut the door, started to cry and said, ‘This is going to cost you, but I’m filing bankruptcy.’ And he had about $5,000 in unpaid shop bills. Those were nasty times.”

He recalls a dealer lunch meeting in Decatur. "A dealer said, ‘I always wake up at 3 a.m. worrying.’ Others said the same thing, so I commented that we might as well have dealer meetings from now on at 3 a.m. — since we're all awake.”

After selling a dozen new combines in October 1979 alone, Wallem says, “We only sold 3 new combines from 1980 till 1986 when I sold out — that’s 3 in 6 years.

“We ultimately ended up having equipment that was built in 1979-80 four years later and paying interest on it. It was equipment that we shouldn't have ever had; equipment that the IH shouldn’t have built during the strike.” Wallem recalls that in 1984, he paid $195,000 in interest rates on equipment that he couldn’t move.

In 1979, there were 11,000 farm equipment dealers of all brands. By 1986 only 5,800 remained, Wallem says. “I vividly remember the suicides among dealerships, including three IH dealers during those years.”

The Exit

The Case-IH merger announcement in November 1984 was when Wallem started to lose his enthusiasm for the business. With the merger, he faced new competition in dire times, including a nearby Case Industrial store that suddenly had access to all his customers’ needed ag parts — that it was selling well below Wallem’s price book. 

With the additional pressure he had as a bank director and with floorplan inventory that was “killing him,” he says he had to do something to stop the bleeding and attempted to sell both operations, yet no buyers existed.

Wallem sold the Belvidere store to the Weeks farm family, which expected to obtain additional operating capital. But the financing fell through and the store closed within the year. His partner at Central Sands picked up the loans and kept it going for a number of more years.

He exited the business in May 1986, 15 months after the Case IH merger was completed.

Life After the Dealership

Reflecting on his career, he cites how involved his entire family was in the dealership. There was his wife, Joan, his son Jeff who worked on the center pivot business, daughter Linda who ran parts in the summer, and son Steve who steam-cleaned the trade-ins. “They all worked in the business at various times, and rode to work in the morning with me. That’s why I was so happy to leave the export job.”

Like so many of his peers, Wallem had to find new life in areas outside of farm equipment. He became a certified financial planner and founded Wallem Associates, which his son Jeff later joined and purchased in 2012, and which currently manages 300 clients.

“To me, one of the major privileges of my life is to spend so much of it with my son in business. We were together twice. He left, went with IH, then quit to run the truck part of my dealership, and then went with Sundstrand. But then came back with me 20 years ago in the financial planning office.”

Wallem is well aware of the challenges of today’s farm equipment dealer. “In recent years, when I’ve seen dealer lots filled with $300,000 used combines, I’m glad I’m no longer a dealer,” he says. “The risk is too high when dealers carry expensive used equipment that can just sit and deteriorate.”

Wallem, who will turn 90 in March, faces another transition ahead, as he lost his wife of 67 years, Joan, in December. 

But he remains in contact with dealers and reads Farm Equipment and its related content, commenting and asking focused questions that might elude even the most astute dealer-principals. He also writes a weekly column for Indiana newspaper Farm World which keeps him dialed into the industry and with deadline pressures. And he’s now working on his 6th book, which includes several titles on International Harvester, his piloting days, a novel and now a new book, called Drives that will include a foreword by his friend Max Armstrong.

He still loves the business and remains grateful for the experience — both good and bad. “It’s fun to enjoy your job in your life. My good friend, Orion Samuelson has said so many times on the air. ‘Find a job that you love doing. You'll never work a day in your life.’ And that’s so true.”