In our 20-plus years of reporting on ag machinery, Farm Equipment has published many articles extolling the aftermarket business’ merits in downtimes. That is, when farmers aren’t buying new equipment, they’ll still buy parts and service from an “on-the-ball” dealership.

For most of this tenure, Leo Johnson, a recently retired dealer exec from Johnson Tractor, called B.S. on this “act of theatre” perpetuated by the major OEMs. In feature articles, videos and Dealership Minds Summit speeches, he’s contended the aftermarket revenue does not rise as the majors proclaim it will, nor is it an effective counterattack for dealers during downturns. When dollars are tight, he says, farmers will “bald their tires” and let every problem go unrepaired — unless something is outright destroyed.

You can see why the majors have propagated this notion. When the ag economy takes a dump, parts/service is a sensible rallying cry. Oh, and to have something else to point to when dealers cite razor-thin wholegoods margins, even in the good times. “But just look at your opportunity in parts and service!” answers the OEMs. “That’s where you’re supposed to make your money!”

Lately, I’ve seen and heard holes poked in this “aftermarket myth” (including an article in The Wall Street Journal concluding it’s also fallacy in the auto world). So I went to the most vocal dealer naysayer I know (Johnson) and then to a longtime OEM exec.

I was surprised to hear both take the opposite view I expected.

Dealer View

Johnson’s views in our archives go back at least 13 years, as he noted parts/service sales falls proportionately with wholegoods. While he long believed in making the aftermarket as profitable as possible, he cautions that “if you’re building a model for survival during a recession, you’re looking at it wrong.”

At the inaugural Dealership Minds Summit in 2013, our coverage of his brother Eric’s speech referred to absorption as “the same theater as another questionable metric, market share.” And that the majors’ motivation was that “a better-absorbed dealer is willing to sell wholegoods at nominal margin — because they’re able to sustain themselves on parts and service.’”

But as you’ll see in his Farm Equipment guest blog, A Contemporary Viewpoint on Aftermarket Absorption Rate the dealer-turned-consultant changed his tune.

Major-Line View

In my research on Hall of Famer Woody McCartney (see our special Farm Equipment Dealer Hall of Fame coverage starting on p. 14), I caught up with retired AGCO Vice President Dennis Heinecke. I also threw the aftermarket question in his direction and learned he held a parts marketing management role earlier in his career.

I’d learned he’d been ladling out the aftermarket Kool-Aid to dealers for many years – as the majors began rolling it out to their dealers in the early 1990s. “Yes, it’s a myth – farmers do not spend more on repairs in downtimes,” he says. “They’re driven entirely by their net income, and when it’s down, they aren’t buying anything nor repairing things well.

“To the question, yes, there was a lot of pressure on us as a company to grow the parts business because that’s where the margins are vs. wholegoods sales. We developed enhanced service programs to help dealers get there.”

At the time, Heinecke, says, he fully agreed with the AGCO’s and the other majors’ logic. “I didn’t realize it as a myth back then. Only later did I realize it was also all about net income.”

Change of Tune?

As you’ll read in Johnson’s essay, he’s come around in his old age, stating his operation is much different than 20 years ago when he and Eric, operating 3 locations back then, were obsessed with wholegoods sales. Today, the business is much better balanced, he says.

Those of you who attended the Precision Farming Dealer Summit last month (see p. 12), know that we’re taking on a first-ever theme of “The Fully Absorbed Dealer” for the 2025 Dealership Minds Summit in Iowa City.

We hope you’ll join this focused forum to examine strategies and tactics to optimize the aftermarket operations — in a year that you’ll want every fractional percent it can bring you.

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