Massey Fugerson
Masseys farm machinery line consists of tractors, several harvesters and other agricultural equipment. The industrial machinery line consists mostly of several industrial tractors. Diesel engines were produced in England by the Perkins Engine Group.

Market-wide problems:
• High interest rates – After the 1973 oil crisis and the 1979 energy crisis, the US economy was affected by stagflation. In an effort to fight excessive inflation, the Fed adopted a tight monetary policy, raising interest rates (as an illustration, the federal funds rate increased from 11% in 1979 to 20% by June 1981).

This affected all players as it led to a plunge of stock market prices, on the one hand, and an economic recession, on the other. Furthermore, Massey was particularly hit hard: since it mainly financed its operations with short-term debt, its financing cost went up dramatically.

• Low demand – The above-mentioned contractionary monetary policy pushed the American economy into recession. Masseys renewed drive into North America (by 1978, it had introduced a new range of large, high-horsepower tractors and an improved baler line) unfortunately coincided with the slow down in US demand. The companys efforts to penetrate the North American market thus remained unsuccessful.

Specific problems:
• Debt level and structure – Masseys financing choices over the years brought with them many problems, which aggravated the already grim situation in the product markets. First, during its expansion in the 1970s, Massey levered itself immensely. Compared to its two main competitors, it systematically had the highest Total Debt/Capital ratio (in 1980: 80.85% compared to 53.56% for International Harvester and 40.28% for Deere & Company). While this might have been justified by the growth strategy, it turned out to be very damaging for the company

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Short-Term Debt And High Interest Rates. (June 8, 2021). Retrieved from https://www.freeessays.education/short-term-debt-and-high-interest-rates-essay/