Lightening Up On Heavy Equipment

There's a lot of dirt flying in the heavy-equipment industry. On Apr. 26, Tenneco announced it would sell 35% of its J.I. Case farm-and-construction equipment unit, a move analysts say could raise $500 million for the Houston-based conglomerate. A day later, Varity said it will sell its U.K.-based Massey-Ferguson to AGCO for $328 million. It seems to be the right time to sell: Both the farm and construction markets are booming in the U.S., and a recovery in Europe later this year could push industry profits sky high. Indeed, during the first quarter of 1994, Case posted operating income of $82 million, compared with a loss of $17 million the year before. And sales jumped 22%, to $1 billion. Case will spend $500 million through 1996 updating its product line. A restructuring plan that has closed plants and rejiggered Case's distribution network will add an additional $200 million to operating income by 1996. And the company, which long hascut prices to prop up market share, has discontinued the practice.

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