HISTORY AND EVOLUTION OF THE YANMAR GRAY MARKET
This is an account of the history and present state of the Yanmar grey market in the United States to date. This is my perspective only, and any arguable points from, say…Kubota, or Yanmar, are theirs to post on their web sites. This is my story.
The industrialization of agriculture in Japan occurred during the mid 70s to mid 80s, with extremely large numbers of compact agricultural tractors from several major manufacturers entering the local Japanese market. As time evolved, these machines began to appear on the used goods market in Japan, and eventually export markets began to emerge.
The grey market in the United States began primarily with Kubota product in the early 1990s. Similar models to US marketed Kubota tractors existed in Japan, and with and existing parts supply network in the US and favorable market conditions, successful import and resale of Japanese models grew steadily for several years. Backlash from the established US Kubota dealer network, and potential product liability exposure led Kubota to pursue an aggressive campaign against these machines, and the first ever ITC injunction against used durable goods was successfully affected.
As the importation of Kubota was coming to a halt, Yanmar manufactured tractors from Japan, (which also represented a significant market share of the Japanese agricultural market, similar to Kubota) became the product of choice for the same process for several reasons. Yanmar had entered the US market with models derived from the earlier Japanese models (1975-1982) and maintained that presence from 1975 until 1991. Excellent parts compatibility remained through OEM Yanmar dealers that continued to supply repair parts for the domestic machines.
At the time (mid 1990s), Yanmar knew these machines were coming into the US market, and they openly allowed their parts to be sold directly to dealers and importers of the grey market goods. Initially, Lowes Tractor (2372 W. St. Rd. 46, Greensburg, IN) had cornered the market as the sole outlet and source of crossover data for grey market Yanmar parts. All parts inquires submitted to the Yanmar parts department in Buffalo Grove, IL were referred to Lowes. As the market continued to grow, Yanmar acquiesced to other inquiries for dealerships. Fredricks Equipment was one of those dealers. I had direct contact with Yanmar’s general council around 1998. I was told once my volume of parts from Lowe’s reached $10,000 annually; they would allow me to become a dealer. True to their word, I contacted them around 1999 and they forwarded my dealer agreement. This became common with many importers and dealers around the US, and Yanmar expanded their parts department in Buffalo Grove, IL to accommodate the surging parts demand. Things were moving along fine. Yanmar sold parts to “authorized dealers” who installed those parts on grey market Yanmar tractors and supplied them to US consumers. The general opinion of the time was that if Yanmar only sold parts, and did not assist in cross referencing for application to the Greys, liability exposure was mitigated. That changed with the Smith Case.
The Smith Case was a wrongful death case in Madison Co, AL, where a Grey Market Yanmar 2210D with Bushog brand loader sold by Maynard Equipment in Moontown, AL overturned in a ditch and suffocated a Mr. Smith. Yanmar was sued, but was released on summary judgment, which was remanded on appeal to the Alabama Supreme Court, which held that due to discovery in which Yanmar knew their parts were being supplied to the grey market, Yanmar was culpable and thatchanged everything. From that point, Yanmar disavowed the grey market, and threatened to terminate “authorized dealers” who dealt in grey market machines. For all dealers east of the Mississippi, Yanmar employed Martin Diesel to distribute their parts, and forced them to employ restrictive filters to add layers of protection against parts going toward, or at least knowledge of parts going toward grey market machines. The writing was on the wall. From then on, injuries on grey market Yanmars were an exposure problem for Yanmar, and there were tens of thousands of machines already in the field. I (Fredricks Equipment) anticipated that my relationship with Yanmar was short lived, and began aggressively developing aftermarket parts to support the tractors we were refurbishing and selling. Further, as the market continued to grow, we saw an emerging opportunity for safety devices to retrofit grey market machines to US standards of practice in regard to safety. I contacted Custom Products of Litchfield, manufacturers of ROPS systems for a variety of OEMs (including some of the US Market Yanmars) and they agreed to work with us to develop ROPS kits for the models I supported.
As expected, Yanmar terminated our parts agreement. The next step was to feel out the grey market and develop a strategy for shutting it down. Because Yanmar had no similar product in the US at the time (2004), the ITC was not viable. Yanmar chose to target 4 businesses in Georgia and filed suit on grounds of IP infringement. One of those named was Albritton Tractor, who was a customer of mine. I offered to support his defense, and where Yanmar obtained quick settlements from the other 3 defendants, Steve Albrittion chose to fight. We employed Mr. Lloyd Walker Jr, who assisted his father, Lloyd Walker, Sr, in the Kubota ITC case. Discovery began, and we went to mediation. While not named in the suit, I was allowed to attend, and we discussed the issues.
At the base of the problem was product liability exposure (from the Smith case). It was pointed out that regardless of efforts at play, exposure existed in the form of some 50 to 100,000 grey market machines already in the field, and stopping the flow, if possible, would not stop the legal bleed. I informed Yanmar of my emerging ROPS program, and a confidential (at the time) agreement was penned and signed between us and Yanmar to continue the development of our safety program, in exchange for assurances of no legal action moving forward against my product. I proceeded in due diligence and completed the safety program as agreed, making it available to all US importers, dealers, and end users as requested. Beyond the agreement, which still remained confidential, I participated in the development of the Used Tractor Dealer Association (UTDA), under council of Mr. Walker, in an effort to offer structure to the market and encourage ALL importers to participate in an adequate safety retrofit program to address all of Yanmar’s safety issues. While ALL machines produced by Fredricks Equipment met those standards, and many of our dealers joined, the program did not gain full market penetration, and many importers and dealers chose to continue to import without the use of safety devices, and the injuries, and related litigation, continued.
In 2012, Yanmar sued over 20 dealers and importers individually. Many acquiesced and provided quick settlement by dropping out of the grey market Yanmar tractor trade. Two of them were customers of mine, Spalding Tractor, and Charles Motors (dba Georgia Tractor Co.). Both were completely clean in regard to product sales within the scope of my 2005 agreement, were UTDA members offering only retrofitted tractors supplied wholly by Fredricks Equipment, and by my view of the way things were, should never have been considered a target for Yanmar to mess with. A third dealer Tony Mills, was later sued, and we added him into the existing litigation. Essentially, it was on…
Yanmar had broken their promise to me, or at least I felt they did. Granted, they changed general council from 2005 to 2012, and perhaps the new guy just didn’t feel that the exchange between me and his predecessor was all that I felt it was, but they went after 3 of my guys, and left me out of it (so the agreement wasn’t completely ignored), and they had a continuing, very real issue.
Litigation was coming at them over and over; and, at least in specific venues, could potentially continue. It was a real problem demanding a real solution. We had it, but we couldn’t get the traction we needed with the competition thumbing their noses as the safety issue. Yanmar had a complaint through intellectual property law, that could potentially win under ideal circumstances, but 13 years of history, parts sales, “the agreement”, etc. put a big question mark on the complete success of that effort, and a loss of any part of the IP argument would be fatal to future suppression of any grey market Yanmar endeavor. Further, with so much time passed, units in the field were approaching, if not exceeding, 100,000 units and the vast majority of them were not equipped with ROPS or other safety devices recognized by both us and Yanmar as essential at this point.
So here we are. We have not vetted the question of trademark in regard to Yanmar grey market. Instead, we allowed ourselves to be enjoined with our 3 dealers, and have effectively tabled the discussion by entering into “Agreement 2.0”.
At present, we are the ONLY importer of grey market Yanmar tractors from Japan with license to use the trademark. Others could follow our path, but it took us 15 years to get here. With a comprehensive aftermarket parts program, a safety retrofit program, and an established history and knowledge base, we expect to continue to be the sole source for refurbished Yanmar branded tractors from Japan, and I anticipate that we will finally be able to affect positive change in regard to the issue of safety enhancement of these machines. As a result, we have disbanded the UTDA, and have implemented our own in-house safety certification, which is our mark of compliance with both our own standards, and “Agreement 2.0”.
Stay tuned as I go to bat with Yanmar for a subsidized retrofit program for the myriad of what they like to call “affected” units in service in the US that desperately need our process applied. In the meantime, if you have a machine that does not have a UTDA or FII certification decal…PLEASE call us, we will be glad to offer our services.