CNH Industrial Has Big Aspirations Following Merger
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July 15, 2013 Vol. 19, Issue 7 • Buyer for MacDon? • Polish Ag Booming • Co. Store Comeback? CNH Industrial Has Big Aspirations Following Merger The merger of CNH Global and its Strong Ag Position to earn a predominant share of its parent company, Turin, Italy-based Fiat With the combined sales of its returns from North American ag. Its Industrial S.p. A., goes beyond simply Case IH and New Holland branded CE business is basically only in North streamlining an unwieldy conglomer- equipment, CNH is clearly estab- America where, in order to compete ate. Post-merger, the newly formed lished the second largest manufac- successfully, they are heavily invested company would be the world’s third- turer of farm equipment in the world in distribution through the Nortrax largest capital-goods company, accord- with $15.7 billion in revenues for organization. Its components business ing to Zacks.com. “The successful year ended December 31, 2012. This is a good contributor to the bottom integration of both the businesses still places it more than a few steps line,” he says. would fortify the combined entity to behind number one Deere, which AGCO, on the other hand, “is a compete at the highest level in the reached $27.1 billion for fiscal year pure ag play and has deepened its capital-goods sector with adequate ended October 31, 2012. Nipping at commitment to this sector with the flexibility to pursue inorganic growth both their heels is AGCO Corp. with GSI acquisition in grain handling.” at opportune times.” $10 billion in ag machinery sales for Market Share. Based on what The merger is also likely to sow the year ended December 31, 2012. Ag Equipment Intelligence is hearing the seeds of a similar endeavor by In his assessment of CNH’s “lon- from green and red dealers, Deere serving as a “technical blueprint” for ger view” approach, Russell says, and Case IH are currently engaged the combination between Fiat and its “Overall, CNH Industrial has the scale in a knockdown, drag-out battle for Chrysler division in the U.S., accord- and breadth to provide resources and market share in North America, in ing to Zack’s. diversity for long-term sustainability,” some cases sacrificing profit margins “The prospectus for the new says Russell. for unit volume. With the continuing company does not make clear who “Deere is the global market lead- boom in big farm machinery — both CNH considers its number one or er in farm equipment and continues Continued on page 2 two capital goods competitors might be,” says George Russell, a former CNH Industrial Revenues by Segment CNH executive, who worked both (in millions U.S. $) ag and CE sides of the business, and 2012 2011 now executive partner with Currie Management Consultants. Ag & Construction Equipment (CNH) 20,972 18,152 “But the prospectus identifies Trucks & Commercial Vehicles (Iveco) 11,659 12,492 the targets as ‘U.S. capital goods FPT Industrial (Fiat Powertrain) 3,832 4,207 companies.’ We assume this means Elimination & Other (2,780) (3,121) Caterpillar with $66 billion in 2012 Total for Group 33,683 31,730 revenues and Deere & Co., which had revenues of $36.2 billion last Trading Profit/Loss by Segment (in millions U.S. $) year. Combining all of its 2012 reve- 2012 2011 nues, including farm and construction equipment, trucks and engines, CNH Ag & Construction Equipment (CNH) 2,030 1,506 Industrial approaches Deere’s level Trucks & Commercial Vehicles (Iveco) 609 647 with about $34 billion in revenues.” FPT Industrial (Fiat Powertrain) 184 140 A ranking global player compet- Elimination & Other (128) (85) ing in CE, trucks and engines is Volvo Total for Group 2,695 2,208 with $47 billion in revenues. Source: company reports The contents of this report represent our interpretation and analysis of information generally available to the public or released by responsible individuals in the subject companies, but is not guaranteed as to accuracy or completeness. It does not contain material provided to us in confidence by our clients. Individual companies reported on and analyzed by Lessiter Publications Inc., may be clients of this and other Lessiter Publications Inc. services. This information is not furnished in connection with a sale or offer to sell securities or in connection with the solicitation of an offer to buy securities. CNH Industrial Has Big Aspirations Following Merger...Continued from page 1 row-crop tractors and combines — Industrial is has a better spread of branded dealerships was also the two are attempting to further business activities globally. “With the acknowledged by Walker in that 2011 increase machine population in all exception of trucks in North America, interview. “We certainly are not going major ag regions in anticipation of a the new company has significant foot- to disrupt current business that’s out slowdown that will eventually impact prints for all products in all regions there with our dealers who happen the overall industry. and a more diverse product portfolio, to have dual brands in the same build- Jim Walker, vice president of Case which includes farm, construction, ing,” he said. “New Holland and Case IH North America, confirmed the truck, engines and powertrains. IH have distinct drivers in the market- push for increasing market share in Its business model of portfolio place, and there’s more product range an August 2011 interview with Ag management says that when one busi- differentiation every year between Equipment Intelligence. ness is down, another well perform- the brands. As we go forward, we At the time he said that Case IH ing business will continue to fund would like to see individuality of our would continue pushing its dealers dealers in pushing those products to focus on increasing their machine and those brands.” population along with market share. “Typically, greater “We’ll continue to emphasize market penetration is CE: Miles to Go the importance of building machine While CNH Industrial will con- population,” he said. “The more they achieved where each tinue to build on its strength in farm can get out there from the standpoint dealer sells the full line machinery, it has some distance to go of product range, the more they’ll put of products from only to get to the number one or two posi- themselves in a position to improve one of the brands...” tion in construction equipment. With absorption rate and to handle any $3.8 billion in revenues for 2012, downturn in new equipment sales.” CNH is among the bigger players, but Walker said building machine growth and development. So, for the has miles to go to get anywhere near population and market share go hand long term, dealers should expect that industry giant Caterpillar. in hand in strengthening a dealer’s CNH Industrial should be competi- According to Boston Consulting position in his sales area. tive in all segments whether their Group data, the heavy hitters in the “Machine population is the con- industry and market is up or down,” construction equipment business sistent buildup of machines year after says Russell. include Caterpillar, Komatsu, Terex, year, which increases a dealership’s Dual Branding. He also adds CNH, Deere & Co., Volvo Group, IR total penetration. Market share repre- that dealers can expect growing pres- (Bobcat), Hitachi, Liebherr, JCB, Sany sents a point in time during a defined sure to reduce the number of “dual- and Zoomlion. period. ”Market share is important branded” Case IH and New Holland Maybe the biggest question about because that’s how a dealer builds his dealerships. “The organization chang- the new company’s strategy comes accumulation of product and popula- es that occurred in 2005 when Sergio in its CE business and the long-term tion, he said. Marchionne arrived and created the source for excavator technology, says Overall, says Russell, CNH global brand presidents position will Russell. “The global agreement with continue in the new CNH Industrial Kobelco is winding down and CNH organization,” says Russell. Industrial will distribute directly to AEI Copyright Notice In its prospectus, the company Case and New Holland CE dealers Ag Equipment Intelligence is a says, “Consistent with its brand pro- in the Asia Pacific region instead of copyrighted publication of Lessiter motion program, CNH generally seeks through Kobelco. Kobelco technology Publications. Copying an entire issue to share with others, by any means, to have dealers sell a full product will continue to be used for excava- is illegal. Duplicating of individual range. Typically, greater market pene- tors built in CNH plants in Europe items for internal use is permitted tration is achieved where each dealer and North America, at least for the only with permission of the pub- sells the full line of products from near future in an arrangement similar lisher. Licensing agreements that only one of the brands [Case IH or to that of Deere and Hitachi in North allow distribution of Ag Equipment Intelligence to a specified number New Holland]…Exclusive, dedicated America,” he says. of readers are available by contact- dealers generally provide a higher Russell adds that Sumitomo is the ing Lessiter Publications at 262-782- level of market penetration.” supplier for Case heavy excavators 4480, ext. 408. CNH’s push to minimize dual- Continued on page 8 AG EQUIPMENT INTELLIGENCE is published monthly for U.S., Canada and Mexico print subscriptions are $349 the farm equipment industry by Lessiter Publications Inc., 225 per year. Save $50 by receiving Ag Equipment Intelligence Regency Ct., Suite 100, Brookfield, WI 53008-0624. © 2013 by each month via E-mail Internet access at only $299 per year. Lessiter Publications Inc. All rights reserved.