CNH 2010-2014 Plan - Investor Relations Solutions

CNH
Harold Boyanovsky
Forward Looking Statement
This presentation includes “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this press
release, including statements regarding our competitive strengths, business strategy, future financial position,
operating results, budgets, projected costs and plans and objectives of management, are forward-looking
statements. These statements may include terminology such as “may,” “will,” “expect,” “could,” “should,”
“intend,” “estimate,” “anticipate,” “believe,” “outlook,” “continue,” “remain,” “on track,” “goal,” or similar
terminology.
Our outlook is predominantly based on our interpretation of what we consider key economic assumptions
and involves risks and uncertainties that could cause actual results to differ. Crop production and commodity
prices are strongly affected by weather and can fluctuate significantly. Housing starts and other construction
activity are sensitive to the availability of credit and to interest rates and government spending. Some of the
other significant factors which may impact our results include general economic and capital market conditions,
the cyclical nature of our business, customer buying patterns and preferences, foreign currency exchange rate
movements, our hedging practices and our customers’ access to credit, actions by rating agencies concerning
the ratings of our debt securities and asset backed securities and the ratings of Fiat S.p.A., risks related to our
relationship with Fiat S.p.A., political uncertainty and civil unrest or war in various areas of the world, pricing,
product initiatives and other actions taken by competitors, disruptions in production capacity, excess inventory
levels, the effect of changes in laws and regulations (including government subsidies and international trade
regulations), the results of legal proceedings, technological difficulties, results of our research and
development activities, changes in environmental laws, employee and labor relations, pension and health care
costs, relations with and the financial strength of dealers, the cost and availability of supplies from our
suppliers, raw material costs and availability, energy prices, real estate values, animal diseases, crop pests,
harvest yields, government farm programs and consumer confidence, housing starts and construction activity,
concerns related to modified organisms and fuel and fertilizer costs. Additionally, our achievement of the
anticipated benefits of our profit improvement initiatives depends upon, among other things, industry volumes
as well as our ability to effectively rationalize our operations and to execute our brand strategy. Further
information concerning factors that could significantly affect expected results is included in our Annual Report
on Form 20-F for the year ended December 31, 2009.
We can give no assurance that the expectations reflected in our forward-looking statements will prove to be
correct. Our actual results could differ materially from those anticipated in these forward-looking statements.
All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the
factors we disclose that could cause our actual results to differ materially from our expectations. We undertake
no obligation to update or revise publicly any forward-looking statements.
April 21, 2010
Fiat Investor Day
Net revenues ($bn)
(IAS/IFRS)
Trading profit ($mn)
Performance over last plan period
Trading margin
4.7%
2004
6.8%
2005
7.0%
8.4%
8.8%
3.3%
2006
2007
2008
2009
Net revenues ($bn)
Trading profit range
($mn)
6-10% operating
margin range
Trading margin range
~14.0
~16.0
~17.0
1,250-1,360
1,600-1,730
1,840-1,970
8.9-9.7%
10.0-10.8%
10.8-11.6%
Balocco Plan Targets (Jul 2004)
April 21, 2010
Fiat Investor Day
Lingotto Plan Targets (Nov 2006)
2
CNH – performance versus peer group
2005
Industrial Operating result
($mn)
CAT
John Deere
AGCO
Return On Industrial Sales (%)
Comparison in $US and US GAAP (Caterpillar machinery operations only as reported )
April 21, 2010
Fiat Investor Day
3
CNH – performance versus peer group
Industrial Operating result
($mn)
2009
John Deere
AGCO
CAT
Return On Industrial Sales (%)
Comparison in $US and US GAAP (Caterpillar machinery operations only as reported )
April 21, 2010
Fiat Investor Day
4
Net sales by business
Equipment operations
2006
Net Sales: $12.1bn
2008
Net Sales: $17.4bn
Net Sales: $12.8bn
26%
$4.5
$4.3
2009
$2,1
35%
17%
$12.9
$7.8
65%
Agricultural Equipment (AG)
74%
$10.7
83%
Construction Equipment (CE)
AG business continued to perform relatively well during the
crisis, as CE market declined ~50%
(IAS/IFRS)
April 21, 2010
Fiat Investor Day
5
Casting an eye over past 4 years
Key accomplishments to date
What we did well...
• Successful unbundling of brands in both AG & CE
• Significant improvement in product quality levels
• Created effective global distribution network
• Covered significant gaps in product offerings
...and not so well
• Did not achieve cost competitiveness in <100hp
tractors
• Reduce complexity of product offerings
April 21, 2010
Fiat Investor Day
6
A global leading player
Presence by region
AG
Combines
CE
40+hp
tractors
Light
Heavy
NA
Top 2
Top 2
Top 5
Top 10
EUR
Top 2
Leader
Top 20
Top 10
Leader
Top 2
Top 2
Top 3
Top 3
Top 5
LA
RoW
Leading positions in AG, top 5 in CE
April 21, 2010
Fiat Investor Day
7
2010-14 plan – the 4 pillars
Refine and strengthen quality
of product portfolio
 Close few remaining gaps in AG
 Improve cost positioning of key products in AG
 Rejuvenate key offerings in CE
Create efficient CE
organization
 Merged, streamlined organization
representing both New Holland & Case
 Continue to build brand focus
 Deploy & implement
modular design systems
Improve margin
performance
Optimize industrial system
Position business in
development areas
 World Class Manufacturing
 Group purchasing
 CIS growth with new Kamaz JV in Russia
 Maximum utilization of FPT Powertrain
 Leverage strength in India and China
 Insourcing of key components
 Improve BCC sourced parts and production
April 21, 2010
Fiat Investor Day
8
AG demand – Key drivers
(US$ per metric ton)
Global Commodity Prices
• AG commodity pricing forecasted to remain at historical high levels
• US Net Farm Income forecast to remain above 10-year average
• European Farm Income to remain flat
• Latin America & RoW to return to pre-crisis level
Source: IHS Global Insight - March 2010
April 21, 2010
Fiat Investor Day
9
Agricultural equipment industry outlook through 2014
*
* All classes of combines (substantial growth in Class 7+)
Tractors
April 21, 2010
Combines (k Units)
Fiat Investor Day
Source: CNH, IHS Global Insight
CNH Internal Regions Definition
10
AG – North American market development
A structural shift to higher productivity equipment
High horsepower tractors
140+ Tractors N.A. & 4WD
Units
 Off-peaks but at consistently
high levels
25.000
20.000
15.000
10.000
5.000
Combines
0
2004
 Off-peaks but at consistently
high levels
2006
2008
140+
2010E
2012E
2014E
4WD
Combines N.A. Class 7+
Crop Production Equipment
 Emphasis on productivity
driving
• Larger equipment
13.000
12.000
11.000
10.000
9.000
8.000
7.000
6.000
5.000
4.000
% class 7+
Units
 Class 7 and above to grow
due to higher productivity
market requirements
2004
2006
2008
Class 7+
• Higher precision
2010E
2012E
2014E
TIV
Source: CNH, IHS Global Insight - CNH Internal Regions Definition
April 21, 2010
Fiat Investor Day
11
AG – Market development in Europe
 European Ag markets to see limited
(US$ per metric ton)
support on biofuel crops in short-term
before mid term rebound
 Dairy and livestock starting to see slight
improvement in 2010 on stable
commodities
• Higher demand for feed grains
• Improved outlook for hay & forage
K Units
equipment
 European Union 2020 mandate for 10%
biofuel will increase short-term demand
for corn and wheat
 Farm credit conditions expected to
improve over the plan
April 21, 2010
Fiat Investor Day
12
AG – Market development in Latin America
Sugar production forecast
Strengthened CNH presence
 Localized production
 Both AG brands positioned as full liners
 Growth in high capacity tractors,
combines and row crop equipment
 Product to support government
sponsored programs
12.000
0
10.000
0
30%
8.000
25%
0
6.000
20%
0
15%
4.000
0
10%
2.000
0
5%
0%
-
2004
April 21, 2010
Fiat Investor Day
2006
2008
2010
2012E
2014E
13
% class 7+
(US$ per metric ton)
Soybean price forecast
K Units
LAR Combine Industry Class 7+
Brazil: new state of the art plant in Sorocaba
R$1 billion investment
 AG & CE production facility,
including parts
 8,000 units per year
World Class Manufacturing
 Laser cutting up to 25mm
 Robotic welding
 State of the art paint shop
World Class Logistics
 Largest parts distribution center in
Latin America
April 21, 2010
Fiat Investor Day
14
AG – Market development in RoW
 India: after 2009 drought, world‟s largest tractor
market to rebound 25% over the course of the
plan
K Units
 CIS (Russia): AG market for large equipment
segments to rise with easing of domestic credit
 Africa Middle East AG markets picking up in 2010
and forecast to return to 2006 levels by 20122013
 China: increased demand for soy and livestock
consumption. Steady demand for small tractors
and increasing trend for larger equipment
April 21, 2010
Fiat Investor Day
15
CE demand – Key drivers
Global GDP trends
2008
2009
2010E
2011E
2012E
2013E
2014E
World
1.7%
-2.1%
3.0%
3.2%
3.7%
3.6%
3.6%
North America
0.4%
-2.4%
2.9%
2.9%
3.7%
3.2%
2.7%
Europe
0.7%
-4.1%
1.1%
1.7%
2.1%
2.3%
2.5%
CIS
5.2%
-7.4%
2.7%
4.0%
3.9%
4.0%
4.0%
Asia (ex Japan)
5.8%
4.4%
7.1%
6.4%
6.6%
6.7%
6.7%
Latin America
5.1%
-0.6%
3.5%
4.7%
4.7%
4.4%
4.3%
Gradual return to pre-crisis level
 Asia to remain strong
 Latin America to restart growth phase in 2010
 CIS growth to return in 2011
April 21, 2010
Fiat Investor Day
16
CE industry outlook through 2014
Heavy Eq.
April 21, 2010
Light Eq.
(k Units)
Source: CNH, IHS Global Insight - CNH Internal Regions Definition
Fiat Investor Day
17
CE – Market development in North America
Global GDP trends
World
2008
1.7%
2009
-2.1%
2010E
3.0%
2011E
3.2%
2012E
3.7%
2013E
3.6%
2014E
3.6%
North America
0.4%
-2.4%
2.9%
2.9%
3.7%
3.2%
2.7%
Gradual return to more normal level

Positive signs from the housing market with early 2010 showing sporadic increase
•

March 2010 housing starts +20% yoy
North American GDP growth above the historic threshold for new equipment sales of
2.5%
•
2010 forecast to reverse recession
US Nonresidential Construction Spending
US Housing Starts
$US in billions
In millions of Units
Source: IHS Global Insight March 2010, US Census Bureau April 2010
April 21, 2010
Fiat Investor Day
18
CE – Market development in Europe
Global GDP trends
World
2008
1.7%
2009
-2.1%
2010E
3.0%
2011E
3.2%
2012E
3.7%
2013E
3.6%
2014E
3.6%
Europe
0.7%
-4.1%
1.1%
1.7%
2.1%
2.3%
2.5%
Soft market expected to continue
 Construction environment to remain
sluggish, but demand to improve in
2011 on fleet and stock
maintenance
 CE market expected down for full
year 2010, yet at a more stable
rate than 2009
Source: CNH, IHS Global Insight - CNH Internal Regions Definition
April 21, 2010
Fiat Investor Day
Heavy Eq.
Light Eq.
(k Units)
19
CE – Market development in Latin America
GDP forecast
2008
Key objectives to 2014
2009 2010E 2011E 2012E 2013E 2014E
Brazil
5.1%
-0.4%
4.7%
5.4%
5.3%
4.7%
4.5%
Argentina
6.8%
-0.3%
1.8%
3.4%
4.0%
4.0%
4.0%
Major infrastructure spending in Brazil
US$300–600bn through 2015
 Hydroelectric mills
 Railways and high speed trains
 Ports
 Refinery and petrochemical complex
Strengthen CNH leadership
 Actively participating in market demand
growth
 Strengthen localization
Focus on high-growth countries
 Chile
 Colombia
 Peru
Strengthen distribution network
 World Cup and Olympic Games
April 21, 2010
Fiat Investor Day
20
CE – Market development in RoW
Global GDP trends
World
2008
1.7%
2009
-2.1%
2010E
3.0%
2011E
3.2%
2012E
3.7%
2013E
3.6%
2014E
3.6%
CIS
5.2%
-7.4%
2.7%
4.0%
3.9%
4.0%
4.0%
Asia less Japan
5.8%
4.4%
7.1%
6.4%
6.6%
6.7%
6.7%
Middle East
5.1%
-0.2%
4.0%
5.5%
5.2%
4.8%
4.6%
North Africa
5.0%
3.5%
4.3%
4.5%
4.6%
4.5%
4.4%
Gradual return to pre-crisis level
CE Industry
commodity
China
 Growth in China driven by commodity and
infrastructure sectors
(k Units)
160
 CIS growth to return strong in 2011 with the
improvements in the credit sector
40
140
35
120
30
100
25
80
20
60
15
40
10
20
5
0
 Middle East and Africa growth on continued local
development and energy sector
Other Countries
 Asia to remain strong ion international trading
'06 '07 '08 '09 '10F '11E'12E'13E'14E
Africa
Middle East
Russia
China
Source: CNH, IHS Global Insight - CNH Internal Regions Definition
April 21, 2010
Fiat Investor Day
21
AG key product interventions over plan period
Productivity
Tractor
 More power (>600hp)
Performance
Powertrain
 CVT across range
 Optimized powertrains
Combines
Engine
 More power up to Class 9+
 More fuel efficient
 High efficiency threshing &
 Tier IV – SCR on high output
cleaning
Crop production
 Wider and larger
 Higher speed with advanced
control
Hay forage
 Interventions to improve
productivity
 Expansion of product range
April 21, 2010
engines
Threshing Technology
 Multi-crop capability
Modular design
Design yielding
substantial simplification
and reduction in cost
 55% reduction in cab
models
 Component
rationalization
 Efficient development
 CNH displays and
controllers adapted to
competitive vehicles
 Improved grain quality
Precision Farming
Technology
 Powertrain
standardization
driven by Tier IV
 Intelligent control
 Machine & farm info systems
Fiat Investor Day
22
AG product development plan
Tractors
Segment
2010
2011
2012
2013
2014
4WD
220+ hp
100-220 hp
55-115 hp
15-55 hp
New models
10
Upgrade
6
Repowering
4
April 21, 2010
PRODUCT ACTIONS
New model
Fiat Investor Day
Major upgrade
Repowering
23
AG product development plan
Harvesting
Segment
2010
2011
2012
2013
2014
Combine
Class 7,8,9
Combine
Class 4,5,6
Combine
Headers
Forage
Harvester
Grape
Harvester
New models
Upgrade
Repowering
April 21, 2010
8
10
3
PRODUCT ACTIONS
New model
Fiat Investor Day
Major upgrade
Repowering
24
CE product development plan
Light equipment + excavators
Platforms
2010
2011
2012
2013
2014
Tractor
Loader
Backhoe
Skid Steer
Loader
Crawler
Excavator
Wheel
Excavator
New models
4
Upgrade
2
Repowering
April 21, 2010
12
PRODUCT ACTIONS
New model
Fiat Investor Day
Major upgrade
Repowering
25
CE product development plan
Heavy equipment
Platforms
2010
2011
2012
2013
2014
Wheel
Loader
Dozer
Grader
Compactor
New models
4
Repowering
11
April 21, 2010
PRODUCT ACTIONS
New model
Fiat Investor Day
Major upgrade
Repowering
26
CE re-organization actions
2009
2010
2009
• Streamlined CE brand management and
merged to single organization
• CE gross savings ~$15mn
• $32mn annualized
• Salaried & contract headcount cut 24%
2010-2011
• Plan completion actions to add $55mn
annualized cost reductions
• Full plan: $87mn of which $40mn is
structural
• Areas of concentration: complete
rationalization programs of industrial
footprint
2014
2011 cost reduction target
by nature
4%
26%
48%
22%
2009 revenue basis
Industrial direct
Industrial support
Mfg footprint
Other
US GAAP, constant , non currency adjusted
April 21, 2010
Fiat Investor Day
27
AG & CE business JV and manufacturing locations
Uzbekistan
Russia
Tashkent
Tractors, Planters
CNH 51%, Others 49%
Retail stores: 13
∗ (Industrial)
Naberezhnye
Tractors, Combine, CE
CNH 50%, Kamaz 50%
Sapporo
Tractors
CNH 50%,
Shibamoto 50%
Retail stores: 25
Russia (Commercial)
Moscow
Tractors, Combine, CE
CNH 51%, Kamaz 49%
China
Shanghai
Tractors,
Turkey∗
Ankara
Tractors
CNH 37.5%
37.5% Koç,
Public float 25%
Dealers: 110
Japan∗
CNH 60%;
40% SAIC
Dealers: 145
Pakistan*
Dera Ghazi Khan
Tractors
CNH 43.3%,
50.1% Al Ghazi,
public float 6.6%
Dealers: 60
India
Harbing
Pithampur
CNH: 100%
Backhoes &
Tractors
compactor eqpt. 100% CNH
CNH: 50%
L&T Limited: 50%
Dealers: 350
India*
New Delhi
Tractors
CNH: 100%
Retail store: 76
Dealers: 51
CNH Commercial and Manufacturing
JV Commercial and Manufacturing
∗
JV Commercial
JV consolidated with equity method
April 21, 2010
Fiat Investor Day
28
(k Units)
RoW positioning – Russia & CIS States
AG
New Venture With KAMAZ
 Localized production late 2010
• Tractors, combines, equipment
 Leverage Kamaz distribution
 Utilize local supplier base
Build on existing partnerships
 More than 15 years as “partner of
reference” for Turkmenistan government
(k Units)
 Industrial tractor presence via JV in
Uzbekistan
CE
Build on KAMAZ JV
 Tractor loader backhoes and other locally
made CE equipment
April 21, 2010
Fiat Investor Day
29
RoW positioning – India & China
AG: Build on industrial presence in world’s
largest tractor market
 Leverage production facilities: +30K capacity
 25% production for export
 Expand into balers, cane and cotton harvesters and
rice farming equipment
 Global sourcing location
•
•
k
(k Units)
India
410
(k units)
India Tractors Industry
390
370
350
330
310
for drivelines and engines
AG and CE axles
290
270
CE: L&T joint venture
 Production of tractor loader backhoes and
compactor equipment in newly refurbished plant
250
2006
AG: Large tractors market for low-medium hp
 JV with SAIC (SNH): tractors 50-130hp
 Wholly owned subsidiary in Harbin
• tractors > 140hp
 Import of higher hp & higher productivity equipment
 Expand exports
(k Units)
China
2008
2010E
2012E
2014E
(k units)
CE: Market continues positive trend
 Step-up sales financial support via local banks
 Grow Case brand positioning through network
expansion
April 21, 2010
Fiat Investor Day
30
Fiat Group Purchasing - CNH
Material Savings 2010-2014 – BCC sourcing plan
2010E
2014E
$4.3bn APV
$6.7bn APV
APV
from
BCC
$0.4bn
or 9%





Glass:
Machined Castings:
Gears and Shafts:
Machined parts:
Utility platform :
APV
from
BCC
$1bn
or 15%
China
China
India
Mexico
Turkey/India
$8 mln ongoing
$50 mln by 2011
$40 mln by 2011
$35 mln by 2012
$35 mln by 2012
15%
15%
15%
12%
10%
saving
saving
saving
saving
saving
Additional $300-400 opportunity by 2014 with increase in-sourcing of global components
April 21, 2010
Fiat Investor Day
31
Insourcing of key components
Examples
Corn Head
Pickup Head
Insourcing of Combine Headers yielding cost reduction of 25%
Auger Head
Draper
Head
April 21, 2010
Fiat Investor Day
32
MidRange tractors
New platform 55-115hp
T4000 - JxC
9000MT - CS
T5000 - JxU
TD5000 - Jx
…converging to 1 platform
Light
Medium
Heavy
55-75hp
75-105hp
95-115hp
Modular design and components standardization yielding 20% savings
Vehicle
Drivetrain
Engine
10%
8%
2%
...plus...
•
•
•
•
April 21, 2010
new CVT
new high capacity hydraulics system
new engine & torque output
better ergonomy
Fiat Investor Day
33
CNH Financial Services
CNH Capital Managed Portfolio - $17.3bn @ 2009 year-end
Originations and Portfolio
Present in 17 Countries
Retail originations growing in line with current
industrial sales forecast
EUR
$4.1B
NAR
$9.5B
Retail originations $bn
7,8
2,6
LAR
$2.6B
ANZ
$1.1B
8.0
6.8
6.3
2,8
2,4
2,9
3,9
3,9
4,1
3,1
5,2
4,9
2007
2008
6.9
Partnering
3,1
3,2
3,4
4,2
4,5
4,7
RoW Originations
Average Managed Portfolio
Managed Portfolio $bn
Global Portfolio Distribution:
18.8
17.1
 $12.4bn Retail Portfolio or 71%
 $4.9bn Wholesale Portfolio or 29%
5,5
Key objectives by 2014:
 Return on Equity: 16% (vs. 10% in „09)
 Return on Assets: 1.9% (vs. 1.2% in „09)
 Cost of Risk: 0.6% (vs. 1.2% in ‟09)
5,9
17.5
5,4
Fiat Investor Day
18.2
16.4
17
17.4
17.8
5,1
4,9
5,0
5,1
5,3
11,3
12,2
12,4
12,7
12,9
11,6
12,9
12,1
2007
2008
2009 2012E 2011E 2012E 2013E 2014E
Retail and Leasing
April 21, 2010
8.1
2009 2010E 2011E 2012E 2013E 2014E
NA Originations
Standalone
7.7
7.3
Wholesale
34
Revenue growth during plan period
2009-2014
AG
Europe
30%
North America
15%
Latin America
65%
Rest of World
60%
Worldwide
-10%
30%
0%
10%
20%
30%
40%
50%
60%
70%
CE
Europe
180%
North America
140%
Latin America
15%
Rest of World
125%
Worldwide
115%
0%
25%
50%
75%
100%
125%
150%
175%
200%
Note: 2010-2014 revenues were calculated on 2010 based FX rates to the USD
April 21, 2010
Fiat Investor Day
35
Industrial Capex/Depreciation ratio
April 21, 2010
Fiat Investor Day
36
2010-2014 Financials targets
$USbn (IFRS)
19.9
18.5
14.1
April 21, 2010
14.7
15.9
17.0
Fiat Investor Day
37
2014 plan is our route to double-digit profitability
Strong macro and industry fundamentals
 Demand growth for agricultural commodities
 Improving outlook for construction in mature markets and strong growth
elsewhere
Better product positioning
 Close competitive gaps
 Leverage strengths in high horsepower AG
International opportunities
 Manufacturing localization for profitable growth
Improved cost structure
 Synergies with Fiat Group in powertrain technologies and purchase aggregation
 Streamlined product line and modular components
April 21, 2010
Fiat Investor Day
38
Appendix
April 21, 2010
Fiat Investor Day
39
2010-2014 Financials targets
€ bn (IFRS)
15.3
14.2
11.3
12.2
13.1
10.1
April 21, 2010
Fiat Investor Day
40
2010-2014 Financials targets
Equipment operations
$USbn (USGAAP)
11.5%
9.4%
7.9%
8.6%
6.1%
10.0%
10.7%
9.2%
7.1%
5.7%
2.9%
12.8
13.4
2.1
2.6
3.5
3.1
10.7
10.8
11.6
2009
2010E
2011E
AG revenues
April 21, 2010
14.7
CE revenues
15.8
17.0
4.5
4.0
12.3
13.0
2012E
2013E
High-end operating profit margin
Fiat Investor Day
18.4
13.9
2014E
Low-end operating profit m argin
41