CNH to separate off- and on-highway businesses into two companies

CNH Industrial on Wall Street NYSE stock exchange Case Tetra

Case CE’s futuristic Tetra concept loader on display outside the New York Stock Exchange. Photo: Marcia Gruver Doyle

CNH Industrial, parent of Case Construction Equipment and New Holland, has announced a new five-year business plan, “Transform 2 Win” that will separate its off-highway assets (agriculture, construction and specialty assets) into a separate listed entity from its on-highway assets (commercial vehicles and powertrain).

CNH says the decision to separate its on- and off-highway segments follows a “deep portfolio review process” that took into account strategic, investor and synergy considerations. This review highlighted that the ‘On-Highway’ and ‘Off-Highway’ businesses have diverging regulatory and customer requirements and are impacted differently by the accelerating industry megatrends of digitalization, automation, low-/zero-emission propulsion and servitization says the company.

The new off-highway company, with 2018 revenues of $15.6 billion, will be predominantly an agriculture company, with agriculture representing 75 percent of its revenues, followed by construction at 19 percent of revenues. The agricultural brands, Case IH, New Holland Agriculture, and STEYR will “build on their market positions, further strengthened product line ups and improved distribution,” says CNH. Specialty vehicles, such as the Magirus firefighting and defense vehicles, make up 6 percent of revenues.

The company’s construction brands – Case Construction Equipment, New Holland Construction and ASTRA quarry trucks – will focus on “improving profitability, product range simplification and growing share in application specific segments,” says the company.

The on-highway company, with 2018 revenues of $13.1 billion, will include the Iveco, Iveco Bus and Heuliez Bus commercial vehicle brands (69 percent of vehicles) and the FPT Industrial powertrain business (31 percent of revenues). The spin-off of the on-highway company is expected to be completed in early 2021, subject to regulatory approvals.

CNH says Iveco brands’ market position and lineup will be “further strengthened with investments in product and technology upgrades.” FPT “will remain a key supplier to the off-highway business through a long-term supply agreement,” says the company.

“The bold plan will lead to the creation of two new global leaders in their respective fields,” says Suzanne Heywood, chairperson, CNH Industrial. Adds CEO Hubertus Mühlhäuser: “Benefiting from greater management focus, the two companies will accelerate their innovation, be nimbler in their strategic thinking and actively participate in industry consolidation.”

Other highlights of the 2020-2024 plan include:

  • Net sales projected to grow at a compound annual growth rate of 5 percent
  • Significant growth planned in annual product development investment for all segments, totaling $13 billion over the five years
  • Adjusted EBIT Margin of Industrial Activities to reach 8 percent by 2022 and 10 percent by 2024, with adjusted EBIT more than doubling from current levels
  • ROIC of Industrial Activities is projected to achieve 20 percent (a 600bps increase from 2018) and adjusted diluted EPS to grow from $0.86 (mid-point of 2019 guidance) to $2.00 by 2024