CNH Industrial announced this week that it will separate its "on-highway" (commercial vehicles and powertrain segments) from its "off-highway" assets (agriculture, construction and specialty segments) to create two listed entities, each of which, CNH says, will be world leaders in their business segments.
As part of its "Transform 2 Win" strategy, the division of its manufacturing entities is expected to be complete by 2021. CNH is seeking to reduce its operating costs and increase the efficiency of its assets by creating manufacturing powerhouses focused on each division's expertise.
The division of CNH's off-road and on-road units "follows the completion of a deep portfolio review process, taking into account, among other things, strategic, investor, and synergy considerations, CNH says it a release dated Sept. 3. "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," CNH says in its release.
"Servitization" is a newer term of art to describe manufacturers who produce equipment, for example, but who also serve their customers with a service and support system built around that product. Some of that service and support is sold as part of the package, others come with a fee charged per use or as a subscription.
The off-highway unit, with revenues of $15.6 billion in 2018, will become a mostly agricultural entity. Agriculture represented 75% of off-road revenue for CNH in 2018. The new entity also will include construction (19% of revenue) and what CNH categorizes as specialty vehicles (6% of revenue). Case IH, New Holland Agriculture and STEYR represent the heart of the new entity. CASE Construction Equipment and New Holland Construction, as well as ASTRA heavy-duty quarry trucks, will focus on improving profitability, product range simplification and growing share in their segments. Defense vehicles and Magirus firefighting will focus on their specific customer base.
In total, segments of the planned on-highway reported revenue of $13.1 billion in 2018.
"The bold plan will lead to the creation of two new global leaders in their respective fields," Suzanne Heywood, chairperson of CNH Industrial, said in the company's release.
"With our 'Transform 2 Win' strategy we are setting an exciting new direction for our company," said Hubertus Muhlhauser, CNH Industrial CEO. "By developing ambitious, yet achievable targets for each segment and reorganizing our structure to create two global leaders, all of our great businesses will be better able to realize their full potential ... "
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