Morningstar | CNHI Expands Margins Despite Political and Economic Uncertainties
CNH Industrial is an agglomeration of businesses that formally coalesced in 2013, when Fiat combined its commercial vehicle and powertrain businesses with its construction and agriculture companies. While this combination is relatively recent, the earliest foundations of the business date back to Cyrus McCormick’s invention of the mechanical reaper, for which he was granted a patent in 1834. The business that developed from McCormick’s endeavors ultimately became part of CNH’s Case IH brand.CNH in its current incarnation comprises four main segments: agricultural equipment, construction equipment, commercial vehicles, and powertrain. These generate approximately 39%, 10%, 36%, and 15%, respectively, of industrial operations revenue. CNH also has a strong financial arm that generates approximately $1.9 billion, or 6%, of overall firm revenue. Of CNH’s segments, the agricultural equipment division has the highest profile and is the most profitable. It maintains a market-leading position in Europe and is second to Deere in North America. It comprises three brands: Case IH, New Holland, and Steyr. Case and New Holland make full lines of agricultural equipment, whereas Steyr is principally a tractor manufacturer focused on Europe. Each brand appeals to a different segment of the farming market, with New Holland slightly more popular among livestock farmers.The commercial vehicle segment makes a wide range of equipment, including trucks (Iveco), buses (Iveco/Heuliez Bus), fire equipment (Magirus), and military vehicles (Iveco Defence). Commercial vehicles are sold globally, excluding North America. In some limited instances, Iveco Defence has won contracts with the U.S. military.The powertrain business (FPT, or Fiat Powertrain Technologies) makes a range of engines, axles, and transmissions. These are used in a variety of applications for on-road, off-road, marine, and power generation. Approximately 50% of its sales are intersegmental.The construction equipment segment manufactures a full product line. However, it trails industry leaders, such as Caterpillar, in the range of its offerings, geographic coverage of its dealers, and profitability.CNH Industrial is a holding company. Through its subsidiaries, Co. is engaged in the design, production, marketing, sale and financing of agricultural and construction equipment, trucks, commercial vehicles, buses and specialty vehicles for firefighting, defense and other uses, as well as engines, transmissions and axles for those vehicles and engines for marine and power generation applications. Co. divides its business activities into three operating segments: Agricultural Equipment, Construction Equipment, Commercial Vehicles, Powertrain, and Financial Services.
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