CNH Industrial's construction business will narrow its product offering and work to strengthen its dealerships in North America as part of a five-year strategy designed to grow construction sales from $3 billion to $4.6 billion and “triple our margins,” according to Carl Gustaf Goransson, CNH president construction.
Speaking to investors, Goransson said the bulk of the CNH construction business is in North America, where they have a strong brand: Case Construction Equipment.
Coupled with producing these results, he said, is a focus on becoming a “top 5 player” in its key product segments: compact and service, general construction, and road building and site prep.
Noting the company’s “strong position” in compact and service equipment, which includes backhoe loaders, skid steers, CTLs, and mini excavators, Goransson said the general construction segment—excavators and wheel loaders—has seen lagging margins, which he attributed to the provider agreement CNH has with Sumitomo on the excavator side. Road building products include dozers, motor graders, and compactors.
In what he called the 80/20 initiative, Goransson said the company will reduce the number of equipment SKUs. According to a spokesperson at Case, this is not “model elimination as much as it is variation elimination. There are not necessarily products or product lines going away, simply the ordering variation. Also important to know this only affects products manufactured in North America, and not what's available in North America, i.e., that number is specific to products manufactured in Wichita, Fargo, and Burlington.”
Goransson also addressed the CNH construction distribution network, saying, “construction equipment is a strong complement to agriculture, and we will build on these synergies. Today, we have 400 dual dealers.” He said the two segments share 15 to 20 percent parts commonality.
“Right now, 100 of our 500 [construction] dealers worldwide represent 75 percent of the revenue we have. We will drive consolidation through the dealer distribution network,” he said, citing a 25 percent reduction by 2024 in the number of dealers in North America and Europe.
“Dealer management and profitability is a key priority for us,” he said. “We want clients to have a unique but yet highly brand-distinctive experience. We will inspire our dealers to aim for the highest standards. Our dealers are essential to our success.”
He detailed five actions that the company has implemented: Network consolidation will provide coverage, dealer management will ensure conversion to sales, dealer performance will increase profitability, dealer standards will drive consistency, and dealer engagement will ensure alignment.
“We are aware of this task, and it is enormous, and it will take time,” he said.
CNH Construction will also focus on its digital solutions, aiming to connect 100 percent of its heavy equipment by 2024.
“Fourteen thousand units are connected today, delivering good insights for us on how they’re operating, what they can do, and how they perform,” he said. “We intend to grow this number to 100,000 units.
“Our connected solutions will help increase value, uptime, productivity, and ultimately customer satisfaction,” he said. “We’re also improving our fleet-management interface. For instance, proactive service solutions, driven by dedicated control rooms in North America and Europe.”
He said the company’s target is 95-percent uptime and 20 percent savings on total cost of ownership.
Source: CNH Industrial