19 November 1999

Merger made official

By Andy Collings

ITS official – New Holland and Case are now a single entity and will be known as CNH. Announced last weekend in Bologna, Italy, the new company will be led by Jean-Pierre Rosso who previously headed the Case organisation, with New Hollands Umberto Quadrino taking on the roll of co-chairman.

Mr Rosso says that with the coming together of the two companies he has identified opportunities to realise $400m-$500m in annual savings.

"We have targeted four areas – purchasing and logistics, research and development, general administration and industrial restructuring," he says.

On the purchasing front, economies of scale is expected to reduce the annual bill by $100m – 2% of total purchases. A further $25m will be saved through co-ordination of global logistic activities.

Combining research and development – shared technology across product lines is expected to save $70m – 20% of the current combined total.

Mr Rosso adds CNH expects $150m to be saved from selling, general and administrative expenses. The companies, he says, will maintain separate distribution and selling networks, but he concedes there will be opportunities to reduce costs by cross-selling some product lines.

On the all-important manufacturing scene, CNH intends to save $125m through a restructuring of the Case and New Holland industrial organisations.

At present these amount to 42 major production facilities. Some will be sold off to comply with agreements insisted upon by the Euro-pean Commission and US Depart-ment of Justice, for example Case Doncaster and Fermec Manchester.

But there will be more, says Mr Rosso. "Other plants will be rationalised as the company seeks to reduce its overall manufacturing organisation in a manner that enables CNH to efficiently supply customers with products," he says.

CNH now considers itself to be the number one manufacturer of agricultural tractors and combines in the world, and the third largest maker of construction equipment. It is also one of the worlds top ten equipment finance companies.

With its headquarters in Racine, US, CNH sells its products in 160 markets through a network of 10,000 dealers and distributors.

"We are committed to a multiple brand," says Mr Rosso. "CNH will combine multiple functional operations on a global basis, commercial and sales organisations and distribution networks will remain dedicated to specific brands."

So, there we have it. A $12bn company has been formed. Its formation will inevitably create changes – but, if the companys strategy is maintained, there will still be red and blue tractors. &#42

New Holland and Case:Market share by product type (%)

Europe North America

New New

Holland* Case Combined Holland Case Combined

Agricultural Tractors 17 8 25 22 18 40

Backhoe Loaders 6 15 21 14 31 45

Crawler Dozers – – – – 8 8

Crawler Excavators 2 5 7 – 12 12

Graders 36 – 36 – – –

Mini Excavators – 4 4 – – –

RTLTs 1 – 1 – 6 6

Skid-Steer Loaders 4 9 13 16 17 33

Wheeled Excavators 6 9 15 – – –

Wheeled Loaders 4 3 7 – 8 8

* Includes O&K sales in 1998, but not Fiat-Hitachi.