CNH Industrial NV at Barclays Industrial Select Conference

Feb 19, 2020 PM UTC 查看原文
CNHI.MI - CNH Industrial NV
CNH Industrial NV at Barclays Industrial Select Conference
Feb 19, 2020 / 04:30PM GMT 

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Corporate Participants
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   *  Hubertus M. Mühlhäuser
      CNH Industrial N.V. - CEO & Executive Director
   *  Massimiliano Chiara
      CNH Industrial N.V. - CFO & Chief Sustainability Officer

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Conference Call Participants
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   *  Adam Marshall Seiden
      Barclays Bank PLC, Research Division - Research Analyst

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Presentation
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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [1]
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 All right. Well, thanks, everyone, for joining us today for this presentation. My name is Adam Seiden, and I'm the U.S. machinery and construction analyst for Barclays. Joining us in this room is CNH Industrial. We have Hubertus Mühlhäuser, the CEO; and Max Chiara, the CFO. I promise you no matter how many times I see Max, I could never get his last name right but...

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 Massimiliano Chiara,  CNH Industrial N.V. - CFO & Chief Sustainability Officer   [2]
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 U.S. pronunciation is fine.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [3]
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 That's it.

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 Massimiliano Chiara,  CNH Industrial N.V. - CFO & Chief Sustainability Officer   [4]
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 I'm American now, so...

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [5]
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 There you go. You've got a smoother accent than I do. So before we begin, I just have to start with some housekeeping things.

 So Barclays Bank PLC and its affiliates are serving as a financial adviser to CNH Industrial in relation to its announced separation of its on-highway and off-highway assets. Our ratings -- research department's ratings, price targets and estimates that Barclays has on CNH are issued by our research department and does not incorporate any such potential transaction and aren't intended to provide a voting recommendation or opinion regarding such potential transaction. What that means for this room and for this conversation with Hubertus and Max, I will refrain from asking specific questions on the spin -- split. Certainly, folks that are in the room, we'll pass it off to you guys if there's any Q&A regarding that part or element of the story. Certainly, I would ask for you to participate. And certainly, if the management team has something there, they can feel free to speak there.

 So with that, I'm going to pass it over to Hubertus and Max to get us kicked off just so for folks to get a bit more of an understanding of CNH and who they are. And then we're going to move to our audience response questions. There are some PalmPilots, BlackBerry-looking devices sitting in front of you, and we'll roll through that right after. So guys, good afternoon, and thanks for being here.

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [6]
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 Thanks, Adam, and thanks for the clarification. So not having prepared a presentation, I just want to give a very brief overview of CNH Industrial and where we are now in transformation journey.

 As most of you know, we're one of the largest capital goods companies. We are the second largest agricultural equipment manufacturer with a full line portfolio under the brands of Case, New Holland and Steyr represented all over the planet. We are a strong player in the construction segment in all parts of the world. We are one of the strongest commercial vehicle manufacturers in Europe, #5 there, focused on heavy, medium trucks but also light commercial vehicles and buses. And we have probably one of the best powertrain businesses on the planet, producing close to 750,000 engines all around the planet, diesel and also natural gas engines and now also moving into battery assemblies.

 The company, as it is, is going to change significantly in the years to come. We have announced at our Capital Markets Day last year with the newly appointed management, a fairly ambitious transformation plan that rests on 3 pillars. The first one is superior growth through innovation. So we believe that we have the chance to gain and regain some market shares by pointed investments into innovation around the themes of alternative propulsion sustainability but also digital and automation. And with that, we firmly believe that we'll be able to overall grow 5% CAGR over the next 5 years.

 The second main pillar of our transformation program is self-help initiatives around the themes of simplification, so world-class manufacturing, taking complexity out of our facility due to the 80/20 principles, getting better purchasing savings with best cost country sourcing but also attacking some of our waste that we have in our overall global footprint by realigning our footprint, industrial footprint to overall demands. So that in itself is going to drive margin pickup in all our segments. And we have given the targets out in September, and we're firmly holding to these long-term aspirational margin targets.

 And the third pillar of our transformation program, and that's what Adam has mentioned, we are on a firm route to separating our company into 2 strong companies: one around agricultural equipment and construction leader in off-highway; and the second company, this spin-off company is going to be the leader of alternative propulsion, commercial vehicles and powertrains around our IVECO business and Powertrain businesses. We have said it in our analyst call earlier in the month that we are firmly committed to the time line. So you're going to see the spin happening in January of 2021, so a little bit shy of 12 months from now. And we will basically inform the investor community on the progress that we made as we progress. But as Adam has said, we have all our advisers now working with us. We're now working backwards the time line, but we're well into that process.

 And with that, over to you. That was kind of a brief introduction.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [7]
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 Excellent. So we'll move to the audience response questions here, so we get them in. There's the devices on your table. And question one, so do you currently own this stock? Yes, overweight; yes, marketweight; yes, underweight; or fourth, no.

 (Voting)

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [8]
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 Okay. Question number two...

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [9]
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 Big potential.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [10]
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 Potential, potentials in the room. What is your general bias towards the stock right now? One, positive; two, negative; three, neutral.

 (Voting)

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [11]
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 All right. Question number three, in your opinion, through-cycle EPS growth for CNH Industrial will be above peers, in line with peers or below peers?

 (Voting)

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [12]
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 All right. Next (inaudible). Question 4, in your opinion, what should CNH Industrial do with excess cash? There's a litany of options for M&A, repurchases, dividends, paydown and internal investment.

 (Voting)

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [13]
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 Max is probably pretty keen on this question here. Question number five, in your opinion, on what multiple of 2020 earnings should CNH Industrial trade and in various bands from less than 10x to higher than 21x?

 (Voting)

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [14]
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 Okay. Very good. And I believe that's it -- one more, question six, what do you see is the most significant share price headwind facing CNH Industrial, core growth, margin performance, capital deployment and execution strategy? This one, I think, is always interesting.

 (Voting)

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [15]
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 Okay. Core growth being #1. So for those on the line, the webcast, we'll give the results post the conference for everybody, and we'll go through them then.

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Questions and Answers
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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [1]
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 So Hubertus, you -- certainly, you started outlining a little bit of what you were -- what you unveiled to the investor world back in September. We're now about 1.5 years or so, I'd say, and so the role of you becoming CEO. And I always like to do a little bit of a temperature check. What's been the receptivity internally to some of these initiatives that you guys are talking about? And more to the point from the C-suite side, to what degree is management incentivized to hit these targets that you put out?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [2]
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 Yes. I think what is very different with this plan to plans that were formerly done, it is not Max or my plan, it's the plan of, well, the segment leaders and their management team. So we have more than 500 people working on the key questions, how can we gain and regain market share, a; b, how can we grow margins to kind of close the gap to some of our key competitors. So -- and in my view, it is just very necessary that we just implement this Transform 2 Win strategy right now. And what I feel is and see is that the company is fully behind that strategy and that we are also firmly on track.

 And we have aligned all our incentives around the implementation of that strategy. As you know, as an executive in a publicly traded company, the major part of your compensation is variable. And the key part of our variable compensation is in equity. And our equity incentives is around the achievement of the strategic plan based on 2 metrics: average return on invested capital and cumulative EPS. And we always have 3-year cycles. So we basically know what we put out there to the capital markets, and we're firmly committed of delivering that.

 I think the only change to what has been announced in September, and that's really one, is that the ag markets -- end markets are just not performing as everybody has expected. And we felt it's reasonable to kind of readjust that end market outlook now being 4 to 5 months into the announcement of the strategy, as everybody else has done. I think the ag markets are currently muted, and we see them in a muted state throughout 2020, which is the reason why we had to kind of adjust our guidance for that end market weakness. But the rest stays the same.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [3]
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 Got it. So you brought up back -- certainly, there's been a lot of moving parts in the broader industry and macros that have moved around. And the guidance, you gave your guidance for 2020 at a different level certainly from that plan. So I guess maybe addressing that elephant in the room, so for the investor that's sitting on the fence, and we identified there are certainly some folks here and you see a stock that may be trading at a discount to the sector. And then certainly, it seems like from a cost attribution side, that's on plan. How do you assure them that 2020 is nearly just a market blip as opposed to necessarily a roadblock to hitting some of these longer-term targets?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [4]
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 Well, as we have said early in the year, what you're going to see in 2020 is margin improvement. And there are 2 main segments. You're going to see a margin accretion in our ag segment despite more muted end market environments because you're going to see the effects of our self-help initiatives coming through in 2020. So expect a margin improvement there and also expect a margin improvement in our commercial vehicle business because with all the investments that we have done on the innovation side, introduction of new products in 2019, you're going to see that this is coming through right now also in the margin portfolio in 2020. So I think that should reassure investors that we are firmly tracking on the right path with the margin improvement.

 And then what is also interesting for investors, of course, is the unlocking of the conglomerate discount that's going to happen with the spin. And I think it is very important why we're focused on self-help initiatives in 2020 mainly and getting us through the spin. You're going to basically see that unlocking of the value of the conglomerate discount towards the end of the year, beginning of next year when we're then trading as 2 separate companies, 2 pure-plays.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [5]
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 Got it. And on the call, you guys talked a bit about managing your production base out of the gate so you don't get caught with inventories being out of balance as we get through the year. So to what extent does that derisk the guidance compared to where we sat going into 2019? And then I guess maybe more, like, broadly of a question, having now seen this business, particularly being any organization that is, for over a year, what lessons from last year have you put into consideration with how you set full year guidance for 2020?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [6]
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 Yes. I think the lesson that all of us learned in 2019 is that the visibility on the ag end markets has dramatically shrunk. And I think all the big OEMs are managing at site really. And that is because of the ripple-on effects that the trade war between U.S. and China has had, not only on the U.S. markets but also on South America and other parts of the world. And given that there is still uncertainty around there, we basically want to be cautious. And the optimism -- if the optimism comes, we're then going to increase our guidance, but we go cautiously into the year. And I think that is a learning. And if you look back into 2019, if you benchmark North America, we cut 10%, Deere cut 20%. I think they got it right there. We were too optimistic still. I don't want to talk about the third competitor, which was kind of a surprise in itself, but it's a different story. And I think in South America, we've all been negatively surprised because all fundamentals pointed into a really, really strong second half in South America and it just didn't come through. And we're predicting that it will come at one point in time, but we see flattish end markets in South America for 2020 as well despite very, very, very strong fundamentals.

 So the learning is optimism is good but be more on the cautious side when it comes to ag. And then the outlook for the other industrial segments that we have has not dramatically changed. Construction is a bit worse than we anticipated but that's mild. And commercial vehicle, we knew that we're going to be in a down cycle. And so that has not changed. And what was your second question?

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [7]
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 You've got -- kind of sold off inventory so far.

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [8]
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 Yes, exactly. And then, yes, of course, and then the risk and the guidance. I think given that we had too much inventory at the end of the year 2019, which was felt in our cash flow, which kind of was under our own expectations, we -- as we said, we're going to be very prudent in the beginning of 2020 and will underproduce in ag and CE specifically. And we'll do so throughout the year minus 10% for ag if the markets don't pick up. Obviously, if the markets pick up, we will let the markets know and then -- and we'll basically change our production schedule. But we have, therefore, derisked our guidance. And this is visible, of course, because, of course, underproduction cuts right into your EPS and you see that basically in our EPS guidance for 2020. And you're going to -- we'll see it also overproportionately into Q1, where we have already warned that the Q1 in terms of EPS is going to be 40% to 50% lower than prior year because of the effects of this underproduction.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [9]
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 Got it. And so maybe thinking about some of the political considerations because over the -- we've seen a lot of those over the last couple of years here. So if you think about -- when you talk with growers and you talk with your dealers and so forth, what sort of expectations, if any, are there for an extension to the MFP program in the U.S. and then -- or really seeing a nice rollout of commodity volumes from the Phase 1 agreement? And then I guess more to how it relates back to you guys specific to -- would be on your guidance, would it be a safe assumption that you're not building in any big step-up from any of these 2 initiatives there?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [10]
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 No, we're not building in any big fantasy because of the Phase 1 deal. And to be very honest, we're taking more stand that also the U.S. pharma takes right now. Our sentiment overall is positive. But they will start buying if they see commodity prices going up, and those commodity prices will only go up if purchases happen. What you see happening right now is that because of the coronavirus, which actually has not to do -- much to do with it, it's used right now as the reason to not purchase in Phase 1. And so we would like to see how this is going to pan out and therefore for the time being, remain conservative. The mood -- interesting enough, the sentiment in U.S. farmers is not negative. I mean it has even increased. But sentiment is one thing, and the other one is opening your cash box and buying. And that sentiment and that buying behavior is not consistent right now.

 So sentiment is good, but the buying is really just at the replacement demand. And this, I think, is another positive news for investors. At flattish to slightly down, the outlook for -- ag is also not going to fall off the cliff. All the global agricultural markets are at trough-ish levels right now. So there's significantly more potential for the longer-term upside than there is for further downside. And to be very honest, to see that the American markets go further down from the flat to 5% that we're predicting right now is fairly unlikely given the high ages of the installed fleet. I mean there is replacement demand and there is a need for investment. The same goes for South America. They have significantly more acreages under the plow, and they need to make those investments. But again, they are all managing at site right now and they want to see a little bit more stability in the global soft commodity supply chains and how they're basically then settling out once there is purchases around these trade deals. And then you're going to see purchases on the back of that but not before.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [11]
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 Great. So I think that touches both North America and South America ag. So maybe thinking a little bit about your dealers. So before I came in here, just at a quick count, I think around 7,000 dealer outlets among the 4 regions. It looks like about half in North America and Europe. So could you talk about the progress the company is making in professionalizing that dealer network in the various regions so far?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [12]
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 Yes. I mean that has been a continuous progress, as you can imagine, over the last years. With 80/20, which looks at A and B customers sold to A and B -- no, A and B products sold to A and B customers, i.e., dealers, of course, we're putting a stronger emphasis on dealer consolidation and really growing with our very, very large A dealers. So we are encouraging, obviously, our larger dealers to pick up smaller or unprofitable or subcritical dealers, and that progress is happening. I think if you look at the strength of the network, we are very, very happy where we are with Case in North America. I think we have more improvement potential for consolidation in New Holland in North America.

 In Europe, it's interesting. I think we have very strong dealer networks throughout Europe with the acceptance of Germany, where we have a lot of white spots. And given that Germany is one of the largest ag markets in Europe, I think it is us -- for us, it is more gaining dealers there and attracting dealers. And I think we're making very good progress there also given that we have brought in new management to the company, also perhaps sometimes with a bit more of a German background, which I think blends very, very nicely with a more Anglo-Saxon, Italian background than we had already. So I think we're just complementing there the other diversity in terms of regional presence, and that will also allow us to grow and gain share in the very, very important German markets.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [13]
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 Yes. So you just talked about a little bit about gaining share. So when you look at the broader market growth opportunity, how much of it would you say would be gaining share versus just letting necessarily the market grow in your various different regions?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [14]
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 Different per segment. I think if you look at our strategic plan for commercial vehicles, we kind of predicted, in a declining market environment, a flat to 1% CAGR over the next year. So that assumes that we will gain share in declining markets in commercial vehicle, and that's exactly what's happening right now. And I think that is a good news where investors are going to see traction on the turnaround of our commercial vehicle business on the back of very, very strong new products that we introduced last year and also on the back of a complete energy transformation that's happening right now in the world and I would say kick-started by Europe.

 If you look at Greta Thunberg and if you look -- follow the CO2 reduction sustainability discussions, they are real. And what we see right now is that supply chains are moved over to more CO2-efficient ways. In the short term, the only solution alternative that you have to diesel is gas, natural gas, LNG, CNG either from fossil or from biomethane, and we are by far the leader there in Europe. And this segment is growing in a declining market by 50% to 100%. It kind of doubled every year over the last years. We're just predicting 50% growth, which is a conservative growth outlook, and we are kind of dominating this segment with 50-plus market share. So that is kind of a technology shift into greener energies, where we are at the forefront.

 I think what investors have not yet fully understood and appreciated is our partnership with Nikola fuel cell trucks. We have announced that partnership at the Capital Markets Day, where we become the lead investors by investing $250 million, $150 million in kind, which is going to help us short term also by moving OpEx to CapEx, so to say. But most importantly, with that partnership, exclusive partnership, we're going to be the first truck manufacturer in Europe and in the world with heavy-duty battery trucks already on the road 2021 and then 2023 with the first fuel cell trucks. If you benchmark that to our key competitors, they all talk about fuel cell trucks on the road by the end of this decade.

 So we have kind of a head start, depending which competitor you take, between 3 to 6 years. This is significant and this is going to show up gradually in the P&L of the commercial vehicle business. And we will educate the market a lot better when we're then on the road show in the second half of the year with the on-highway business. But this is an amazing story around the whole theme of sustainability and where we are with IVECO, really the only competitor in the world that has short-term offering and responses to this mega trend.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [15]
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 That's helpful.

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [16]
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 And LNG, obviously, is in the short term. I mean you're going to see -- I said that LNG is going to grow this year by 50% and we're going to maintain our share there.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [17]
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 That's great. So having brought up Nikola, IVECO, et cetera, I'll open it up to the floor. Is there any questions regarding the CV business or the spins or anything along those lines? Going once, going twice, all right. You could save them for later.

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 Unidentified Analyst,    [18]
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 You talked about commercial, the organic versus the end market, but can you do the same for ags or (inaudible)

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [19]
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 Yes. I think in ag, the 5% CAGR that we predict there is predicated on an assumption that over the next 5 years, we're going to go back towards mid-cycles in ag. So a lot of that growth is going to come from end markets but also from investments into digital, from investments into white spots on the landscape that I just said with Germany, on investments into technology, into combined technology. So I think we will be able to gain and regain some share and also if you look at 2019 about the end markets where there are a couple of areas where we significantly improved our market shares and regained market share. And so if you take that together, stronger end markets over the 5 years, next 5 years coming from trough-ish areas, plus gaining share in some key areas, that's going to be the top line story for ag.

 And the margin story for ag is really, a, moving some of our manufacturing of our key complex product into lower-cost countries. I think some of our competitors have done this years ago. We're a bit late there but that's good news because that's kind of low-hanging fruit that you can harvest. But also because of the investments that we do right now in digital, an increase in our aftermarket service business, which of course is far more margin-accretive and far more margin-rich, and actually in our plan, we want to outgrow our whole goods business by twice with our aftermarket business, so projecting more than 20% of revenue coming from aftermarket businesses, which is partially product but also Software as a Service with significant different margin profile. And if you add those together plus the self-help initiative, we believe that the move from high single digits to kind of 14% EBIT margin is absolutely realistic.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [20]
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 That's great. Any other questions in the room?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [21]
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 And the last thing perhaps on construction to answer that, I think the construction increase in top line, the 7% there that -- and we put this in the presentation for this business, this means it is organic but also some inorganic growth there. And what we've said very clearly is the business has to earn the right to grow. We have to basically come to a situation where we earn our cost of capital. Once this is achieved, we will then become more acquisitive in the Construction Equipment segment given that this is the only segment where consolidation is really not as much progressed as in our other end markets. So there are lots of targets that we can get.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [22]
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 We've got a question over here.

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 Unidentified Analyst,    [23]
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 [Can you hear me?]

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [24]
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 I hear you also.

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 Unidentified Analyst,    [25]
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 Any updates on debt leverage and I think one of the questions in terms of the importance of (inaudible)

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 Massimiliano Chiara,  CNH Industrial N.V. - CFO & Chief Sustainability Officer   [26]
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 Yes, of course. So 2019 ended up with a slight increase in net debt. We were able to hold gross debt flat. Obviously, we have to now work towards the realization of the spin. So we will provide updates to the capital markets at the appropriate time of how we intend to define a capital structure for the 2 separate companies. But again, one anchor point remains the investment-grade rating, and actually, we are building on that story on the liquidity side with a more substantial undrawn revolver facility, which is -- was recently renegotiated last year, is a 5 plus 1 plus 1 facility that's EUR 4 billion. And we are in the process of, let me say, exercising the first, let me say, extension to maintain the facility at 5 years. So...

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [27]
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 Got it. Maybe thinking about 80/20 -- I know there's another question in the back. We'll get to you in a second. But thinking about 80/20, how much of a sales headwind should we think about from 80/20, whether it's 2020 or over the life of the plan? Is there something that -- maybe a ballpark?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [28]
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 We're trying to -- leveling it off. So products that we basically -- or sales that we lose because of products that we stop and can't move into A products, we try to basically eliminate that loss in sales with better pricing on B products that we still keep. And we're seeing that this story kind of holds. So you see a lot of pricing-induced benefits because of 80/20 this year, and we basically kind of manage the headwinds with that.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [29]
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 Got it. And when you think about from the 80/20 side, so how far and wide are the ranges between the products that you'll be exiting or at least reducing production of or maybe exiting in its entirety to necessarily some of your best products? Like is it...

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [30]
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 It's -- the 80-20 there, I mean there's a more strategic view on the product portfolio where you really exited. What 80/20 really does is it's more the -- under the microscope where you basically kill the variances. If you kill the variances and the different variations that you have and become, therefore, easier for your manufacturing lines, and that's also the impact that you're going to have on the supply chain that you do not see yet in our company. You will see those in the end of this year, beginning of next year, then what you see right now, short term, of course, of 80/20 is the pricing benefits.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [31]
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 Got it. Is there a question in the back?

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 Unidentified Analyst,    [32]
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 Just quickly, if you can remind the room in terms of the adoption of the alternative powertrains. Are there any local government incentives to actually drive adoption rates?

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [33]
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 Significant, yes. And for example, for LNG, liquefied natural gas, you have a toll exemption in Germany. And Germany has just communicated verbally that they're going to extend this even further than our wildest dreams were. So -- and with that, the payback of a more expensive LNG truck is significantly below 2 years. So it's a very, very attractive investment in terms of total cost of ownership for the end customer given that there is subsidy levels around plus you're doing good for the environment. And what you also see right now, you have very, very large end customers that are currently demanding their logistics partners to switch over from diesel to LNG.

 So this transformation is real, and that's happening. And given that we are investing into natural gas engines since years, since decades, I must say, and we have the largest installed base of natural gas engines for mobile applications on the planet, we just have a very, very competitive product, which allows you independence of up to 1,000 miles. So we have like 30% to 40% higher independence autonomy with our trucks than the next best competitor. So that basically is a real change that's happening, and we are at the forefront of that. And then once we then have our battery, heavy-duty truck in '21 and fuel cell, we will further -- even further change that. And I think the market -- also market forecast has not yet really reflected these technology changes that we have announced there. And so it's going to be interesting to see how that's going to play out.

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 Adam Marshall Seiden,  Barclays Bank PLC, Research Division - Research Analyst   [34]
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 Excellent. With that, I think we're out -- over time. So thank you, Hubertus. Thank you, Max and CNH Industrial.

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 Hubertus M. Mühlhäuser,  CNH Industrial N.V. - CEO & Executive Director   [35]
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 Thank you.




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