Drive into any mid-size farm community and you're likely to see one business with a bunch of red tractors around it on one side of town and one with a lot full of blue tractors on the other.
The fact that the same company makes both the blue tractors and the red tractors and associated equipment might make you wonder about the wisdom of its management, but it's all part of a plan, according to Harold Boyanovsky, president and chief executive officer of Case New Holland.
Boyanovsky talked about why the company has kept both the red and blue brands following the merger of Case IH and New Holland into CNH with a group of ag editors at the Case IH “Big Red Roundup” event in Phoenix.
“We went into the multiple brand business because it was interesting, but also because we thought it was the best way to offer our customers around the globe — in more than 160 countries — alternatives,” he said.
“As we've moved through the first five or six years of the formation of Case New Holland, we spent a lot of time trying to put the heritage of these two great companies together and build the infrastructure to make them stronger. I'm pleased to say we've turned the corner and have built a solid foundation for the future.”
Boyanovsky, who became president and CEO of CNH in March 2005, said the company closed out its 2005 fiscal year with net income of $163 million, a 30 percent gain over the $125 million it posted in 2004.
Getting to that stage has taken a significant commitment of resources and a lot of work, he said.
Over the last five years, CNH has modernized most of its product lines, introducing more than 250 new or upgraded models of agricultural and construction equipment. Case IH previewed a number of its new offerings at the media briefing.
“We have taken a hard look at our portfolio over the last year,” said Boyanovsky. “We have good products, outstanding distribution and a solid customer base, but we've been digging deeper into what we need to do to further improve the performance of the business.
“We've identified the work plan in these areas and are continuing to move forward, as we speak, to make CNH a stronger company.”
The plan includes efforts to close the gap against competitors in the construction or agricultural equipment businesses. “You'll start to see the benefit of those gap closure plans as early as this year, but they should be wholly recognized by the year 2008.
Boyanovsky said he considers the CNH brands — Case IH Agricultural Equipment, Case Construction, New Holland and New Holland Construction — the “four pillars of our business.
“Since we've reorganized the business to further focus on the customers and the heritage and strength of our brands, we have given the operating presidents full responsibility for their brand. We think that will help us further increase our speed to market and more importantly our focus on our customer.”
CNH understands its brands will compete with each other in the marketplace. “And that's just the way it is,” Boyanovsky said. “Good, healthy competition was what made our brands great prior to the formation of Case New Holland or CNH.”
But those brands also serve different customer bases, he noted. “Clearly, on one side, New Holland is a brand that's focused on hay, forage, livestock and mid-range small tractors for twilight farmers or hobby farmers. On the other side is the heritage of Case IH history of providing a full product line for the crop production cycle.”
CNH also recognizes that the brand is not just about the product; “it's about everything that touches the customers. It's the face that our dealers provide to the customers. It's the parts and service support, it's the ability to provide financing to the customer.”
Boyanovsky said CNH considers the customer the key to its success. “Quite simply the greatest asset of Case IH is the legacy, the quantity of customers that we've earned the right to provide products and service all the years we've been in business.”
While Case IH is increasing its sales to customers around the world, said Mario Ferla, president of Case IH Agricultural Business Worldwide, it will not lose site of the need to serve the customer in its largest market.
Case IH currently receives 58 percent of its revenue from North America (the United States and Canada), with Europe contributing 25 percent; Latin America 5 percent; and the remainder of the world, 12 percent.
“North America is quite important to us,” says Ferla. “We were born in North America. We have been expanding in other parts of the world and have enjoyed the benefits of that expansion. But North America continues to be the place to be and will dominate our efforts.”
After spending the last few years integrating the two companies, Ferla said Case IH has begun looking outwardly again. For openers, Case IH employees have been told to develop closer ties to their customers.
“We said ‘You're doing a great job, but we need to move one step further,’” he said. “For example, we've moved our sales managers back into the field so that we have more people working directly with our customers. Sometimes we need to understand their business better than they can. We want to be true partners to our customers.”
“We are thrilled to be able to begin writing the next chapter of our story. I have no doubt that we can dominate where we need to be dominating.”
One area where the company is not providing customers with separate brands is its credit operation which has been consolidated into a new organization called CNH Capital. The new entity includes the credit, insurance and financial services arms of CNH.
With a total managed portfolio of more than $13 billion, CNH Capital serves more than 500,000 customers through a worldwide network of 12,000 dealers and distributors in 160 countries, said Troy Price, vice president for North American Agricultural Financial Services for CNH.
“We have to offer a full range of products through CNH Capital,” he said. “Changes in the industry in recent years are driving them, and we see no sign that that will change anytime soon.