CNH Industrial NV (CNHI) 2011 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's CNH Global 2011 first-quarter conference call.

For your information, today's conference is being recorded.

At this time, I would like to turn the call over to Mr.

Manfred Markevitch, head of CNH Investor Relations.

Mr.

Markevitch, please go ahead, sir.

Thank you, Laurie.

Good morning and good afternoon, everyone.

We would like to welcome you to the CNH 2011 first-quarter earnings conference call.

Just a quick introduction.

I would like to remind everybody they can refer to page three of our presentation, which was distributed today and posted on the Internet regarding certain forward-looking statements.

Also, all information that will be used in the conference call today is available on the website at CNH.com.

Today, we will have a presentation by Mr.

Rich Tobin, the CFO of CNH Global, followed by a short Q&A session.

We have with us today Rich Tobin; Harold Boyanovsky, President and CEO of CNH; and [Andrea Paulls], our new Treasurer, who replaces Marco Casalino.

Just another reminder -- we will need to stick with the one-hour time frame, as we have also other calls at 3.00 and 4.00 p.m.

with Chrysler and Fiat Industrial, that might conflict.

So with that, I will hand over to Rich Tobin.

Thank you, Manfred.

Good morning and good afternoon, everyone.

I'm going to start with slide four.

So, it's a highlight slide.

CNH Global net sales increased 17% to $3.8 billion for the quarter; agricultural equipment up 17%, construction equipment up 19%.

Equipment operations operating profit of $246 million, an increase of 71% over the prior year.

Equipment operations net cash position decreased by $271 million.

We're going to get into that further in the presentation.

It's mostly net working capital-driven.

And net income before restructuring and exceptional items of $138 million, with an EPS before restructuring and exceptional items of $0.57 a share.

Moving to slide five, this is basically the numerical version of what I just told you.

The only highlights I would call your attention to is the EPS before restructuring and exceptional items of $0.57 as compared to $0.16 in the first quarter of 2010.

There was an exceptional in the prior year with the Part D Medicare, so just to be a little bit careful when you go back and reconcile the two EPS numbers.

But overall, the EPS growth year-over-year driven by the improvement of earnings.

I had mentioned already on the equipment operations the cash flow of negative $240 million.

I've got more detail and color on that further on in the presentation.

And the equipment operations net cash of $1.9 billion, which is really a roll forward from where we stood at the end of the year after the bond issue in July of 2010.

Next, please.

Slide six is net sales by geographic region.

Let's take a look -- this is a relatively new slide that we used last year -- I think the second half of last year.

But what you have, if you look at the 2011 column, you see the top plus 17% year-over-year Q1 to Q1 change.

And then you see the change broken out by region.

You can see that in Latin America, we have a negative headwind of 2% as we had guided back in January after the full-year results.

So that was as expected.

And then you see a 25% growth on the European side, which has really driven a lot of the profitability increase on the Ag portion of the business.

I would compare those figures back to the 2008 time period.

So you can see, as compared to 2008 pre-crisis level revenues, that all regions are up with the exception of Europe at this point.

But with Europe growing at that kind of percentage rates, we think there's some upside potential going forward to the extent that Q1 holds true for the balance of the year.

In the far right of the column, you see percent of 2011 net sales.

And that's the geographic distribution.

The big change there, you can see the arrows, is the Europe as an increasing share of total revenues Q to Q on the back of the 25% growth.

So overall, a healthy distribution of revenue growth for the group on a quarter-to-quarter basis.

We were quite pleased.

We're not overly concerned at the compression of Latin America, because as we discussed in the January call, that was largely driven due to election change and some waiting to see how [Fanami] financing would develop in the quarter.

That has been settled late in the quarter, so we expect the Latin American market if not to improve, to at least trade flat over the balance of the year.

And we'll discuss that further in the presentation.

Moving to slide seven, what you have is on the agricultural and construction equipment -- so Ag in blue, construction equipment in the yellow.

You have the net sales distribution year-over-year going back to 2007, and then you have the operating profit distribution on the right-hand of the slide.

So, in consolidation, you have CE revenues up $115 million; Ag up $445 million; CE profit up $19 million Q to Q; and Ag profit up $83 million; incremental margins for Ag are 18.5% -- 18.7%; incremental margins for CE, despite still posting a loss -- which we'll add some more color later in the presentation -- at 16.5%, in terms of the leverage on profitability.

Right now, in terms of capacity utilization, the Ag sector is running at 87% capacity, and that's after cutting capacity utilization in Latin America, where we ran in the mid-60s in Q1 due to some, as I mentioned before, in terms of some lightness in demand.

On the CE side, we're running relatively low at 53%, but one has to keep in mind that that number is heavily influenced by downtime due to product launches, primarily in North America due to the skid steer launch, and in Lecce in Europe, which is the backhoe.

Slide eight, please.

Equipment operations, operating profit evolution for Q to Q.

So far left hand side of the slide Q1 2010 of $144 million.

Q1 '11 on the far right hand side of the slide at $246 million.

Volume mix clearly on the back of revenue growth providing $95 million Q to Q profit.

Net pricing of $48 million, both the agricultural and the Construction Equipment segment are positive net pricing, even taking into account Q1 commodity cost headwinds of $48 million.

The bulk of it being on the Construction Equipment side, as pricing compression due to inventory liquidation has largely been reversed.

And as we move into new equipment being delivered to the market where it's the attempt to recapture and bring those prices back to previous market pricing levels.

Production costs of negative $13 million is largely related to launch costs during the period and some negative economics associated with those launches.

The balance of the presentation, the SG&A up $23 million is largely driven by commercial activities evenly split between Ag and CE.

R&D, as we had guided previously, up on the back of spending as it relates to product launches and primarily Tier 4 compliance, and other of a positive $12 million, driven largely by an improvement of quality-related costs Q to Q of a plus $12 million.

Next slide, please.

Contribution from equipment operations JVs.

On the left hand side of the slide marked in red are the significant unconsolidated subsidiaries.

So you see Turkey, Japan, Pakistan, and India.

India we'll discuss in a moment.

And the green on the bottom left hand side is the international region consolidated subsidiaries.

So you'll see you Russia with Kamaz, our two JVs in China and Uzbekistan.

The top hand right of the slide shows the equity and net income of equipment operations unconsolidated joint ventures of CE, a 243% improvement Q to Q.

That's driven largely by reversal of prior period losses in the Construction Equipment JVs in the first quarter of 2010 on the back of improved conditions in the Construction Equipment market, and improved performances on the Ag side largely driven by our joint venture in Turkey, Turk Tractor.

In the middle of the slide, those of you who read the press release this morning, we had announced a couple of weeks ago, the acquisition of the full ownership of our Indian joint venture that we had with L&T.

That acquisition was consummated on March 31.

We recognized an equity or a gain due to the revaluation of equity.

So that is the positive after-tax -- $16 million that we recognized in the quarter was due to that -- the acquisition of our 50%.

Cash out for the transaction was approximately $50 million US.

I think that we've talked about previously what the venture makes up.

I think that we're happy to finally be able to gain full control.

We thank our previous partner, L&T, with the joint venture back through 1998, I believe.

This is going to allow us to expand into the Indian market plus use, as we do on our fully consolidated Ag side, our Indian operations for both machines for the Indian market itself and for re-export opportunities in both whole goods and component parts.

Slide 10, please.

Equipment operations change in net debt first quarter.

You see a negative -- or a use of cash of $271 million.

I think we could spend some time on the working capital portion of that.

As you can see, the accounts receivable, accounts payable are negative and neutralizing themselves.

You've got inventories up $427 million.

Of that $427 million, 53% is raw materials and WIP.

As we move up production capacity as the markets begin to develop over the year, we would expect that to move up.

Finished goods is up 31%.

That's predominantly in Europe as we build inventory to support a market that is growing 25% and in parts, which is basically directly correlated with revenue.

So overall, I think we had guided previously in January that we could not look back at 2009 and 2010 operating cash flow because of the enormous effect of the liquidation of prior peer builds inventory.

And now going into a more normalized view of working capital performance tied marginally to revenue.

Slide 11, please.

This is the slide we use commonly for inventories.

So what you see on both an Ag and Construction Equipment Company inventory, inventory development, CNH retails and CNH production, first quarter over production on the Ag versus retail is 16%; 10% reduction in forward months of supply.

So we've over-produced retail in Q1.

It's primarily in tractors and it's primarily in Europe for the most part.

In North America on the combine side, quite frankly, we are a little bit behind.

The market is, as you will see later in the presentation, we've upgraded the combine growth for the full year, so we were, up until very recently, somewhat short in combine inventory, due to the fact that Q4 was stronger than expected.

So we are in a bit of bit of a catch-up mode there.

I think that we've largely corrected that for our European operations, the industrial portion of the business it does has done a very good job of ramping up production capacity in Europe to support the growth going forward.

So we feel good about our position on the European side on both the tractor segment and the combine segment.

On the Construction Equipment side, first quarter under-production versus retail of 6% and a 48% reduction in forward months of supply.

Quite frankly, that's a little bit below what we would have hoped.

The same reason as I mentioned with the Ag, I think that the Construction Equipment demand has been greater than we would have expected going -- coming out of Q4.

And our launch downtime specifically on the skid steer was greater than expected in Q1.

We've got okay to ship now on all of our launch products so we're going to be in catch-up mode.

I would expect over the balance of the year, based on what we can see in terms of backlogs and Construction Equipment, that largely we are going to have a direct match between production and retail going to the balance of the year, because we're -- basically we're going to have to catch up approximately 1,000 to 1,500 skid steers, which has largely had a negative effect in terms of market share performance of Q1 which comes further in the presentation.

We'll skip to slide 13.

These are the metrics that generally we use on commodity prices per metric ton on the Ag side, which is the top end slot portion of the slide.

I don't think this is an unchanged view.

I mean, you have to take a look at the scale, but commodity prices are not necessarily moving up.

It's a little bit of a choppy range, but quite frankly, are doing very healthy range in terms of how it extrapolates into farmer's income that you see on the right, top right hand right of the slide.

So, right now, the dynamics for the agricultural market remain very strong.

There seems to be -- even if commodity prices in the Ag side were to decline somewhat, we don't think it's going to have a detrimental effect on equipment demand, because of the huge run-up that we've seen more or less since mid-year of 2010.

So the top right of the slide, you can see the curve in terms of farmers' net income versus the Global Insight 10 year average.

So everything looks healthy in both the farmers' net income on the back of commodity prices.

And that is extrapolating itself into future equipment and demand over the balance of the year.

The bottom of the slide is more of a macro data that we used for construction equipment.

So you see nonresidential construction and spending in housing starts.

I think we can deal with that in the Q&A a little bit, but largely, Construction Equipment is improving, but let's be frank -- it's off a very low base.

And we're more of a wait-and-see approach.

But we have upgraded our view of Construction Equipment demand for 2011, which you'll see later in the presentation.

Next slide, please.

Slide 14 is market share performance year-over-year.

I think that I touched on it on the Ag side.

We held share and actually increased share globally.

In tractors, did a very good job in Europe.

And that's been reflected in terms of some of the data points I gave you before, our capacity expansion there and we've done a good job of gaining market share.

I mentioned earlier in the presentation that we lost some share in a global basis on the combine side.

We believe that we can catch up over the balance of the year, just to put it in perspective.

The North American share loss equates to 105 combines in the quarter.

We believe that we've got our production capacity up to the point where we believe that that position will be caught up over the balance of the year.

On the Construction Equipment side, it's more of a question of going into the year with low inventory levels, and in a more buoyant market than we would have expected.

And as I mentioned, some longer downtime as it relates to launch.

We're a little bit behind.

We're approximately 1,500 units in the light segment.

We held share on the heavy segment, despite having -- despite the difficulties that we'll address later in terms of excavators and the impact of the Japanese supply disruptions, but we managed to -- held share on the back of a successful launch in the wheel loader segment and the Construction Equipment side.

Moving to slide 15, I'm not going to spend a lot of time on the next four slides, but we've gone through on the Case IH brand in January, all of the large product launches.

So that the large four-wheel drives, what's coming up on the combines.

We've had the successful launch on the 600 horsepower four-wheel drive tractor late in the quarter, where everything's going there.

So what you see is just some of the periphery and implements that go around on the Case IH side in preparation for Tier 4 combine launches, which are scheduled for later in the year if not early next year.

We can deal with that in the Q&A side of the business.

Moving to slide 16, we've had the successful launch of a new utility tractor.

And the CX5000, CX6000 series of combines for the New Holland brand, and then some mention of what's going on in terms of Tier 4 implementation, which we think is more appropriate for Q&A.

In terms of technological advances I think that we've had, there's been a significant amount of news flow from the group of where we stand in terms of solutions for Tier 4.

So you see some of that laid out on slide 17.

So it's not just Tier 4; it's all of the variety of different features that we are launching on our product lines in association with the Tier 4 launches.

And moving to slide 18 is the Construction Equipment portion of the business.

We covered a lot of this at Con Expo in Las Vegas a couple of weeks ago, so I won't spend a lot of time here; but you see where we are in the launch cycle with the new crawler excavator, new wheel loader, new motor grader, which is a Latin America launch moving to slide 19.

On the light side of the equipment, I think that we covered heavily the loader backhoe, which has been successfully launched in North America.

As we're ramping up capacity to meet demand, it is being progressively launched in Europe out of our Italian plant at Lecce.

We've got the new skid steer loader.

We've got okay to ship on both the non-ROPS and ROPS cabins on that.

So we're now in full production on the skid steer and the mini crawler excavator at the bottom of the slide.

Slide 20, please.

Industry unit volume full-year outlook -- we've left the tractor side flat to our previous estimates, so you see tractor demand flat to up 5%.

We've upgraded combines for 2011 now up to 15% to 20%.

I'll just call your attention on the tractor side.

So despite having some good performance in Q1, one has to take into account the APAC number and the influence of APAC units in the low horsepower segment.

So I think I would call your attention to what we're saying about the North American tractor market and the European tractor market, which is offset slightly by -- will continue to have Latin America -- we're calling on the tractor side of flat to down 5%.

On the construction equipment, we're upgrading both the light and heavy segments, the light up 25%, heavy equipment up 25% to 30%.

That has not been adjusted for Japanese supply constraints, which I'll cover on the next slide going forward.

Next slide, please.

Early trends and financial outlook.

We touched on commodity cost headwinds in January at the full-year.

We had guided at that time between $110 million to $125 million of commodity cost headwinds.

That number has not improved or gotten worse so we're going to hold to those estimates.

As we had mentioned at the time, that our expectation was full cost recovery through pricing in 2011.

We've raised prices in the agricultural segment.

We are raising prices in the Construction Equipment segment.

I mentioned back on the profit [lock] on the Construction Equipment side, so construction equipment is already recovering from liquidation prices that we'd seen in 2009 and 2010.

So we're on track in terms of full cost recovery on the $110 million.

The Japanese supply situation, we gave some color to that in the press release.

So we've given an estimate of between $300 million to $500 million in revenue headwind and operating profit headwind of $40 million to $60 million.

That's primarily on the Construction Equipment side and it's a combination of negative absorption from lack of componentry; gross margin on those CNH-produced units and the loss of margin for some lack of availability on whole goods, primarily in the excavator segment.

The situation right now is stabilizing.

All of both our joint venture partners and our component suppliers are doing their best in terms of meeting our demands.

We've seen some improvement from some pretty negative situations that we had seen two or three weeks ago, so we think that in terms of what we're giving as guidance, that's probably the top end, barring another leg down for something unexpected.

The third bullet is where we stand on Tier 4A/Stage IIIB engine updates, product conversions are on schedule.

We've covered what the mix is going to be between SCR and EGR solutions, depending on the equipment class and horsepower.

As I mentioned previously in the presentation, we have now launched the 600-horsepower four-wheel drive late in the fourth quarter, so we're very pleased about that.

And then in terms of full-year revenue and earnings growth, despite the headwinds on the commodity cost escalation and Japanese supply base, we're basically sticking to our guidance of plus 10% in revenue growth for the full year and an operating margin between 7.1% and 7.9%.

Manfred, that's the last of my slides for the presentation, so I think we can turn it over for Q&A.

Thank you, Rich.

We will now move on to the Q&A session.

Laurie, please retrieve the first question.

(Operator Instructions).

Ann Duignan, JPMorgan.

I guess my question is around your incremental profits in the Ag sector.

The margins were pretty strong, about 18% incremental profit.

Can you talk about, is there anything negative in terms of mix going on there, region over region or 40 to 100 horsepower tractors recovering?

Or -- I might have expected incrementals to have been higher on the Ag side.

Could you just address that, please?

Yes, sure.

Well, I mean, they're accretive, so we're happy about that, but I think it's a fair question.

I mean, look, in Q1, if you look at where the growth is taking place, a lot of it is coming through European demand, which is very -- I mean, it's a positive sign for us.

I think the growth that we saw on the Ag side from European CIS is a little bit better than we would have expected.

Quite frankly, there is ramp-up costs of us moving up production in Europe.

So there is componentry, expediting costs.

There's hiring costs.

And it is at present driven more by tractors rather than combines.

Actually we built approximately 200 to 300 combines of inventory in Q1, which we haven't wholesaled yet.

So we would expect incremental margins over the balance of the year on Europe to move up.

And there's some country mix, the region mix also, as Rich indicated, Latin America Ag business was down in the quarter, which is a good margin business for us.

That's helpful.

And then on the flipside, for Construction Equipment, can you talk about your expectation for profitability through the remainder of the year also?

Yes.

I mean, we would expect to move into the profit position in Q2.

I guess the only part that we're going to have to address is this issue on the Japanese supply situation.

We're going to have to curtail production temporarily in both Q2 and Q3.

And whether we're going to be able to offset that by the ramp-up in the absorption benefits of bringing both the skid steer plant and the backhoe plant up in both North America and Europe, whether that's going to be able to offset it.

Quite frankly, we're going to have to wait and see.

But over the year, even with the headwinds, unless we're at the high-end range, we expect to move into a profit position in Construction Equipment.

And I think just to confirm, I think you said that the amount, the impact of the Japanese supply base, you think that's the worst-case scenario, is that correct?

Based on the information that we have right now, that's the worst-case scenario.

Okay.

And just real finely (multiple speakers) --

(multiple speakers) Yes, it's a developing situation, Ann.

So, I mean, based on what both our joint venture partners and the suppliers are saying, we think that that's an estimate we can hold to.

Okay.

And I appreciate that.

It is a developing story.

And I'm assuming mostly Q2 and then probably things get back to more normalized in Q3.

Is that the right way to think about it?

No, I think it's evenly split between Q2 and Q3 from a production point of view.

And you just have to keep in mind that there's a lot of lost profits due to lack of whole goods.

Because we bring in a lot of whole goods from our partners.

And that's going to be spread, let's just say, more or less evenly between Q2 and Q3.

So I would split the difference between the two quarters.

Okay.

That's great color, I appreciate it.

Thank you.

I'll get back in line.

Henry Kirn, UBS.

It's Henry Kirn.

Just to hit the Japan question one more time.

Are there any categories of components that you sole-source from Japan that you couldn't get elsewhere if you absolutely needed to?

Yes -- the answer is yes.

And over time, everything is resourceable.

But the question is, over what time?

I mean, quite frankly, as Rich indicated, one of the issues that we have now is just the power supply to the manufacturing and industrial footprint in Japan.

Some of the excavator plants have been running at 50% due to the rolling blackouts.

But there's some -- the light stuff, the hardware clearly easily to resource.

But then you have swing gears and ring gears, which is a significant component that requires not only resourcing but significant testing for quality purposes.

But the same is true of hydraulic valves, i.e., Kayaba, et cetera.

But this is an industry issue, not just a CNH issue.

That's helpful in framing that.

And could you talk a little about the first-quarter launch and ramp-up costs, and how they should track through the remainder of the year?

Yes, I'll let Rich weigh in here, but I would just say relative to the Construction Equipment business, if we did not have the launch penalties, as Rich indicated, and the increased logistics material cost headwinds, we would have been around breakeven in the CE business.

So, to Rich's comments, we expect, barring anything extraordinary coming through the comments relative to Japan product and component supply, to have the CE business running profitably.

Thank you very much.

(multiple speakers) Mark Koznarek, Cleveland Research.

Just first of all, just a quick question on some of the outlook, the market outlook.

I'm kind of surprised on the Ag equipment side, Latin America, where the tractors -- you actually revised that downward a little bit despite the fact that Fanami has been reauthorized for the remainder of the year.

Can you talk about that?

Yes, Mark, Harold.

Let me give you a shot on that.

If you look at the first-quarter industry tractor volumes, Brazil was down about 15%.

Although the government is reauthorizing and refunding those programs, they are going to come through at a higher rate than the programs that existed in 2010.

And that could have some impact, particularly on the midsize or smaller tractor business.

Okay.

Maybe I had misunderstood your prior guidance back in January -- I thought that assumed that there would be no reauthorization.

Was that -- I guess that was not the case?

I think that's incorrect.

We've always commented that with the change in administration, there needed to be a time to -- the new administration to assess their programs.

And clearly, there is a tightening of funds in Brazil to curtail inflation, so (multiple speakers) --

Okay.

All right.

Thank you.

(multiple speakers)

Yes.

We always assumed that funds would be available but not at what rate.

I See.

Okay.

So the rate is just a little bit higher than what you thought.

Okay.

The other question I had -- and I'm sorry if this was addressed, because I got on the call a little late -- but just the price versus cost dynamic in the quarter and the outlook for the full year.

It's positive for the quarter and it's neutral for the full year.

And can you get any more specific about Ag versus CE?

I prefer not to be more specific, because there's a lot of moving parts there between how we go with price depending on the region and depending on the class of equipment.

What I can tell you is if we look at slide eight, where it says net pricing of a positive $48 million, the bulk of that has come from the CE side.

So that's despite our own difficulties with the Japanese supply base and our launch, our CE organization has done a good job of recapturing from, let's say, from liquidation-driven pricing that happened in 2009 and 2010.

We've announced our price increases on the Ag side and that's anywhere from 2% to 3.5%.

That will largely become effective over the second quarter.

Those are the -- that's the second round of increases, is that right?

That's the second round non-Tier 4-related.

That's all incremental.

That's more -- that's all related to commodity cost headwind.

Okay.

Great.

Thanks very much.

(Operator Instructions).

Mark Koznarek, Cleveland Research.

Sorry, I'm not trying to dominate, but it doesn't sound like many people are on.

So I did have one or two more.

Which was -- the Construction Equipment, quite a shortfall from the industry trends.

And you spoke about why with the skid steer and loader backhoe plants, basically at low operating conditions.

And some of that obviously you're launching new models because of the requirements for Tier 4 and [Euro 3].

Obviously those requirements are -- also the Ag equipment side is subject to that.

Does that -- this shortfall here in construction, is there the possibility of a similar kind of shortfall at some point on the Ag equipment side as you roll into those new models?

Oh, okay (multiple speakers) --

That is certainly not in our plan.

I would hope not.

For sure.

The construction side, I think part of this is just the low inventories that we had in the channel as we entered the year.

I mean, to give you an example, our dealer inventories are about half of what the rest of the market is in North America on CE.

So we really need to get the plants up and running.

And as you know, the skid steer loader is an all-new clean sheet design, so it's not just the packaging of an engine for emission requirement.

Well, I guess maybe -- let me ask it a little different, Harold, is -- was this degrees of shortfall relative to the market in your plans?

Or was there sort of the -- things developed differently than you expected?

And what will you now do different in the Ag equipment side to prevent that from happening?

Let's set aside Ag, because I don't anticipate any issues on the Ag side.

I mean, our major launches relative to the high horsepower, two-wheel drive, four-wheel drive tractors, and as Rich indicated, the 600-horsepower four-wheel drive coming out of Fargo, we're in production, in the field, being received very, very well by the customers.

So those major launches are behind us.

It's just a matter of ramping to demand.

On the Construction Equipment side, really two things, Mark.

One is, we didn't anticipate the amount of national account rental companies rebuilding of their inventory as quickly as they have in the first quarter.

So I'll say we underestimated the industry.

And you add to that the ramp-up of the product launch of the new skid steer and TLB.

Okay.

And then just a final one for me is, was there -- as I said, I'm sorry, I got on a little late -- but was there an outlook statement for the finance sub and the income from joint ventures for the full year?

Or could you provide one?

No, there wasn't, but I think on both, one could roll forward the finance company in the balance of the year.

And on the JVs, I think the absolute profit you can roll forward with the compare or the increase becomes tighter because the CE joint ventures largely recovered in Q3 and Q4 of last year.

So basically annualized the first quarter income but not the year-over-year change?

That's correct.

Okay.

Very good.

That's all for me.

Thank you.

Steve Volkmann, Jefferies.

There's been some news, I think, recently in the Latin America market about Ag pricing perhaps being a little bit soft.

Can you comment on that at all?

Are you seeing anything like that?

From a Case IH and New Holland brand standpoint, we haven't seen or participated in the situation that you referenced.

Fair enough.

Thank you.

And I wonder, switching gears, whether what's going on with various supplier and joint venture partners in Japan -- does that change your strategic view of how you think about your excavator offerings as we go down the road?

Is there an opportunity to streamline that whole process a little bit?

It doesn't change our view on the importance of the excavator to our businesses or the importance of the relationships that we have with our partners.

Great.

That's all I had.

Thank you very much.

As we have no further questions, that will conclude the question-and-answer session.

I would now like to turn the call back over to Mr.

Manfred Markevitch for any additional or closing remarks.

Thank you, Laurie.

I would just like to thank you all for joining today's call.

And as always, the information is available as well on our website, CNH.com.

Thank you.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.