Chrysler 2000 Annual Report Download - page 58

Report on Operations – Agricultural and Construction Equipment
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CNH Global ended the year with operating income of 45
million euros (0.4% of sales), against income of 371 million
euros realized in 1999 for New Holland alone (95 million euros
in operating income, equal to 1% of sales, including the Case
result on a pro forma basis for all of 1999).
The performance of CNH suffered from the contraction
in volumes, especially in the more profitable segment of
heavy agricultural equipment, and from significantly lower
contributions from the Sector’s financial services business
mentioned earlier. These negative effects were only partially
compensated by improved pricing, particularly in the latter
part of the year. Furthermore, the Sector’s integration and
industrial streamlining plan undertaken after the merger made
it possible to realize synergies worth 155 million dollars
during 2000, a first step towards the achievement of the
plan objective of at least 600 million dollars in four years,
including the 155 million dollars realized in 2000.
Depreciation and amortization totalled 562 million euros
(117 million of euros in 1999; 534 million euros on a pro forma
basis in 1999), while capital expenditures amounted to 447
million of euros (178 million of euros in 1999; 318 million euros
on a pro forma basis in 1999).
The significant increase in depreciation and amortization
results from the change in scope of consolidation and higher
amortization charges from the Case acquisition.
The Sector is currently implementing a plan to integrate and
streamline the industrial operations of New Holland and Case.
Under this plan, a few facilities in North America and Europe will be
closed and manufacture of the respective products transferred to
other plants, some product lines will be reallocated to different
production units, and certain non-core businesses will be divested.
CNH Global is the world’s leading manufacturer of
agricultural equipment and ranks among the top producers
of construction equipment and providers of related financial services
in the world.
Revenues by business unit
Agricultural equipment
Construction equipment
Financial services
59%
34%
7%
CNH worldwide
Rest Rest of
Italy of Europe the world Total
Production facilities 6 16 23 45
R&D centers 2 6 9 17
Dealers 174 3,890 5,936 10,000
Research and development expenses of 366 million of euros
against 158 million of euros in 1999 (335 million euros on
a pro forma basis), mainly reflect the change in scope of
consolidation.
Net result for the year was a net loss of 754 million of euros,
down from net income of 216 million of euros a year before
(net loss of 170 million euros including Case on a pro forma
basis in 1999). The Sector’s interest in net result was a loss
of 764 million euros (212 million of euros was the Sector’s
interest in net income in 1999).
The results include extraordinary restructuring charges
of 490 million of euros which are part of CNH’s merger
integration plan.
These restructuring charges were accounted for under
the Fiat Group accounting principles of consolidation and
reflect the costs of industrial restructuring actions which are
expected to be completed within the next two to three years.
The amounts recognized under the Fiat Group accounting
principles differ from those accounted for under US GAAP
as adopted by CNH Global to present its consolidated
financial results in the United States.
The negative results in 2000 negatively affected cash flow
which became negative for 192 million of euros as compared
to a positive cash flow of 333 million of euros in 1999 (364
million euros on a pro forma basis).