Good morning, ladies and gentlemen, and good morning or afternoon to those of you joining us via the live webcast. Welcome to the CNH Industrial Capital Markets Day here in New York. I'm Federico Nati, Head of Investor Relations, and we are absolutely delighted to have you here with us. This event is being broadcast live on our web site and is copyrighted by CNH in Accel. Any other use recording or transmission of any portion of the broadcast without the express written concept of CNH Industrial is strictly forbidden.
All of today's presentation material will be uploaded to the Investor Relations section of our website at CNHindustel.com. By clicking the banner on homepage, you will be automatically redirected to the appropriate section. For attendance here in the room, we have provided a tablet that you find on your table. During the day, as each speaker takes the stage, The respective presentation slide will be accessible for you to read as well as being projected on those on these three screens behind me. For those following the webcast, you will see the slides in real time with the option of revisiting prior slide.
Let me now draw your attention to the usual Safe Harbor statement displayed behind me. Please note that any forward looking statement we make today are subject to the risks and uncertainties mentioned in the Safe Harbor statement. Additional information pertaining to factors that could cause actual results to differ materially is contained in the most company, most recent 20 F and E-one hundred report as well as other periodic reports and filings with the U. S. Securities And Exchange Commission and the equivalent authorities in the Netherlands and Italy.
And now the agenda of the day. Our chairperson, lady Haywood, will start with opening remarks and will provide context for today's presentation. We start with that of our Chief Executive Officer, Hubertus Mollhoiser. Hubertus will present CNH Industrial Corporate Strategy, entitled Transform To Win. Which provides a clear direction of how we intend to execute a transformation of our businesses.
They will provide the framework upon which our 5 businesses president will expand. Derek Nielsen for agriculture, Cargoos, Kaporenson, for construction, Gerdmarx, for conventional vehicles, Alisa Supernango for powertrain and O'Donnell Chiza for Financial Services. Our Chief Financial Officers, Max Gera, will summarize how our strategic plan translates into financial targets through 2024 and provide a financial context in which we will move forward during the transition period. Finally, we will end with closing remarks from our CEO followed by a moderated Q And A session. At 10 minute coffee break, has been scheduled after the construction segment presentation.
We will ask you to be mindful of the time in order for us to stay within our schedule. I would now like to invite our chairperson, Lady Heibode, to take the stage. Thank you all.
Good morning, everyone. My name is Suzanne Hayward, and I have the honor of being the chairperson of CNH Industrial. It is with great pleasure that I welcome you here today to our Capital Markets Day. And I want to take a few minutes before we begin, just to give you an introduction to our company, and share a little bit of a summary of the company with you, which will set the stage for what the management team will be sharing during the course of today. CNH Industrial is a global leader in capital goods with a strong presence in both on and off highway applications.
CNH Industrial has 12 strong global brands, each recognized as leaders in their respective fields. These brands provide farmers with precision technologies to help feed a growing world population. Their system building cities and infrastructure of the future and they deliver sustainable transport solutions for goods and communities with future proof powertrain solutions. DNHI has a continuous history of innovation, creativity and consolidation that stretches back over 175 years. DNH Industrial is recognized also as a sustainability leader, having been known named as the industry leader, in the Dow Jones World Index and the European Sustainability Indices for 8 consecutive years.
We are committed to continuing on this path enhancing the company's growth and profitability, while maintaining high levels of sustainability to help deliver even greater long term value for all our stakeholders. Our employees put our belief in sustainability into practice every day in everything that they do. We are a signatory to the business roundtable's recent announcement, which you may have seen, which stated that in addition to generating long term value for shareholders, a company should also consider customer expectations It should invest in its employees. It should deal fairly and ethically with its suppliers. It should support the communities in which it works and it should protect the environment.
These values are already at the heart of CNH Industrial. Our sustainability commitments align both with this statement and with the United Nations Sustainability Goals.
And our
ambition is to be carbon neutral to develop to deliver and develop a fully recoverable life cycle thinking for our equipment to ensure 0 serious injuries and to be fully engaged with our workforce. And that is very much central to all the presentations that you'll see today. We've already seen meaningful results from the transformation work at CNH Industrial. And again, you'll see that as we go through. The strategic business plan that the management team has developed with the full support of the board of directors is based on 4 key pillars: effectively, these are the 4 things that we challenge the management team to do, and you're going to see the results of that today.
We asked them to come up with a plan that would deliver superior stakeholder value. We asked for a plan that would drive future opportunities. So not just thinking about today's world, but thinking about the future world for CNH eye. We asked for a plan that would execute across the cycle, so it would be robust in all different points of the cycle, and we asked them to review the portfolio. To really think about how the portfolio fits together.
Over the next few hours, we'll explain how we intend to achieve these goals but we'll also give you detailed metrics that will allow you to track our progress in achieving them. So in conclusion, I'd like to thank you again very much for joining us here today I hope and trust you're going to find it both interesting and informative. And after a short video, I would like to invite our CEO, Hubertus Muhouser, to come and our strategy through to 2024.
Our world is changing.
It's transforming
right in front our eyes. We see an increasingly urban world and ever growing population We see our lives shaped and we see changes in our fundamentals that we must face responsibly, but we also see a world of opportunities a world where new technologies allow us to reinvent ourselves, where digitalization and automation help us to serve and connect people around the globe. A world which enables us to feed, build, power, and connect And we see a world where our industry leading innovations enable us to develop groundbreaking technical solutions solutions that help Yes, our world is changing. But we are helping to transform it for for today. CNH Industrial, powering sustainable transformation.
No applause. So good morning. Good morning, everybody. It's great to see such a big crowd, and thank you, Susan, for your very, very kind introduction. For those of you who don't know me, I'm Hubertus unpronounceable Muhoza, I'm sorry for my last name.
And I've been the Chief Executive Officer of CNH Industrial for exactly 1 year right now. Before I start laying out our strategic direction, let me step back a little bit and share my observations after 1 year at the helm of this beautiful company. Obviously, there were things that I knew already before I joined, such as the strength of our brands and the market positions in the agricultural space as well as FPT's strong engine lineup And please do remember that I had to compete against my current colleagues for several years in my prior professional life. However, what I learned in the last 12 months is a confirmation that there is a very, very strong, I would call it foundation to build on, albeit with areas of improvement. However, this would everybody expect.
So when reviewing our technology and innovation position, and you see that at first on the slide here. It became very obvious for me that we had a fairly strong innovation pipeline across all the segments and that we were addressing many of these key disruptive trends that we talk about. However, I think we also had to acknowledge that we were under invested in some of the areas, and this has to be corrected going forward. And we do correct this with a strategic plan. What really impressed me coming into CNH Industrial was our best in class, I would call it, operational and commercial capabilities and world class manufacturing was rolled out to all our facilities.
And I think you heard me talking about it. And I think it is the strongest program that I found in the industry. However, on the flip side, we also had to recognize that we were optimizing an overly complex, I would call it, product range and that we had and still have excess manufacturing capacity, which is a drag, I would say, on our profitability. So going forward and with this plan, we need to address growth. We need to simplify our product lineups, and we need to have a more efficient use of our asset base.
Now third point, looking at our strategy and brand portfolio, it's very fair to say that we have several strong leadership positions at product and brand level with an amazing heritage and loyalty, I would say, for our most of our brands. And Just a personal note, there are very few brands in the world where people sing songs about. We do have those brands. However, I've also learned that there was a need to focus the organization and to sharpen our strategic positioning in order to achieve the full potential of our segment portfolio. Fortunately, and as the final point on that slide here, I also found a very strong and I would say collaborative management team, both on the corporate and the operation level with a true partnership culture, I would call it, that is very, very open receptive to change.
On the flip side, we have become a very, very large global organization with many hierarchical levers and a lot of processes. And I felt a very, very strong need for us to become more agile, customer centric, and all the to reflect the spirit and the culture of the strong entrepreneurs that have created this strong company A year ago, when I joined CNH Industrial, I also set out for myself and the entire organization, 3 very clear priorities. And today, I'm very, very proud to say that we have delivered on all of them. The first priority, as you see here, was to continue to deliver on our operational margin performance. And we have clearly shown to you that we did this through consistent margin improvements over the last four quarters.
The second objective was I made a priority to develop a strategic roadmap and a transformation plan that is supported by the organization and most importantly that we can deliver on. And of course, including the answer that the board and Susannev asked, of the future composition of our portfolio, which we'll share with you today. Finally, my third priority was to build out a leadership team and an organization that is capable to create and deliver on an ambitious transformation plan in a rapidly changing environment. You will see this leadership team in action today. Summing up of these 3 priorities and all our achievements today, we're excited about the significant value creation potential that is this plan embodies today that you see, and that is ahead of us.
And all our share We have reorganized our global executive team early in the year and have given full profit and loss accountability to our segment presidents and they are supported by strong functional leaders. We've done this with a good blend of existing strong talent along with channel that we brought in from the outside, like Andreas Viza, who is sitting there in the front row, and Gerhard Marx, who was sitting there, our head of our Commercial Vehicles segment, and they brought fresh perspectives to our company based on their in-depth industrial experience. You will see evidence of this strength of this leadership team today when the segment presidents present their strategies. And later in the Q And A and I invite you also to ask questions to our functional leaders that are not on stage, but they're all with us here today in the room. So let's not talk about the strategic plan and the strategic transformation plan.
As part of our strategy review as Susan has said, we looked ahead and analyze the economic and social macro trends that impact our business. And I go from the left to the right here. We see a world population that is constantly growing, and that will comprise 9 billion people by 2050. And while this population is growing, we will experience a simultaneous calorie increase by 2030, and this will drive an increased demand for food and that in turn is going to act as a strong driver for our Agricultural segment. In parallel to this population grows, we see a rural exodus with more than 1,500,000 people moving into urban areas every week.
They are already today on the world more than 140 Cities with more than 300,000,000 inhabitants, and this number is growing. So the infrastructure need that we see to support this urbanization is increasing and will drive an enormous need for infrastructure development and this will benefit our Construction business segment. Another macro trend that we see that we identified is a degree to which the population is increasingly connected. What was once geographically distant networks of suppliers and customers is now instantly connected in volumes and speeds that we have never seen before. And all this exciting stuff.
This offer access to many products and services almost instantaneously. And it's an increasing strain on our transportation infrastructure. So we must find ways to transport goods, and this will increase demand for our transport solutions, and we have solutions to offer. Finally, and perhaps most importantly, there's a real existence and threat of climate change. As responsible corporate citizens, we must constantly work to adjust our business practice to the reality that we, as inhabitants of this planet, are changing the environment we live in.
We do have a responsibility to conduct And our chairperson, Lady Hayward, laid out very key objectives as to how we aim to accomplish and confront this macro trend. For us, we see sustainability as a business enabler for CNH Industrial that will help us to provide real competitive advantage going forward. As a matter of fact, you will see that sustainability is the underlying theme in all the business segment strategies that we will present today. After looking at the macro trends, we then went, I would say one level deeper looking at the specific megatrends that will impact our industries over the coming years. And we have, and I personally have referred several times to these megatrends in the last quarters, and we will continue to refer to them in today's strategy presentation as they are impacting all of our business segments.
Again, from the left to the right, digitization and connectivity is the new normal. Digitalization in turn is the enabler for autonomous and automation. Autonomous vehicles. And we are addressing this trend throughout all our strategies. You see a nice example in front of the stock exchange.
Cermatization and the services around our physical products have an ever increasing importance, and we see new business models emerging as a result of this trend allowing us to significantly increase our aftermarket service business and you will see this later on in the presentation. And finally, the changing climate forces us to think about alternative propulsion system. There is growing public awareness of this trend and the need for action. And it provides even more pressure to become carbon neutral in the near future. It requires OEMs such as CNH Industrial to proactively come up with solutions rather than being forced by legislators, politicians.
We owe this to the next and the future generations. It is with this backdrop that we have developed our transformation strategy, which we call Transform to Win. And you see this house here, I will shortly populate this house talking out our purpose and values, our corporate objectives, our function segment strategies, and finally, I will finish my presentation with our portfolio strategy. Please note that we have taken a 5 year planning perspective So all the financial projections that you see will point to the achievements in 2024. However, to provide an interim check, so to say, We will also share the 2022 financials.
So looking at the strategy, top of the strategies, of course, our purpose. Powering, sustainable powering to kind of go, yeah, powering sustainable transformation. This purpose provides the why we are in business and is consistent with our position as an established sustainability leader as her advisors and The well used to find the way we want to conduct business and what culture we want to have going forward in CNH Industrial. And inertia, which means for me to challenge the status quo, fight against bureaucracy, but also to take calculated risk That is a key value that defines our corporate culture and reminds us constantly of the strong entrepreneurs that created our world leading brands. Additionally, we value people with passion that are selling ambitious yet achievable goals for themselves and their teas.
And the strategic plan that we present today will come to fruition supported by the values of relentless teamwork and an excellence in implementation and execution. Our strategy that we present today has 3 themes that you see here that will drive both the corporate objectives of this plan and all our strategic initiatives. So this gives you the what we want to achieve overall. The first strategic theme top left is centered around innovation and thought leadership. This will drive a lot of investments and strategic initiatives into our technology and brands.
In turn, This will result in market share gains, and it will lead to a net sales growth of 5% annually throughout the plan period. The second theme is around industry benchmark performance. You've asked for that for a long time, and we're addressing this by improving and simplifying our operations, but also all our product lineups. A strategic plan that we present today and the corresponding initiatives very concrete initiatives around that theme will give us an adjusted industrial EBIT margin increase of 400 basis points to 10% EBIT margin and an 80 percent CAGR in our adjusted EPS moving from the mid side of our guidance this year, $0.86 per share in 2019 to $2 earnings per share in 20.24. Finally, that's also an important one.
We want to make best use of our assets and optimize our capital returns. So all initiatives around capital productivity will increase the return of our invested capital by 600 basis points from 14% in 2018 to 20% in 2024. Needless to say that the achievement of this plan will deliver superior shareholder and stakeholder return. Also as a heads up, for those of you that follow later on the segment presentation, you will find the levers of grow, perform and simplify, as well as optimize throughout the subsequent presentations by my colleagues. So this will allow you to better understand the corresponding initiatives that will drive shareholder returns, and you can understand what is self help and what is market help we have really separated that.
Now let's switch gears and talk about how we will achieve this. We have already started corporate wide transformation initiatives as was outlined by Suzanne that are, of course, embedded into our presented functional strategies and Throughout the plan, this will be delivered by our functional leaders. Let me run through the main headlines of the content and impact of those functional initiatives. To start with our visualization strategies, foresee that over the course of this plan, 85% of our new products will be digitally born and connected. This is a paramount important as The connectivity is the driver and enabler for automation as well as for our service business.
Speaking of the service business, this will drive the potential to grow our aftermarket sales and service business from today's 16% to, in the future, 20 percent of future revenues. And it will outgrow our equipment sales twofold. And of course, it will improve our margin mix. The investments that we make in the digital and aftermarket infrastructure under the leadership of L'Oreal look where are you. There you are.
They're significant, and they will support this growth ambition. Now looking at the supply chain and its excellence. In this plan, we are achieving net annual sourcing savings of 1% of our procurement spend year over year. And the continuation of world class manufacturing will drive productivity improvements of 4% Tom Lebatten, who took the leadership of the supply chain organization earlier this year. Tom, where are you?
Is already in full implementation mode with his global teams and is very, very happy to answer all questions around that subject later on. Furthermore, the company, all its business segments, have fully, I would say, embraced the eightytwenty simplification methodology that we started to roll out already in 2018. As you know very well, the eightytwenty methodology that we use addresses customer, in our case, dealer, line simplification as well as product line simplification. In the area of customer line simplification, we will consolidate our leader network over the course of the plan by 10% creating one that is stronger, and we would say more viable. Simultaneously, we will simplify our product lines.
And we will reduce complexity by reducing stock keeping units and variance by more than 50% over the 5 year time plan or the plan. And you will hear a lot more in eightytwenty and its profit and loss impact from the segment presidents in their respective presentations. As stated in my opening address, we also need to address our manufacturing footprint and network. And in fact, we have looked at more. We have looked at our entire footprint in the world, manufacturing facilities R and D centers, and we got Alan Berger here in the room, our chief technology officer.
We also included him in that review. The parts imposed and all other regular offices. In the plan period, we will rationalize our operational footprint by 1,200,000 square meters. And for the Americans in the room and we are near nearly 13,000,000 square feet. Over the next 5 years.
And this will allow us to increase the utilization from today's 66% to 85% in 2024. And this will further help us in the improvement of margins, of course, and capital returns. Finally, and for sure, one of the most important points, we can only deliver on this plan if we have a fully engaged workforce. Therefore, we will make sure that all our employees are fully engaged and are living up to those values that I explained early on. We also see diversity as a key enabler of this plan and have embarked on a corporate wide initiative to strengthen diversity and inclusion within CNH Industrial.
So let's switch gears now and look at the how or the segment strategies. And, and how transformative, above and beyond those functional strategies they will be. Also important to note is that we view all of our 2024 segment targets as mid cycle. As we'll also discuss in the segment presentations and, of course, in Max Chiara's financial summary. Now let's go from the left to the right.
In agriculture, our strategic trust and ambition is to become the leader in sustainable agricultural solutions. The key priorities of that strategy for that segment is that we will support this goal by doubling down, as you would expect, on Precision Farming solutions. The better positioning of our differentiated brands and the provision of superior product performance and quality. All of this will lead to market share gains and it will lead to 5% net sales CAGR over the planning period. An increase in net adjusted EBIT margin of 500 bps to, we believe, 14% is a realistic target for us and a return on assets improvement of 1300 bps to 33%.
As you probably have seen this morning, we announced the acquisition of AgDNA, And this is, I would say, another stepping stone in our digital farming strategy, which is part of our overall investment of 5.6 1,000,000,000 in the Ag segment alone. Please note that this investment number on this slide and all the others are the sum of CapEx And R&D. The strategic thrust for our Construction Equipment segment is to, as we call it, develop focused leadership positions. The key priorities that drive this strategy are the continued delivery of the turnaround earning the right to grow in products and markets, and I'm looking at Karl Gustaf, and he knows he has to earn the right to grow. And, of course, to better leverage the channel synergies that we do have with our agricultural business segment.
Once the Construction Equipment business is showing a, we would say sustainable track record of margin improvement We also intend to pursue opportunistic M and A into be an active participant in consolidation. With a presented plan, we will achieve a 7% CAGR of net sales, and now Ben, we discussed about this before, arguably, from a low base today, however, with the tailwind from our high growth markets in India and South America, and Both leaders of our high growth regions, Stefano Pampalone and Wilma Fister Roll, where are you? They're here with us today. And I think they can also support this plan and answer some question. The plan that we present today for the Construction Equipment segment sees with 5.70 bps margin improvement to 9%, while our return on essence will improve to 24%.
In this segment, we plan to invest a total of CHF 1,200,000,000, not included here, are the investments made by our supply partners. Please note that. Now to the next segments, our Commercial Vehicles segment, will become, as we say, the global leader in sustainable transportation. The key priorities that will enable that thrust will be the repositioning as we talk frequently about of the heavy duty truck line, the extension of our leadership in alternative propulsion by we would say aggressively expanding liquefied natural gas LNG and entering into the fuel cell segment. And realizing global growth through partnerships.
We firmly believe that this will allow our commercial vehicle business to increase the EBIT by March by 3.80 bps to 7% and to lift our return on assets in that segment to 14% finally earning its cost of capital. We have also communicated a very, very important for this segment's strategic partnership with Mikola today. We believe that this will leapfrog our commercial vehicle segment and will position EVACO as a true disruptor in the trucking industry. And It will open up for us the very, very important U. S.
Market where echo was, if echo was so far not present. Those positive long term effects are not yet reflected. So the Nicola acquisition, not yet reflected in the strategic plan, And I think, Daryl, you agree with me. They represent significant upside to this segment going forward. The overall investments to commercial vehicles will be US4.2 billion dollars.
This is including the Nicola Partnership that we have announced this morning. Looking at our powertrain segment, powertrain is today already a leader in alternative for branching. And We will enlarge its portfolio with focused investments in revolutionary diesel technology as well as in electrification and of course also fuel cells. Allowing it to continue to drive non captive sales, and you're going to hear a lot more from Analisa today on that strategy. All of this will result in a 5% net sales CAGR and adjusted EBIT growth of 110 bps and a further improvement of already a stellar performance return on assets to 32% with an overall investments into our powertrain segment of US1.9 billion dollars over the time frame.
Finally, We will provide customer centric financial solutions that will support our business segments on the Finkgo side. We will do this by launching new products and markets fully taking advantage of the digitization within our industries. This will lead to a portfolio CAGR of 4% for the finco and a net income CAGR of 3%. So now the full house to summarize this powerful, we would say transform to Win Strategy we will repossessions CNH Industrial as a thought and technology leader in the industries in which we operate. It will lead to a significant step up of our financial performance and it will allow us to outgrow our competition and to regain market share.
Our segment presidents will outline in far more detail the substance of their transformation plans shortly. However, Before we do this, let's take a look at the composition of CNH Industrial's segment portfolio over time. As Lady Hayward outlined in her introduction, we challenged ourselves to think about the right portfolio composition going forward. We challenged our thinking across three dimensions, we would say. First, and you see that on top left here, we looked at a strategic lens to evaluate our portfolio by looking at market attractiveness and competitive dynamics.
Then We looked at our portfolio from an investor land. So we're trying to sit in your chairs here and take your view and reflect investor preferences. And finally, given that we now know, finally, the investment plans for our segments, we thoroughly analyze those and evaluating the true synergies between our different segments and where it really made sense to be under 1 corporate roof and where it would make sense to go separate ways. All of these different lenses and perspectives came to the similar conclusion. Looking at the portfolio composition now with the strategic lens, we concluded that while all the megatrends that I referred to are impacting our segments, their impact is very different in the on and the on highway business.
Furthermore, we found that very different market and competitive dynamics exist for the on versus the off highway business with different strategic starting points that we have. Requiring the need for more flexibility to seek and actively participate in needed industry consolidation. All of this led us to the conclusion that from a strategic point of view, we need to have a distinct and differentiated management approach and focus and accountability for the on and off highway business. The second lens which, as I said, we call the investor lens, came to a pretty similar conclusion. As most people here in the room would agree, the capital markets preference is for focused business models and companies, the so called pure plays.
Also, there are varying investor expectations for the on and off highway companies. As a result, CNH Industrial currently gets a conglomerate discount, not fully reflecting our inherent strengths we would say and to some
of our
parts. Our conclusion therefore from investor lens was that we should create 2 focused enterprises. And finally, we looked at our portfolio from a synergy perspective. And this review I must tell you was very enlightening for all of once we understood the strategic investment plans and needs of the different segments. Here, we were looking first, and you see that on top right there, at the intersegment synergies between the on and the off highway business.
And looking at these famous mega trends that I referred to earlier, which are all affecting the segments. We saw, however, low investment synergies in automation, digitalization and serverization, while only alternative propulsion struck us to be a major leasing logistic area between on and off highway. And we deal with this later on. On the operational and commercial synergies, we found limited to no synergies on the distribution on the engineering as well as on the manufacturing side, though there are obvious synergies you would say, around procurement and the administration side, of course. When we then looked at those synergies within on and off highway, we saw that there was an overwhelming synergistic potential between ag and construction equipment as well between commercial vehicles and powertrain, given that the relative cost share of the engines is higher in trucks than in off highway and the majority of the volumes goes into trucks.
Also, on highway is typically leading with emission regulation, and these changes make it critical to our CV business to be close to the engine. As a result of these findings, we concluded that we had to transform our for you in order to be able to win. And the creation of 2 global leaders in their respective industry was for us the only viable path forward, and that's the reason why we call it transformed to win. If we look On the upper side here, the off highway business will be focused on becoming the partner of choice to feed and build the world by creating the global leader in sustainable agriculture with a highly synergistic construction equipment business. The pro form a sales will be US0.15.6 billion dollars, of which 75% of the vast majority are in the agricultural space and a pro form a adjusted EBIT of USD 1,000,000,000.
We've also concluded, and that's below, that we need to spin off Our commercial vehicles segment, consisting of light commercial vehicles, medium heavy duty trucks and buses as well as our powertrain segment. This newly created on highway company will build on its leading positions in Europe for commercial vehicles, and Worldwide for powertrain to become the global leader in sustainable transformation and will become the partner of choice to power and connect the world with pro form a net sales of USD 13,100,000,000 and a pro form a adjusted EBIT, as you can see here, of USD 500,000,000. We believe that today's partnership announcement with Nicola will further add to this company's credibility and it will grant access to not only revolutionary fuel cell technologies, but also to the important U. S. Market for E vehicle.
Max Kiara, our CFO and myself, will go into more detail on the technicalities of the spin, of course, later today, and we are open for Q and A, of course, there as well. I think it's fair to say that we are really excited by the opportunity that this overall transformed to win strategy will create over the years. With the 3 building blocks of margin Pros, portfolio changes, and organic and inorganic growth opportunities that are grounded, as you will see today, in concrete actions and a clear execution commitment that you will hear from me and my colleagues during the day. And therefore, we believe that we are truly at a defining moment as one analyst put it yesterday in CNH Industrial's history. With that, I'm happy to turn it over to Derek Gilson, our President of our Agricultural segment.
Please welcome Derek after a short video. Thank you very much, and more to come.
Thank you, Hubertis, and good morning, ladies and gentlemen. And may I add my welcome to those of Suzanne and Hubertis. My name is Derek Nielsen, and I am the President of the Agricultural segment. The short video you have just seen has opened a world into our window into our world. A world of powerful machines but our business is simply not about selling pieces of equipment, rather it's about working alongside our customers, in fields the world over to help them feed an ever growing population and is incumbent upon us to enable farmers to maximize yields from every single acre.
Looking at the agricultural market, our addressable market for farm equipment is worth some $18,000,000,000 annually. We expect the Ag equipment market to grow during the period of our strategic plan at single digit level, driven by positive fundamental macro trends of population growth and changing diets towards more protein consumption. This will in turn drive an increase in demand for commodity production. Given the limited availability of arable land, the main levers for production growth will be an increase in per hectare yield. Realising higher yields ultimately require farmers to invest in equipment, either to increase mechanization levels in developing markets, or in mature crop markets to step into farm digitalization and more precise field operations.
Which will drive and turn a more favorable mix in equipment and service demand. Together, these positive trends could drive double digit industry growth in the plan period, but we are conscious of possible further market constraints linked to tariff risks, subsea reductions and political instability in some of our key markets and countries. CNH Industrial's agricultural brands have a solid presence in all regions with a global manufacturing footprint to optimize its logistics flow and hedges naturally against foreign exchange fluctuations. Our well established dealer network is perfectly designed to be close to our customers. This is clearly demonstrated by a strong market share position in all regions, as you see on the slide behind me.
Whilst Europe and North America are the largest revenues by revenue, our position in the fast growing South American region is very strong and very well established. We continue to grow in the rest of the world particularly focusing on the Asian growth markets. Their mechanization levels continue to increase rapidly. Our global presence and footprint allows us to partially balance the impact of the regional ag cycles. First North America and Europe are still in the low part of the cycle, South America and the rest of the world are experiencing medium to strong growth.
Allowing us to offset the downtime in the North American market to some extent. All of us in the agricultural segment are firmly behind our mission to be a high yielding partnership delivering sustainable growth. We strongly believe that farmers are at the center of everything we do. Quite frankly, they are the reason our brands exist. A great many of us working in the agricultural segment, hail from a farming background and together with our dealers, We listen to and engage with farmers every single day.
These strong relationships assist us in developing and investing into products that will improve farmers productivity, enable them to become more efficient and effective to satisfy the growing global demand. For our customers' sustainability is today a tangible concept as every decision they take impacts the future of their livelihoods preserving scarce resources such as soil fertility and the availability of water will ensure that generations to come will continue to farm profitably on their lands. We are committed to helping farmers steward the resources and helping them to transition to using on farm solutions such as natural gas to power their equipment, for the resulting reduction in greenhouse gas emissions. Sustainability for us is much more than a word the case of thinking and day to day actions. As Hubertus mentioned earlier, we in active culture of defining 7 key pillars to grow, perform, simplifying and optimize our business.
The 4 levers linked to growth comprised of brand positioning, further enhancement of our product portfolio, digital transformation and the further development of best in class aftermarket solutions. 2 pillars are linked to our perform activities, namely the development and investment and further professionalization of our dealer network and focusing on our passion for quality and reliability in line with farmers' increasing expectations. The last element of our optimization is the optimization of an industrial footprint to strengthen our global presence while keeping close to our customers. We will continue to build on this strong DNA and heritage of our outstanding and well established brands. Going forward, we will strive to further strengthen the clear positioning of each of our 3 brands through our revised product lineup and go to market approach.
Continuous customer dialogue has driven us to further clarify our brand's positioning in the market. Including both the scope of product portfolio and service offering. Starting with case IDH supported by a strong heritage in North America, or remain a powerful and highly productive full lineup for professional producers. Leading edge Innovation And Technology will enable the brand to become a tech leader, providing customers with the best in class experience. New Holland will continue to grow in the back of its strong harvesting and Hain Forry's expertise operating as a sole liner, servicing all customers' needs from Orchard and Vineyard farmers, it's a mixed livestock and arable farmers, including small and rice cros around the world.
New Holland Solutions focus on innovation, sustainability and outstanding superior cost efficiency. We will invest heavily in Nostrea brand to strengthen his position as a premium European brand. Leverage unit's long standing passion for quality and reliability with cutting edge features and styling across a full range Tractor Portfolio aimed at the most professional and demanding farmers in Europe. As a premium, short liner, Styer is open to partnerships, with implement brands that are complementary to a superior positioning. With this powerhouse of our 3 brands, and continued investment in a professional dealer network, our go to market strategy will have significant impact in the marketplace.
In terms of product lineup, we already have a very strong and complete portfolio and many product updates and developments are already in the pipeline. We will productize efficiency and productivity enhancing features like automation and digitalization for future investment. Harvesting remains a passion within our company. Our common harvices today provide the best total cost of ownership and highest degree of automation in the industry. And we will continue to develop features which will further boost productivity in the short harvesting windows, minimizing losses, delivering best in class crop processing to ensure top quality because quite frankly every grain counts.
Our next generation combines will help us increase our leadership position in harvesting in Europe And South America and to expand our position in North America and the rest of the world. In tractors, we continue to leverage the leadership position of our FPT engines, thank you, Annalisa, to power and drive our tractor portfolio. As pioneers in Ocanada propulsion, we will shortly launch a fully sustainable mid range natural gas power tractor. Last week at the fan progress show in Decatur, Illinois, we presented a new cash prop high tractor singling the start of our Cab refresh program, which provides best in class visibility, comfort and control systems. Our new cabs are now enhanced with digital technology offering a real suite of field and fleet applications available both on and offboard.
All of our tractor portfolio above 100 horsepower, we upgraded to next generation by 2022, thus allowing farmers to further improve the efficiency of the field operations. We are also focused on the sub 100 horsepower range when we target annual production of over 100,000 tractors based on a global platform. As Hubertus mentioned, applying eightytwenty methodology, we target a high level of modularization and standardization to leverage scale advantages. Enancements will also take place across the crop production and hand forage offerings as we continuously strive provide draws with the most efficient and reliable machinery to support their operations. And in addition to that strong organic, development pipeline, but also seeking interesting partnerships and bolt on acquisitions, thus taking an active role in future industry consolidation.
We believe reached our solid position in certain products seeking further expansion and to cause gaps on margin and penetration will be a less strong. Agriculture is a primary industry accounting for the largest productive use of land feeding growing populations and is fundamental in helping achieve sustainability goals given its impact on greenhouse gas emissions. CNH Industrial actively supports sustainable firm, farm management waste systems, leveraging bio digesters to produce alternative fuels, derived from animal waste and by product mass from crops. By building upon FPT industrials on road experience, and natural gas engines, we are committed to unleashing the full potential of the secular economy. This targets the full utilization of families through biodegesters for the production of biomethane, which is used to power farm machinery and supply the transport industry.
We firmly believe this will be a disruptor in our industry I hope you noticed today are stunning biomethane tractor when you entered the building. That confirms this disruption is imminent. In the short term, a medium horsepower natural gas factor, blend for series production, pre series testing is already underway. St. Farmers leverage their biogesters to satisfy their own fuel requirements, thus becoming energy independent.
Those farmers running those pre series tractors are highly satisfied with the testing programs and are already inquiring us to the future of natural gas powered products such as expanding the tractor portfolio and other equipment such as forest harvesters. Today, our smart equipment tech solutions deliver unparalleled productivity benefits for farmers. We combine the performance and reliability of our world class equipment with digital functions to enable smarter farming practices. Our next generation high horsepower tractor platform comprises market leading precision and technology, connected services and a user friendly interface, to allow farmers to optimize day to day field operations. Together these digital technologies can increase farmers productivity by over 10%.
Unveiled at the spring farm shows in the U S earlier this year and launched the farm progress this past week We are confident we will gain market share quickly and exceed customer's expectation with this new tractor and its digital capabilities. Our market leading combines, benefit from New Holland And Teli Sense, and case IH harvesting control systems. Quite frankly, these have been setting the standards for smart harvesting since their introduction in 2018. The superior control system inform automation and sensing technology, ensuring that farmers benefit from the highest throughput, minimal losses and highest grain quality. Productivity gains are between 10% to 20% are achievable depending on the operator scale level.
Following the launch of these automated harvesting systems, We have made rapid and tangible market share growth in all markets in which we operate And these market leading technologies you see today are just the beginning of the journey to unlock the full potential of the digital farming of tomorrow. We have set our digital farming development program with the clear ambition to develop comprehensive suite of digital connected services to help customers run their family operations in a more productive way. Compared to today's conventional farming, we expect to enable some 20% productivity gains through the entire crop cycle. In all key applications, Fate, field, and pharma. I know that many of you new audience today perceive us to be significantly behind the industry in precision farming technology.
The truth is, however, that we have a strong competitive offering in field applications such as Cadence And Control Systems, as well as sensing and field monitoring. We intend to further develop and expand our offering as proven by this morning's announcement over acquisition of ID And A, a leader in fund management information systems. We are well positioned to take advantage of fleet and farm segments, which represent an opportunity for us to rapidly grow, something we are clearly addressing in the near term, as you will have seen in our products and applications launched to fund progress, and this will be further expanded on at the planned IT Technically Show this November. In the coming months, we will position ourselves as a leader in the digital evolution by closing any gaps in an overall precision farming offering. All of this will enable us to provide farmers with a more competitive offering and be assured that we are pursuing a segment by segment plan with a very detailed roadmap for the development of our digital enabled offering.
This overall plan is to provide farmers not only with leading edge offerings, create superior value, but also allows us to command a leading share of the value created in this segment. We will continue to invest heavily as presented by Hubertus earlier in this segment and strongly believe that we'll be more than double current revenues from a digital and precision farming solutions by 2025 double. Whilst achieving a greater than 30% EBIT margin. Digital solutions. Furthermore, to achieve the digital farming objectives and in line with our open platform approach, We have built an ecosystem of partners that you see on the screen today.
Field applications such as fully autonomous operations and more precise equipment out of the center of our R and D activities, including those of the autonomous tractor and the automated harvesting machine. Fleet Services which support remote monitoring and improve operational efficiency are core to our offering. In addition, our partners provide our customers access to the most updated technology and best in class fund management solutions as well as agronomic decision making support. Moving on to agrixtend. Agrixtend is our incubator aftermarket brand for leading innovation technologies, basically allowing farmers to enhance their efficiency and probability.
The brand is based on an open approach to innovation, working with best in class startups, Act Technology Companies and tech drawn from other industries. Our dealer network and field sales team help bring together startups and primers, thus enabling the targeted development of the initial concepts and to fully realize solutions. The ag extend portfolio strives to provide best sensing and control solutions across soil, environment, machine sensing, implement control and plant and crop, thereby maximizing sustainability of all operations where reducing inputs and drastically reducing chemical use. And this product offering will increase significantly as we go into 2020. We're extremely optimistic about the Six dating bank having already received multiple innovation awards most of the major European agricultural shows and we will see entering the U.
S. Very soon. Alongside our global brand and portfolio improvement initiatives, we have developed a targeted plan in each region and specific market to ensure capturing all growth opportunities. In Europe, as I mentioned, we want to grow the key customer segments and markets where we are currently underrepresented, such as take oriented premium customers in Germany, for example. So enhancing the positioning of Keysight and Skye brands, as innovation leaders and as premium brands and the respect of customer segments, we are confident that we'll be able to bring trends quickly.
We also aim to become European number 1 in the combine market, driven by new Holland brand, thanks to its best in class combine portfolio. And I emphasize best in class. In North America, we will see the largest rollout of our new products. And parallel to this, we will also work to further professionalize and consolidate our dealer network to create strong partners. They will have the capabilities and means not only to meet increase in customer requirements, but to exceed them.
In South America, the focus is on further strengthening key accounts and go to market approach We have worked in a very detailed marketing assessment, segmenting customers by size. Our primary focus will be on some 2000 large customers, who represent an opportunity to increase our share of wallet by applying together with our dealers and new go to market approach. We are currently number 1 in crop harvesting in South America with over 50% market share in Combining Building on that success, we want to expand further our leadership position and attain outright leadership in the Sugar King Haverson. In EMEA region, we have a market by market approach targeting growth, highly prioritizing leverage on strong footprint in India, both in terms of global sourcing and further local market penetration. We fully intend to double our market share in the Indian market by 2024.
And in parallel to this, we are proactively assessing the market to complement our product portfolio through partnerships. In my concluding slide, you see the revenue and profit walks structured in the contribution coming from Grow, perform, simplify and optimize initiatives as mentioned by Hubertis earlier. Just for information, this is the format, which is a consistent across all segment presentations you'll see later today. Specifically for the agricultural business, you can see that until 2022, our focus is on self help initiatives improving our probability. After 2022, our investment in growth initiatives will become fully effective.
Allowing us to grow in a second wave. Over the period, our strategic plan will invest some $5,600,000,000 in AG, with a strong focus on product enhancements in light of the future megatrends. In terms of revenue, we are targeting a 30% growth to $16,000,000,000 in 2024 with an intermediate target of $14,000,000,000 in 20.22. We are targeting an EBIT margin of approximately 14% over the cycle and aim already achieving 12% by 2022, driven by those self help initiatives that I mentioned earlier. In the next few years, we will prioritize initiatives related to Optimize and perform, which will drive efficiency and profitability such as footprint optimization, investing in dealer professionalization and quality excellence.
And in parallel, we'll continue to invest and grow our initiatives to drive product, digital and automation enhancements which will be fully deployed by the midpoint of the plan. This will support revenue growth in the 2nd part of the strategic business plan cycle. And also world class manufacturing and sourcing excellence will continue to run across the entire 5 year period, supporting the realization of an ambitious margin targets. With the implementation of this robust and comprehensive plan, we are confident of accelerating our agricultural business to the forefront of the industry, fully realizing the full potential of our very very prominent brands. With this, I conclude my presentation and thank you for your attention.
And I'd now like to hand over to Caro Gustavo after the short video. Thank you
Good afternoon, ladies and gentlemen. I'm very pleased and happy to see some of you here today. I think we can speak about the full house, and we are here, as Sveto said, to present the powerhouse of CNH Industrial. I am Carl Gustafironsson, and I am the President of CNH Industrial Construction segment. And I'm here today to give an overview of the construction equipment business and opportunities within our strategic footprint.
Throughout the presentation, I will be talking about our business earning the right to grow by excelling at the fundamentals where we are strong and have a proven DNA and track record. Ultimately, building on that to grow our business strategically, by focusing on attractive customer segments supported by strengthening our product portfolio in these areas. Let's have a look at the business. The Construction Equipment business is a fragmented industry valued at around $100,000,000,000 annually, where the top 5 OEMs account for some 40% of our sales. The majority of the market today is in North America, Europe and China, but India is growing rapidly.
The bulk of our business is in North America, a market now at its peak. We do have strong positions in other areas as well. In India, for example, we are number 1 in compactors in South America, number 2 in reloaders and in Europe, number 2 in Raiders. World markets are in different stages of the cycles. At the moment, Europe and North America are at or nearer peaks, whereas South America is in the trust and the rest of the world is growing thanks predominantly to India.
GDP, construction spend and infrastructure projects are the main drivers for growth. So let's look deeper at the business. The construction business market in which we operate is just currently south of 1,000,000 pieces of equipment. As to business, we have enjoyed a strong global market position in the past, and our ambition is to return that with a focus to become a leading industry player. We do have a 175 year heritage, a strong name and a loyal custom base.
We recently focused our business on 3 key segments with the goal to be closer to the customer and their market needs. By targeting our product development resources around the segments you see on this slide. These segments are compact and service equipment, general construction and role billing and site preparation. Now clearly, we have a strong position in compact and service equipment, which is primarily backhaul loaders, skid steer loaders, compact track loaders and mini excavators. This is also a major part of the market insights.
We have a strong share in North And South America, but we have smaller positions in Europe and less the world. This is also where our eightytwenty initiative is currently focused, and this is how we'll boost moisture on these products. In the General Construction segment, we are focusing on 2 major products, excavators and wheel loaders. We have great products in this segment, but in some markets, our share has liked. Some of our margin performance is in this category.
It's muted since we sourced from an OEM partner and share margin with them. Finally, we are present in role building and site preparation sub segment, where our focus is on products doing all the preparatory work up to the point where I asked for this late. Dosors, graders, compactors are the key products in this segment. As you can see, this is a smaller part of our portfolio where that wherever we can increase scale, improve product simplification through the eightytwenty, gain market share and consequently increase the margins, okay? And our mission is clear.
And the philosophy and this is the philosophy that we apply throughout our business. And we have talked about our business owner drive to grow. And I believe this can only be achieved by winning our customers' loyalty. Ultimately, our efforts are focused on ensuring that the customer is satisfied Now if we can achieve that, then we'll earn and maintain the loyalty. And we do have loyal customers.
That said, We will now shift gears and present what we intend to do when accounts to providing reliable, intuitive, sustainable solutions. So let's take a look at our strategic pyramid that summarize our journey ahead to 2024. Here you have it. Our main aim is earning the right to grow by continuously working on our efficiency and our performance. We see construction equipment business consolidating further in the coming years, and we intend to actively participate in this consolidation focusing on core business and strengths.
We have as a company. Our long term aim is to become a top 5 player by addressing 3 key areas. 1, expand in attractive customer segments
2,
strengthen our core product offering and 3, excel at our core processes. Let's look at the attractive segments we will focus on. In construction infrastructure, we have a strong base in current offering, and we see this segment growing worldwide. Rental as one is growing and the new economy will further accelerate the concept of a so called one stop shop integrated solutions driven by customers. Here, we're developing complete concept from product to service and distribution to capture a higher share of the rental segment.
It's clearly a great opportunity here. The other one, Industrial applications such as waste handling are being driven by increasing urbanization as you heard in the beginning across the world. We do have a core of products upon which we are going to be to gain share in this area. Moving to the product segment of the pyramid based on the attractive segments, we will focus our R and D spend on 3 main areas. These are wheel loaders, excavators, and finally, compact and service equipment.
Now the turbine has 5 main areas of which is anchored. 1 is manufacturer network, 1 is quality, 1 is aftermarket solutions, product simplification through the eightytwenty principles and leveraging the great synergies we see with Agfa where we see opportunities. So let's start with these 5 billing blocks. And specifically, let's turn our attention to the synergies we have within the Ag segment of CNH Industrial. It's a great opportunity, as I said.
For construction equipment, this synergy creates 3 main drivers to deliver revenue. The first is the go to market approach of setting construction equipment through both the ag and construction dealer channels, and by providing complimentary products for farmers. Today, we have 400 dual ag and seed dealers. The second, as Derek mentioned, is the technology and innovation. We provide fleet management services, technological platforms, displace, drivelines, telematics that benefit from a joint development.
Investment in areas such as automation can be mutually shared and leveraged. Clearly. And thirdly, operations, we have, for example, one shared factory up in Fargo, North Dakota. When it comes to parts commonality, We do share today already 15 percent to 20 percent common parts commonality. And we have shared logistics systems and aftermarketing services.
Let's now look at the eightytwenty initiative, as you heard already here. We start this program in CE at the end of Q1 in North America. And we're now rolling it out worldwide on a worldwide basis. Why is A220 important to us? First, it drives complex deduction, focusing on high volume products where we are most profitable and can make money.
2nd, we create simplicity and efficiency for operations, which is a key contributor to excellent manufacturing quality. This is fundamental or change this is a fundamental change to work for us and our extended enterprise and our dealers and our suppliers. And we are aware of this. It will take time, but we're definitely on the right track. So far, some key decisions taken and under execution within the program are for example, a rationalization of 44 models going from 172 to 128, bundling of available product options, so called quick pick ordering, introduction of differential, differentiation of policies, A customers versus B customers, implementation of a differentiated price strategy for B products.
We believe that this for this program, we can achieve a SKU reduction 2% and we're looking at the 300 basis point improvement. As also mentioned earlier, we applied the same methodology within this solution. Which will be key to our success. Today, 100 of our 500 dealers worldwide represent 75% of the revenue we have. By implementing this high objective, detail on this slide, as you see here, We are on track to drive benefits to our extended enterprise and our deal network.
We are aware of this task, and it's enormous. And it will take time, but we are long term with our dealers. That's the key to be successful. For instance, in Europe and North America, we will drive consolidation through version network, whereas the rest of the world, we will see a more provide a more coverage. Dealer Management is and profitability is a key priority for us.
And we would provide further strategic support for a network to facilitate a conversion from, we say, prospect to sales. When the clients, clients are entering a construction dealership, no matter where they are in the world, we want them to have a unique, yet highly brand, distinctive experience. We will inspire our dealers paying for the highest standards and ensure that they are fully invested in this process. Our dealers, ladies and gentlemen, they are essential to our success of the strategy. As you will recall, quality is at the center of our strategic year pyramid in the middle, literally.
We have an actually As Rebecca said, working with world class manufacturing for many years. And now we're applying this excellent concept to our product development and quality. We believe that with focused efforts on quality, we can actually claim in this leadership which is a key driver of customer loyalty. The key pillars for ASR, the introduction of world class engineering processes, driving quality focused development, from product design to production. The management of so called end to end customer journey with new customer advocacy department is showing higher standards from supplier to dealer.
The Net Promoter Score or NPS to drive customer experience An improvement in the resolution of product quality issues backed by a stronger and agile product management process, increased cooperation across functional teams better prioritization and faster resolution of key issues. We say this will enable us to reduce the number of claims by 25%, time to repair by 20% and our cost of non quality to a level below 1% 1.5% of sales. I know this is a goal target, yet I am confident that with the 11 initiatives we have run running on will we will have success in this, and we are going to claim leadership in the industry. Markets also means aftermarket. Aftermarket is the center element for both profitability and customer satisfaction.
If this works, the rest will work. We are aiming to strengthen our aftermarket solutions performance with modern e commerce to drive and simplify port sales. We will broaden our product portfolio with REMEM products. We will create a better and stronger attachment offering for our products And digital, as you heard, is growing in importance and will connect connectivity as standard on all heavy equipment and optional on the light products we aim to significantly increase our connected fleet. We have today some 14,000 units connected, in the units and they are generating good insights and value for us to understand how machines are operating and what they can do and how they perform.
We intend to grow this number to 100,000 units. Our connected solutions will help increased value, uptime and productivity and ultimately customer satisfaction. We're also improving our fleet management interface. Example of our product offering will include proactive service solutions, driven by dedicated control rooms, as we say, in North America and in Europe. To remote the Diagnosis services to target an uptime of 95% of our products targeted total cost of ownership, including fuel or 20%.
And finally, increased the productivity by up to 25% through maintenance control features, including, for example, automated blade console and dig for doses. Let's go through the product piece. Very exciting. And you have already seen some stuff here in the streets, which I will come back to. Let's talk about portfolio.
We have projects focusing on innovative, sustainable solutions, as I said, that are meaningful and efficient for the customers and ultimately our industry. In Compact, we have a new miniature concept and innovative dosing created from a conventional compact tracker unit which will be launched in 2020, late 2020, but we will present this one at the trade show in connection with Las Vegas. We will also be launching the new B series of the compact track loaders and the skid steers in early 2020. As you know, we invented the backhaul order. We did.
And over the years over the course of the coming 2 to 3 years, We will introduce a next generation of backhaul orders, while also evaluating different propulsion solutions of this equipment. For wheel orders, we developed our Tetra project loader, and which was unveiled at Bauma in April show, And hopefully, I believe you have the chance to see it outside. And I'm very proud. I've never seen people taking so many selfies of the wheel order before. So it's very positive for us.
This new concept fully embraces CNH And Justice commitment to CNG LNG alternative fuel technology. However, the TETRA concept, as you have seen, represents much more with a futuristic design and cabin tier year outstanding disability and technology advanced features. Moving to the next, at TRODEX betas, a key product for us, part of our strategy for the quarter. We are working intensively with our partner Sumitomo on developments for the e generation and excavators to be launched at the end of next year. Secondly, we will start local production in India in Q2 next year 2020 of these excavators.
As you know, India is one of our core key markets where we have a top 3 position with our current product offering. The market is growing rapidly we are going to be present with distribution and production. And it's a great opportunity for significant growth. We will focus on specific application segments, as I said in the pyramid and geographies to drive our growth. The rental business, as I mentioned, before in North America represents a significant opportunity for us, sold as waste management and infrastructure projects both in North America and Europe.
As already mentioned, India will be a growth for us. Finally, let's take a look at our financial targets. These are aggressive for sure. But as you have seen on previous slide, we believe that
we're on a path together.
We are looking at investing over $1,000,000,000 in our product and service offerings over the next 5 years, which may at first seem low given our sales ambitions. But keep in mind that 30 percent of our products are sourced from other OEMs. So don't so those product investments don't show up directly in this number. As mentioned earlier, we see that investment through the lower margins that we share with OEM partners. We set an ambitious goal to grow our top line by some 50% while tripling our profit margin.
This plan may seem a dossiers, but I am personally fully convinced that we can deliver on this plan. In broad terms, we could break that down by saying about half comes from data 20 simplification and focus on product quality and the balance of volume growth driven by new product and services offerings that will excite our customer base, including our expansion and presence in India. As we move into the execution phase, we are excited and motivated to drive our business forward and participate as an industry consolidator. Thank you very much, ladies and gentlemen. We're now going to break for 10 minutes, I reminded to keep the timing for 10 minutes.
When we come back, we will hear from Garrett who will talk about commercial vehicles. Thank you very much
good.
Alright. Can I
Let us
And gentlemen, can I kindly ask you to return to your desk,
please?
Navali Take me.
Yeah. I I have a reason. Can you return to your desk, please? We are starting Thank you.
Ladies, ladies and gentlemen, good afternoon, and welcome back. And I see that the room is still full packed. And I hope that I can give you more color on the announcements you've heard this morning. On our first strategic investments in the area of fuel cell. My name is Garrett Marks, and I'm president of the commercial and specialty vehicle business since early this year.
A brand in any industry can only develop and grow its presence when it understands and anticipates the spirit of its time. Which is what Iveco and our founding brands have done remarkably well for more than a century. Listing the companies that merged and created the Industrial Vehicle Corporation known today as Evicco. You see some of the most iconic and legendary brands in the early transport industry. Fiads, Lancya, O.
M. Unig, all very proud and very historic names in the early transport industry. They were all founded by visionaries by entrepreneurs who were financial and emotional investors in their ideas and convictions. Around the transportation of the future. Their products and services were truly disruptive and innovative for their time, always crafted around summer.
Giovanni and Yeali, Vincenzo Lancya and many more are still ingrained in our Iveco culture today. Back in 1975, Vico was created upon these very foundations as a combination of different brands, markets, and cultures merging into what was the very 1st large scale European truck group together facing the challenges of their time and the decades to come. Customer centric innovation has always been the most powerful driver in Evoqua's history demonstrated by being among the very first to launch industry defining technology breakthroughs. As an example, in powertrain, Iveco has always leveraged FPT Industries groundbreaking technologies that have since become industry standard in the markets when we play. But then at least I will further expand on this later today.
Iveco today is a full across all commercial vehicle and bus ranges. We are strong in niches, leading in alternative powertrains, with our 2019 lineup fully connected to the Microsoft Digital Cloud. Light commercial vehicles account for over 1 third of the 2018 revenues, and we are a clear leader in the European professional chassis cap segment. The new daily model in 2019, which we have launched in the first quarter this year is continuing this success story. Medium and heavy duty trucks represent 43% of our revenues.
The recent launch of the new InBEC OS Way, our heavy duty truck, prepares the ground for us to regain market share in this heavy segment. The S-ray with its new features, aerodynamic, aerodynamics, connectivity, new caps, features combined with our Generational LNG technology will reposition this important vehicle for the future. And I will share with you later the whole new level to which we are going to take this heavy duty segment very soon. Buses, generating 17% of revenues, enjoys a solid second place in Europe, driven by city and intercity buses. And here again, thanks to our robust and efficient power trains, including natural gas and also full offerings from FPT Industrial, we are very well positioned.
Accounting for about 6% of our revenues, our specialty vehicle business, comprises of Astra heavy duty choritrocks, defense vehicles, and like gears firefighting vehicles. These specialized products satisfy the very specific and demanding missions of our customers when the stakes are really high. We are globally present with a strong European base. But not yet engaged in the North American market, which is now entering the tougher part of the market cycle as shown here on your right side. Regardless of the psychodynamics impacting mainly the diesels, neurodisruptive powertrain technologies will enter the North American market.
And so do we, but more of this later. In terms of market trends, we expect Europe to be close to the top of the cycle with some softening to come soon possibly or likely countered by ever tightening emission regulations in 20,252,030, calling to continuously upgrade the fleets that operate in Europe targeting emission neutrality by 2015, which is a clear goal. Set in Brussels. We feel very well positioned to accept this challenge in our way forward. South America is a mixed bag with strong market growth from very low levels in Brazil, while there's higher uncertainty in Argentina, around the near and long term trajectory.
Overall, however, the South American region is going to recover. The rest of the world has ample upsides for us, which we will explore and target 1 by 1, and this also includes our presence in China. Where we have a strong partnership. When engaging in partnership and collaboration discussions, we seek geographical expansion game changing technology and synergy and scale of our segments, while preserving 1 of our core assets if not the co asset, which is being among the neatest and most agile players in our industry. Global climate change, geopolitical conflicts, democrat, democratic shift, demographic shift, future availability of fossil fuels and the self aware circular economy, all call for a fundamental change in how we operate.
Our industry is experiencing an ever accelerating rate and growing magnitude of change fueled by megatrends such as electrification. Servitization, alternative propulsion automation, and
all
the things you've heard earlier today. We embrace these trends as a chance to redefine and recreate our position in the markets when we play. They represent opportunities for us to be even more customer centric and, I mean, end customer centric, meaning targeting to our customers' customers, not only the fleets we serve. Electric mobility and alternative propulsion are the good deeds you've seen it quite known in this, in this game going forward. We have to become emission neutral or even CO2 negatives with biofuels decarbonizing the air we breathe.
With our CNG and LNG technology capable running on bio methane, we have already paved the way in Europe. Electrification by battery technology will enable the short haul and distribution. While for the long haul fuel cell technology is going to gain momentum for sure. In a way to read approach, biogas and biofuels and hydrogen powered electric trucks represent the only true green solution with 0 impact on the industry, obviously, only if or better when the energy sources for that energy are becoming renewable as well. But we have to start and positively contributing participant in the Circular economy for the generations to come.
Autonomous Commercial Vehicles will follow the path passenger cars as we engage in level 2, 3, and 4 autonomous driving as well as platooning solutions. Always However, with a driver in the cap who has been and will remain a very crucial assets for the fleets in the coming decades. Yet we do not see large scale robo 5, level 5 robo trucks on our streets anytime soon. With the exception of limited safe areas, for example, geofence point to point deliveries, it's a digital chess play that has its purpose in harbors, airports, and in cities on fixed routes. Finally, the future of Inveco, trucks goes hand in hand with connectivity and new services tailored around the customer.
Digital and telematics solutions to real time data, not only offer greater efficiency, predictive maintenance and overall productivity benefits, but they are the key to unlocking a world of new highly personalized services precisely tailored to our customer's video permissions. Our new daily is a fully connected panel then, and the newly launched eVAC OS, where it has closed the gap. To other key competitors in this segment as widely recognized by the public after the launch back in July in Madrid. Digital and telematics solutions, maximize vehicle uptime by conducting proactive diagnostics and taking preventive actions planning maintenance and service interventions efficiently to minimize the number of workshop resets. Our segment mission summarizes all of the above.
We put the driver in our customer's business front and center while exploring the full stack of technology to achieve emission neutrality by 2050. Sustainability, not only for the environment, but also for the driver's job without whom our economy just wouldn't work. We have developed a new meaning of TCO, adding a loop, which you can see here on this page, which has always been at the TCO, has always been the most important driver in our own industry, but it was not enough. We have incorporated all the aspects of a modern transport solution like driver satisfaction and productivity, social responsibility, and sustainability. In the loop.
We have moved from a mere list of expenditures, very important ones around fuel consumption purchase price, residual value maintenance and uptime. Without which none of our industry segments will work in a competitive way to a more comprehensive perspective you see here on this slide. We have incorporated the traditional TCO elements in the overall ecosystem with social economic environmental sustainability to create a loop where all the elements intact continuously influencing each other. This is how we think about sustainability and the total cost of ownership in a circular economy. As previously mentioned, we have a different positioning for each of our product lines, with a significant, but also exciting challenge ahead of us, the repositioning of our heavy duty trucks, which will take time.
For light commercial vehicles, we enjoy a solid market share and probably best in class financial performance with the leadership in Europe in the CAP chassis segment over 3 point halftons for professional customers. In the medium duty segment, our Eurocargo is renowned in Europe and in many export countries for its robustness and versatility. The bus division, I will come back to the heavy duty in a minute, is the example we want our heavy duty trucks to follow. 5 years ago, Iveco BOSS was a challenged business, but thanks to new products, new technology and management focus, we have transformed it into Europe's second biggest bus brand with best in class margins and leading technologies. We now lead in the city and intercity applications because of its innovative net for gas and electric powertrains.
And the heavy duty truck segment is where Iveco has been facing a clear need to reposition and redefine its presence in order to, again, tap sustainable profit pools. This was already started several years ago with the addition of a natural gas engine technology to our product lineup, where we are today, European Leaders with more than 50% share of market. We are continuing along this path with a relentless focus on service quality and connectivity and a step change in electrification. Our strategy is to strengthen the overall product positioning and lineup, product upgrades and adoption of new specs the company by regulatory requirements will drive our investments in the years to come. The strategy develops our strategy to develop around 6 linked and interrelated building blocks or puzzle pieces.
Firstly, in product or first in product evolution, we will continue renewing our product offering with continuous enhancement and new products as we have shown with the new daily the new Inveco S Way and the intercity buses. We continue to focus on regulatory and competitive features, together with powertrains from FPT Industry. Heavy duty truck repositioning is our focus area to fix, and we continue what we have started already, not in a linear, I might say a predictable way, but we will go a nonlinear in a larger, larger transformation. In total quality and eightytwenty simplification, the repositioning of the heavy line and the continued success of our other lines, like the light, medium, and buses, will be driven by total quality and the eightytwenty simplification of our business. We aim to deliver customer and driver satisfaction across the entire customer journey and across the entire life of our products.
Service excellence and aftermarket will continue to be a key decision driver for customers. Our plan is based on where defined initiatives, increasing quality, experience, and the entire spectrum of services, thus demonstrating our customer centricity. While leveraging digital solutions. Alternative propulsion is and will remain a differentiating factor for Eveco. And later, I will come back to all of our first big investment in this journey revealed today.
Connectivity and digital services are already a reality in our segment. And we are ready to offer leading innovative solutions in line with driver and customer needs. On July 3rd, we launched our new Evecos Way heavy duty truck line. It has received enthusiastic feedback, really enthusiastic feedback, from both customers and in this industry media. We with more than 5,000,000 contacts and several hundreds of thousands of views in YouTube in recent weeks, which has been, by the way, for us, this is the record.
And we're gonna build on from there when it becomes about brand awareness in, in the new media. This is helping to drive, obviously, as well, a very positive order book. We already we are really proud of the team which developed this new truck, in less than 3 years and an investment of no more than $250,000,000, of which more only some 100,000,000 were actually external spend. This again demonstrates our roots and culture of being one of the leanest and most agile OEMs in the market. You might take this as a good example for Inveco Science And Art of Engineering, but the science rooted in physics that apply to all of us and the art and grant in our teams to deliver the very best with available resources.
The other building block of
our global strategy is service excellence founded on 4 or 5, 4 key pillars customer centricity is at the heart of all of them. On the product, service and offering, we are focusing on total cost of ownership and uptime along the machine's entire life cycle. On digital capabilities, we are working to enhance consistency and ease of data usage across IT systems combined with telematics data collected from our connected vehicles in the field. We wish to become the easiest to work with and the easiest to innovate with truck OEM by making selected datasets accessible to new partnership ventures thus disrupting the value chains around us. Think of our fleet as APIs, digitally and flawlessly integrating into the changing ecosystem of our time.
In the network, with our partners, we are working on new ways of collaborating with our dealers and service partners in order to move to a real strategic long term partnership. We will develop their abilities as service advisors and are reinforcing both our and their digital interfaces to facilitate and standardize the entire customer journey. On efficiency, We continue to work on appropriate stock levels, introducing automation and artificial intelligence in our processes to accelerate productivity and improve our and our dealers performances. As mentioned, we have been pioneers and are amongst Thank you, and amongst the leaders in alternative propulsion segments in bus, lights, and heavy duty trucks. With regards to CNG and LNG, we currently offer the widest lineup.
And with the introduction of the Eveco SVLNG, we will offer buy far the best performing longest autonomy heavy duty truck in the market with a range of over 1400 kilometers or one load. The concept truck outside gives you a vision of where we want to take this technology in the next decade and beyond. Our forecast in terms of LNG market and the heavy duty truck segment is pretty conservative, assuming around a 6% to 8% of LNG on a total segment in Europe by 2024, with the Evoquel to continue enjoying a leadership position with its 50% market share today. On electric, especially with the Helius brand bus brand, we are currently, which you've seen in the video, we are currently leader in this segment's offering of electric buses. New products are in the pipeline, both for electric vans and electric trucks for the distribution and short haul applications.
Following the prototypes we launched back in 2006 for the Turin Winter Olympics together with other concept studies, evicorn FPT industrial are now entering a completely new era of hydrogen fuel cell electric vehicle technology and propulsion. After having pioneered LNG Technology, and this is important and the development of a European wide refueling network for long haul trucks. With the aid of strong partners, we are once again driving the introduction of yet another complementary game changing technology. While today, LNG delivers significantly lower well to wheel emissions in the medium to long term. Fuel cell and battery electric technologies will deliver the ultimate goal of 0 emission trucking.
With our LNG technology, we have proven to be the European disruptors, taking the lead in industry transformations, including the fuels supply, which is very important in life cycle ownership of the assets we sell. And with regards to the hydrogen and fuel cell electric technology, Enicon FPT industrial are proud and excited to have announced this morning at 6 AM, a strategic and exclusive heavy duty truck partnership with the Nicola motor company based in Phoenix, Arizona. This partnership will accelerate industry transformation towards emission neutrality of Class 8 heavy duty trucks in North America and Europe through the adoption of battery and fuel cell technology. Fuel cell technology is a logical next step to liquefied natural gas powered engines. As it can also of hydrogen.
Hydrogen obviously can also be produced through electrolysis of water powered by green energy, or through can be distributed through pipelines of existing infrastructures. And within this overall framework, Nicholas range of 0 emission heavy duty trucks powered by proprietary, hydrogen fuel cell technology will be the first to market distributing and commercializing vehicles with performance that is app sulatively comparable to diesel trucks. CNH Industrial will take a $250,000,000 strategic stake in Nicola as the lead Series D investor, comprising $100,000,000 of cash $150,000,000 in services, such as product development, manufacturing, engineering, and other technical assistance, as well as supply of certain key components to accelerate the production timeline. The range will comprise the Nicola 1, a U. S.
Class 8 sleeper truck sleeper cap truck, the Nicola 2, a US class, a day cap truck, and the Nicola tray, or 3, a European cap over heavy duty truck. On the other hand, Nicola will contribute technologies, including, among others, class leading fuel cell expertise, E axis, onboard hydrogen fuel storage and power. Electronics. The strategic near term project milestone is the combination of proven Iveco Sway truck technology the bones and the battery electric powered nuclear trap kept over concept with the systems developed in, Phoenix. This new model will be engineered both for the U.
S. And the European market. The testing phase is foreseen for late 2020, while first customer deliveries are expected in 2021. We want to do it right and base our joint work on thorough customer feedback. Inviting them to actively co create and co engineer in clinics starting soon later this year, this groundbreaking new vehicle.
Medium term goals include the industrialization of the Nicola 2, fuel cell powered Class A truck for the U. S. Market, with testing to begin in the second half of twenty twenty one. In the long term, a European fifty-fifty joint venture is envisioned and agreed covering both battery electric vehicles and fuel cell electric vehicles. Launches are expected within 2023, and new Nikola will leverage E Because European sales, service, customer financing, and warranty channels to accelerate access to the European market.
More information and there will be questions, I'm sure, will be shared later this year during a joint press conference Conference to explain this whole partnership in greater detail and explain also the timelines and the products. We are totally excited to partner with, Nicola and benefit from Nicola's founders mentality with a very clear 0 emission intent. This would be a positive addition In terms of product evolution, we are planning to continue on this path of product renewal, and innovation. With new models, new engines, new embedded technologies and new services for our customers and drivers. By 2022, all ranges will have version, and thanks to the partnership with Nicola, okay, we will anticipate by 2 years the delivery of battery and fuel cell electric heavy duty trucks.
We welcome challenging emission targets in the near and the long term. And this is not only the right challenge to approach it in a circular economy. But it will shake up our industry, change supplier landscapes, and enable the most agile and the most focused players to benefit from such opportunities of discontinuity. Our plan, which is shown here on my last slide, foresees over $4,000,000,000 of investments, half of which is product related. And none on this slide, none especially on the right side reflects any benefits from any partnership.
This is an entirely organic plan We base our inorganic optionality I talked about on this solid base case plan, delivering the core of our business as outlined before. In the 1st 3 years of our plan, we expect revenues to be more or less stable across the cycle at around $11,000,000,000 with a focus on profitability, mainly driven by what I outlined around repositioning, product upgrades and cost discipline. We will certainly not ignore upsides to these numbers, but it's important to also refer to the industry cycle maturity in the markets where we play. Thank you. And I would like now to hand over to Annalisa, President, Powertrain.
Thank you, Garret. Ladies and gentlemen, good afternoon. My name is Anaiza Stupelango, and I'm the president of CNH Industrial Powertrain business. As we saw in the video, FPT Industrial Develops Manufacturers and commercialized engines transmission and access for both CNH Industrial segments and third party customers. Established in 2005, FPT Industrial was created with more than 100 years of innovation behind it.
We presented many industry first, including direct injection, common rail and variable geometry turbochargers, for diesel engines, all now industry standards. In 1995, we started developing psychometric combustion technology for natural gas engines and since then, have become the leader in CNG, LNG engine technology for industrial applications. Our focus is 2000 has been on the development of after treatment system, alternative propulsion and fuels. We've attempted and high efficiency after treatment system that allows highly regulated on end of road customer to avoid complexities such as diesel populated filters and external gas recirculation systems. We further expanded our natural gas innovation leadership and we were first to launch a hybrid natural gas engine and a natural gas engine with diesel like performance.
And now we dominate the European market. Today, this innovation leadership result in a superior market position. On road. Gas engine with diesel light performance, battery electric and hybrid power can solve both boxes and like commercial vehicles. Off road, pioneering alternative fuels in tractors and wheel loaders, as you have seen on the display in display in front of the stock change today.
Marine, where we set a new world speed record and power generation, We develop a plug and play solution to minimize the installation cost and OEM time to market. Our cursoryx concept, a picture of which you see on the slide, represents our new way of thinking with innovative technologies and their credible introduction. With the aim of industrializing multiple our multiplication, modular, and mindful solution, our goal is to further expand our portfolio by introducing disruptive engine technologies and 0 emission propulsion solution to meet stricter emission regulations. Our innovation driven approach enable us to rank first in highly regulated countries and second, overall globally. With more than 8000 employees and approximately 100 dealers, we are present in all marketing regions with a significant manufacturing and R and D footprint.
11 plants and 8 R and D centers. In 2018, our product leadership generated sum of $4,600,000,000 of revenues with 70% of sales in Europe fall by the rest of the world with 20%. We are a full liner in all, all road and off road segments with more than what 500 application took over Worldwide emission regulation, with 5 engine families from 55 to 90010 horsepower from 2.3 liters to 20 liters, different architectures, including 3, 4, and 6 cylinder line and V8. With diesel and natural gas version for all application has PT industrial as a supremacy that no one else can match. With this broad engine portfolio and the full liner offering on, on road trade lines, we can power every kind of industrial application in every on and off road power generation and marine segment.
With 58% annual turnover derived from Honaiwe application, we have revenue split consistent with the 65% to 35% global powertrain industry value breakdown. Looking ahead, We believe that the standard product centric approach will not be enough to fulfill future requirements. The marketplace will be dominated by those who have the capability to release unique product and service solution as a result of disruptive actions. 3 main trends will shape the future powertrain ecosystem. New regulations, evolving customer requirements and new technology.
Number 1, From 2025 CO2 emission requirements will be increasingly demanding with global convergence to our highly regulated emission standard bringing key regions such as Europe, NAFTA and China to adopt similar standards. Furthermore, to retain major global cities, have announced 0 emission transport taxes zones. With divergent policy, and we cannot exclude further such local initiatives. These facts are driving the ship the alternative fuels and power electrification. Number 2, customer requirements demand greater productivity, which means, high performance vehicles.
For example, in the last decade, off road performance increased by 25%. Lower total cost of ownership and maximize uptime through added value services. Number 3. New technology introduction where digitalization and smart ability will allow the development of more intelligent engines. Able to perform advanced diagnosis, mission and usage based analysis, coupled with predictive powertrain control.
Connected and smart powertrain components will increase customer expectation and create a demand for advanced technical assistance service. And disruptive methods will be the enabler to increase our leadership. Titoning global emission standard are expanding the highly regulated market, where we enjoy sustainable competitive advantages. Today, this market represents 60% of the total industry. By 2025, they will account for 90% and 30% of the market will have ultra low emission and CO2 requirements.
As an innovation leader, FPT has the natural right to win in a tighter regulatory environment. Hence, we are confident that with this regulation as a tailwind, we can benefit and grow our market share. Also, This emission scenario will generate rapid powertrain industry consolidation, and we are ready to face this future. Given the new requirements and how these new targets will drive the evolution and powertrain system, what will be the discriminating and differentiating factor? And how will this emission targets be mapped from a technological point of view?
To deliver future proved sustainable powertrain solution is the answer. And our mission is consistent with our way of thinking innovation, the ride from disruptive thinking applied to standard technology is the natural evolution of our heritage. As a natural consequence, our strategy is based on a threefold approach, extended products and solution updated and evolved product portfolio and optimized operational capabilities. These have the ultimate goals of offering best in class powertrain, accelerating alternative propulsion technologies and increasing non captive sales. Solution extension will be one of the major contributors to our growth.
From 2020, a significant number of new vehicles and machine will have factory fitted connectivity smart boxes. Leveraging digitalization and connected engines, we are designing a new service model through a multi system and predictive powertrain diagnostics. This new service model will improve product lifecycle management and increase customer loyalty. Our aim is to expand the service offering portfolio in maintenance and repair contracts. Ir Rahman and developing predictive algorithms, enabling remote and preventive assistance, predictive maintenance and paper use.
All integrated in OEM Telematics. This action will both secure our current aftermarket business and double turnover in in David, assuring consistent growth. Furthermore, We will expand our conventional powertrain product offering by launching new engines by increasing verticalization and lengthening of the value chain. For example, we are planning to produce and assemble battery packs to ensure on and off product packaging flexibility. A second building block of our strategy is the portfolio.
In particular, we will invest in diesel and natural gas engine optimization and in pure battery and fuel cell propulsion. To optimize development and investment and reduce customers switching cost and time to market, all new developments will be modular and scalable. Approximately 50% of non captive business growth will be from modular and configurable products. Optimize fixed cost asset and cost management while improving quality is our 3rd strategic building block. We will optimize our manufacturing footprint and target over 85% capacity utilization.
To maintain our innovation leadership in sustainable powertrain technology, we pursue a portfolio approach. This approach allows us to address the greenhouse gas emission challenge from different angles and to contain an evolution towards 0 emissions. Allow me now to elaborate on this approach using the depicted well to will analysis. 1st, we intensively focus on improving the efficiency of diesel engines as diesel will continue to be a dominant on and off road the fuel cells. Also for the next decade, given its versatility and the distribution popularity.
Secondly, we continue to focus on natural gas as this technology is already thick and widely available alternative, which reduced the CO2 emission by up to 92% versus diesel, when using biomethane or even negative values when generating it from manure. As presented by Derek, natural gas engine technology is an essential component in the circular economy and receive a stronger septons and support from customers. Thirdly, we invest in immobility both on the basis of battery electric propulsion and hydrogen fuel cell. When applying renewable energy sources emobility is the only technology with the potential to be 0 carbon from well to wheels and also carbon neutral from tanks to wheel. As Garrett outlined, battery electric vehicles are gaining share her in light duty application while hydrogen fuel cell are anticipated to become a reality.
For heavy duty applications and long distance haulage in the near future. In internal combustion engines, applying both standard and disruptive technologies and in 0 emission propulsion solutions. On the basis of our our client portfolio approach, our product development roadmap drives the 3 proposition forward. To increase the fuel efficiency of diesel and natural gas engines, We further focus on improving the engine design and develop a new aftertreatment solution. We also work on disruptive technology for internal combustion engines.
For long haul heavy duty application, this technology has the potential to reduce CO2 emission by 30% compared to diesel engines, while also providing product costing, payload advantages compared to electrified engines. As Hubertus mentioned in this opening comment, we will announce more details about the this exciting development shortly. At the 3rd pillar, we focus on next generation powertrain for 0 emission vehicles. The 2018 IAA and Nova Truck exhibition, if they conduct between Dassel and Veda, a fuel cell powertrain concept, which has been recognized as tough leadership and hence today has been awarded with the European community development grant. Together with our partners, we will drive this 5 year project under the umbrella of the European Union Horizon 2020 program for research and innovation.
In addition, as Gary mentioned, the partnership with Nicola will further reinforce our fuel cell capability and support our leadership ambition in this future technology. But I would like to dive a bit deeper into our position on NDF Fort. We have invested in natural gas engine technology. This is a crucial development step on the evolution pathway from diesel to 0 emission powertrains. Natural gas not only reduce CO2 emissions, but also nitrogen oxides by up to 65% Particulates by up to 98% and noise levels by up to 80% compared to diesel.
Natural gas also brings total cost of ownership advantages to the lower fuel cost compared to diesel. As already mentioned, AFP Industrial pioneers, the geometric gas technology in 1995 covered by 22 patents. Today, our leadership is universally recognized. Today, we have sold some 50,000 units with approximately 70% market share in Europe. And we have the widest natural gas engine portfolio in the industry.
As leader in LNG and CNG and biomethane propulsion for on highway application with the a clear path for off highway adoption. As illustrated by our 2 natural gas concept. As a consequence, of all the development priorities, which I mentioned before, we see ourselves in and our sending position to expand our business and grow our top line. Compared to today, in share of power training, the total value creation of a vehicle will increase as fuel efficiency, adherence to stricter regulation and sustainability became significantly more important as key product characteristic and selling propositions. In this process of verticalization, business enlargement through auxiliary products and solution is one pillar to enlarge our current core business.
Going forward, you offerings for e mobility solutions such as battery packs, are a second pillar to bring further top line growth. Finally, aftermarket and telematic solution, which further improved customers productivity are a tour pillar for growth. As these services will open new revenue stream for us. As a result, by 2024, we are targeting additional value creation where approximately 35% of net sales, which is well balanced across the described pillars. With our focus on value creation and superior solution, we are targeting to expand our current customer portfolio some 100 OEMs by an additional 50 OEMs.
Currently, we are already in a good negotiation with around 50 end of this new customer and feel very confident about achieving our growth plan. Let me now summarize our part of our plan until 2022 will be transitional. And particularly in terms as we invest heavily in developing new solution and products. We will rebalance our product mix and in this phase prepare the company to sustain growth in the 2nd phase of the plan. Further to this action, we will also work on customer based diversification thereby increasing business resilience to offset potential industry changes and regional cycles.
Revenue will grow 17% compared to 2018, with EBIT 6% higher versus 2018. Supported by the action in the aftermarket solution, digital services, verticalization, and continuous attention to cost optimization. From 2022 to 2024, own new product and service come into fruition, and our alternative propulsion offerings enter the market We are targeting revenues at over $6,000,000,000, an increase of 33% compared to 2018, with a 7% compound annual growth rate and EBIT margin hitting double digits. This revenue growth will be generated and sustained by another all increase in investment. The majority of which is relating to the megatrend as such as regulatory trends, alternative propulsion and digital technologies, which impact our business alongside product and service software expansion.
Over the course of the 5 year plan, we expect to invest $1,900,000,000 with an average of 1.2% increase in our investment to revenue ratio compared to previous levels from 5.9% to 71%. And this is in line with our peers. Also, there are many external factors which make the whole ad challenging. We are, however, fully committed and well equipped to deliver on this ambitious plan. Thank you for your kind attention.
And now I leave the stage to Adona, President Financial Service.
So good
afternoon, everyone. I'm Madeline Chiza. And since 2013, I'm heading the Financial Service segment. I'm going to provide you today with a concise overview of our business as well as the main strategic initiatives for the plan period. So from Page 2, where we have a snapshot of what our financial services today, you see we have a portfolio of $26,300,000,000 at the end of 2018.
Including 4,800,000,000, in non consolidated joint ventures with primary banking institutions in Europe. Those are BNP Paribas and Santander for Spain. The portfolio is well diversified across regions, as you can see from the slide, and the North America portfolio is exclusively composed on agricultural and construction receivables, where most of the on highway portfolio is in Europe, 90%, ninety-ninety two percent of it. A significant part of this on highway portfolio is, in the JV, it's guided by the non concentrated JV. And if we look at the portfolio split by segment, the off highway business accounts for 75% of the total, and our penetration rate is 45% 44% in agricultural customers and more than 30% in commercial equipment.
Final customers are predominantly supported with loans and financial leases and to Alexis's extent, 2 operating leases offered by CNH Industrial Capital. If we look at the whole highway business, more than one out of, every 4 commercial vehicles is sold with a financing instrument provided by the captive organization. And again, this is mainly to the joint venture. Our mission is continue to be providing sustainable financial solutions and supporting the sales of our brands, to dealer and and final customers. While governing the credit process for the entire company and maintaining superior portfolio quality.
We do so, as you can see, with our brands, CNH Industrial Capital and Evaco Capital, and with multiple business models. Ranging from on book financing to JV to vendor programs with primary banks, depending on fund availability, size of the market, and regulatory requirements in individual jurisdiction. Talking about funding, while we have increased the amount of unsecured funding through bond issuance in the Americas. We remain one of the largest originations of asset backed securities in the equipment space. We are also relying on a solid and mutually satisfactory experience with our long term JV partners in Europe.
Captive finance as a central role in the relationship between dealers, OEM, and customers and connectivity on our equipment and digital enabled service can only increase that focus by providing dealer and customers with a seamless experience while enhancing our commercial segments in TMC with customers and customer behaviors. New forms of ownership and usage but also becoming more and more common for professional user of equipment, and we are addressing the nascent need with digital platforms. They're all the captive that Beyond provided a regular payment to the customers and increasingly includes insurance and services that have been integrated with connectivity. This provide a lower cost of ownership for our customers, while leasing equipment sales, maintenance, and renewal cycles. Financial service can leverage a unique knowledge of CNH Industrial Equipment and a continuous relationship with our dealer network pending internal and external services, including partnerships with bank and insurance companies.
Proximity to the industrial segments, dealer and customers, understanding of the respective needs and the ability to provide the right products are distinct elements of our success. Following on from the following on from the previous slides, digital apps are one of our key transformational drivers and are widely used in our interaction with dealers and custom digital process, enable a streamline of operations, including among others, a signature of contracts, remote audit of dealer stocks, and online communication with our collection agents. We are conducting a significant upgrade of our IT platform in North America which will allow increased use of APIs in a variety of situations. Most of our dealers in distributor financing operations are all, are run on a proven and flexible ERP platform. This allows for a quick and reliable implementation in new legal structures if and when This will be needed in the frame of our corporate portfolio actions announced today.
Dealer and distributors for off highway and on highway segments we'll have continued assets to our financing facilities from day 1 after the expected company's operations. As Alana before, Financial Services is continuing geographic expansion to address the global sales of our company. We successfully started fully fledged financial service operation in our Off Highway business in India in 2018, and we expect to restart retail financing for the on highway business in Russia in 2020. We are also planning to strengthen our presence in China, where we today operate through a vendor program with a strong local player. Our final objective is to geographical coverage of more than 90% of CNH Industrial equipment sales.
Now let me walk through the financial, service targets for 2024. By the end of the plan period, our portfolio will grow by more than 30 percent to $34,000,000,000 on the back of our net sales growth in our industrial segments, continued geographical expansion and significant growth in our penetration, moving from 44% to 50% in agricultural business and from 27% to more than 30% in commercial vehicles. In terms of profitability, our target is to maintain our profit on a range of 1.8% of managed assets, cycle. So touching $600,000,000 mark on pretax profit in 2024, up 50% from 2018. So this concludes my presentation.
And now I would like to invite Max Kiara, our Chief Financial Officer, to the stage. Thank you.
I'm pleased to share the same backup plan as the donor. With my paper. Ladies and gentlemen, good afternoon here in New York City and, connected through the webcast. I'm Mats Cara, Chief Financial Officer And Chief Sustainability Officer of CNH Industrial NV, and I'm going to wrap up the presentations illustrated so far by the CNH Industrial Management team into our Transform to Win Financial targets at corporate and segment level. And we'll also address certain key highlights related to our plan to separate our business.
As As a precautionary note, I would like to call your attention on Slide 2 of the presentation recapping our key disclaimers. In particular, with this SPP presentation, we are starting to report return on asset metrics, as you have seen from the previous, presentations. And specifically, we will show a ROIC calculation for our combined industrial activities and a return on asset for the individual segment reporting. Such that investors can appreciate going forward the efficient use of the capital invested into our business. Finally, we have also highlighted in the slide our assumptions on industry for an exchange and macro environment for the planned period.
In the last three years, CNH Industrial performance have substantially improved and successfully led us to the recognition of the investment grade rating. Industrial Activities adjusted EBIT margin 2016 to 2018 was up 150 bps to 5.7%. Demonstrating a resilient performance despite a persistently challenging macro and industry environment. We have 2 very strong business in agriculture and power train, and we see the recovery underway in construction and commercial vehicles. We have also diligently worked to normalize the below the line items namely interest expense, foreign exchange expense and income tax rate to further accelerate our bottom line improvements.
Moving to the balance sheet. We have successfully extended the maturity schedule of our industrial activities between 20162019 from 3 to 6 years, while successfully de leveraging our industrial activities to party debt. We have maintained an healthy liquidity buffer, which was further improved by the recent successful renewal of our revolving credit facility. Consequently, we have achieved investment grade status with the 3 tier 1 rating agencies. Finally, since company inception in 2013, we have returned cash to our shareholders with $1,500,000,000 cumulatively paid in dividends, and $300,000,000 cumulatively paid in company shares buyback.
On Slide 4, before going into the financials, allow me to wrap up our sustainability targets to substantiate the aspirational goal that have been highlighted by Lady Hayes was very clearly at the beginning of our presentation. After having constantly been ranked at the top in the Dow Jones ustainability Industries in the last 8 years and several other recognitions, we have now set 10 challenging targets for 2024 to illustrate our festering processes, logistics, and the usage of our vehicles. We are developing a decarbonization strategy to shift towards a more environmental friendly product portfolio. And our goal is to have 25% of our product portfolio available with natural gas powertrain. Regarding occupational safety, we take preventive and protective approach to minimize the risk of injury in the workplace.
Our 2024 target is to have the employee accident frequency rate over the 10 year time frame, while targeting 0 serious injuries. Moreover, we recognize the importance of minimizing the impact on the environment through a life cycle approach. Active engagement with our stakeholders worldwide is crucial for creating share value over the long term. Our sustainability target is aligned with the 17 sustainable development goals set by the United Nations for 2030. This is how we intend to continue to work for a better sustainable future.
Let me now switch gear and illustrate the SVP framework where ultimately we expect to realize our full potential through profitable growth, improve earnings resilience, and unlocking significant shareholder value. Our SVP has been initially developed with a strong focus on individual segment initiatives and functional improvements. In this regard, we have adequate capital resources to implement investment, commitment in each one of our businesses and execute on our plan ambition. In the execution of our plan, we will not compromise on our proven earnings resilience as well as our commitment to maintain a strong balance sheet and to further improve our credit rating. We have a clear path to continue delivering cash returns to our shareholders.
The outline plan will lead us to achieve a best in class performance as detailed on Slide 6. We project net sales of industrial activities to grow with a CAGR in excess of 5%, which is above GDP trend and above industry average. Translating into a net sales target of $35,000,000,000 in 20.24. As a result, we back to more than double our industrial activities adjusted EBIT, achieving a margin of approximately 10% and an adjusted EBITDA incremental margin performance of about 25 percent over the 5 year timeframe. Between 20202020 4, we expect to generate cumulative operating cash flow of $11,000,000,000, helping us build a net cash position of $1,700,000,000 by the end of the plan period.
And in doing that, we expect to achieve an industrial activities net debt free position by the end of 2021. We have prepared a fully invested plan capital expenditures equal to 3.7 percent of net sales on average annually from 2020 to 2024. A total amount of $5,900,000,000 will be invested in our business with CapEx amounts consistently above D and A for the next 5 years. Notwithstanding the higher capital intensity, the ROIC of our industrial activities will grow at an approximately 10% CAGR over the period to achieve 20% the net income will grow 2.2 times over the period to $2,700,000,000 and adjusted diluted EPS We'll move from $0.86 per share, which is the midpoint of our 2019 guidance to $2 per share implying an 18% CAGR during the period. All these improvements will allow us to move closer to our best in class peers.
Turning to Slide 7 as a recap to the segment presentations. Please note, adjusted EBIT margins by segment indicated here, here, are before corporate costs and eliminations, corporate cost allocations and eliminations. In light of the portfolio Cision announced today, it is important to go through the individual segment targets to ensure accountability over the long term. Here are the 5 year targets by business. The agriculture business will reach in a mid cycle industry scenario at 14% adjusted EBIT margin with a return on asset of 33 percent by 2024, thanks to the realization of the various initiatives presented before by Derek.
Major drivers in our top line growth come from increased penetration across our product portfolio, supported by improved product mix, and the new revenue pool in aftermarket and emerging digital solutions. In construction, both adjusted EBIT margin and return on asset with 3 to 9% 24%, respectively, by the end of the plan, and this represents the most ambitious performance improvement driven in large part by our eightytwenty simplification execution and market share recapture actions, including the launch of the the 10 new products that, as Carl Gustaf mentioned during his presentation. Net sales growth generated by penetration in developing markets such as India and South America and by aftermarketimprovedivity. The commercial and specialty vehicles will move then, will more than double adjusted EBIT margin to approximately 7% driven by differentiated strategy focusing on alternative propulsion and driver centric approach. Topper and CAGR is only 1% as we have modeled the industry to soften in Europe in the next 3 years.
Before stabilizing around the long term average. We expect to double the return on asset to 14% by 2024. Powertrain will expand its adjusted EBIT margin to 10% with a return on asset of 32% by the end of the plan by completing the transformation to a full fledged alternative propulsion solution provider, including natural gas, battery electric and fuel cell powered vehicles. Moving on to Slide 8, in a nutshell, the transformed to win execution is targeting the achievement of a superior ROIC, EPS, and TSR above their average. With the aim to create solid and resilient foundations of our plan targets, We have initiated approximately 30 strategic initiatives per segment with delegated execution of different layers of the organization in line with our management metrics.
These initiatives are clustered into the 3 categories: grow, performance simplify, optimize, as we have been able to appreciate from the segment presentation illustrated before. In particular, performance simplify and optimize initiatives, are also enabling our efficiency program, which I'll talk about into our efficiency program that will support our transformed to Win Strategy. The efficiency program is targeting a lower operating cost structure and an optimization of our asset base by utilizing 4 operational gears to set a better environment for the initiatives to run faster and cleaner. First, as a reminder, the rollout of our new organizational structure was started in January 2019. In a subsequent effort to optimize the span of control and reduce organizational layers, we expect to achieve a best in class and talented organization that fully shares our objective under this chapter have already started in the second quarter of 2019.
2nd, the thorough analysis of our fixed asset will lead to a 10% optimization in our asset base and encompassing manufacturing plants, R&D centers, parts depot and commercial premises. 3rd, we are also looking to optimize the efficiency of our current assets particularly in our pre owned truck base in light of the successful launch of the new generation heavy duty truck platform as way, and as a way to foster its successful market penetration, we have identified specific actions that our commercial organization is committed to achieve. Lastly, as already communicated as part of our eightytwenty initiatives, we are rationalizing our art dealer network to create in class service capability, which will translate into an enhanced customer experience and increase profitability. In totality, these initiatives would result in 1 off charges of between $450,000,000 $500,000,000 the impact of of the transformed to Win strategy with full run rate realization expected by 2022, which is our midpoint in the plan. On slide 10, during the preparation of our SVP with the aim to align the organization's goals to the strategic goal of creating a superior shareholder return, we have also introduced a new metric TSRI in order to operationalize the TSR concept into a notiable tool for management decision and performance.
SRI complements our key decision metrics for our strategic business plan in evaluating the full portfolio of our 150 plus strategic initiatives, allowing us to select and prioritize the top 50 value accretive initiatives, we generate the highest return to our investors. This approach will consent us to further instill shareholder value thinking into our organization, processes and ultimately decision investment decisions by thoroughly considering how each investment contributes to our future enterprise value and generates cash Consequently, TSRI has been rolled out as additional performance metric beyond the traditional NPV IRR and payback to assess investment decision and effectiveness. Let's now transition to Investment And ROIC on Slide 11. We will invest $13,000,000,000 to 3.5% of net sales in 2020 and stabilizing at around 3.7% in the following years. Research and development costs will experience a more linear path with a steady growth from 4% of net sales expected in 2019, to 4.5% average during the plan period.
The plan stats just described will bring us in line with peers' best class historical investment levels. Investment in our product roadmap will represent the largest portion of our efforts at 60% of total. Followed by dedicated investment in megatrends, representing approximately 20% of total, among which we will cumulatively invest more than 1,000,000,000 in digital solution, about 1,000,000,000 in alternative propulsion, and about half a 1,000,000,000 in autonomous vehicle technologies with the remaining investment essentially allocated to maintenance, ICT and capacity optimization spending. The investments in both R and D spending and CapEx are based on market projections of our current pipeline of product launches and in committed capital included in the plan, depending how the market perform, especially in the earliest of the plan, the investments will flex up or down across the portfolio and by segment. Notwithstanding this higher capital intensity, our ROIC of industrial activities will grow over the period to achieve a total of 20% in 2024.
On the next slide, number 12, I would like spend a few minutes explaining how the initiatives will play together to drive a superior financial performance at operating level through the next 5 years. This chart represents a walk of our industrial activities adjusted EBIT through the period of 2018 to 2024. First of all, we have separated the plan into 2 superior is clearly characterized by distinctive drivers of performance to increase management accountability. In the 1st phase ending 2022, the majority of the commodity 800,000,000 adjusted EBIT improvement will come from self help initiatives rooted in perform and optimize that together will positively contribute $600,000,000, allowing industrial margin to improve by 200 plus bps, to about 8%. Hence, this period is not highly relying on growth initiatives.
With the management commitment, commitment to execute on the plan expressed today by my colleagues, I'm confident we can achieve this target, delivering a positive impact starting with 2020. While in the latter part of the plan, we expect that the grow initiatives in which we have invested into since the beginning will commence to pay off with a positive contribution of about 500,000,000, complemented by a second layer of perform initiatives on our cost structure of about 300,000,000, supporting profitability to reach almost 10% adjusted EBIT margin by 2024. In a nutshell, our plan is realign realizing its full potential in the latter part as a function of the projected superior growth initiatives. Foster by the ramp up of the investment curve early on in the plan and building on the more agile and lean environment generated by the simplify and optimize initiatives in the first part of the plan. Moving on to the slide with adjusted net income adjusted diluted EPS targets.
Bottom line, we expect an acceleration in our earning trajectory fostered by a sound level of investment for growth with adjusted net income to grow to 2,700,000,000 achieving an adjusted diluted EPS of $2 per share by 2024. In an effort to provide enhanced visibility to our investors, in the interim period through the effective separation of our businesses, we are also identifying an adjusted EBIT initial target for 2020 of $0.95 to $1 per share with an expected year over year improvement of more than 10% versus the midpoint of our 2019 guidance. On Slide 14, our industrial activities cash flow. We expect to continue to reduce our net debt of industrial activities during the timeframe of the plan and become net debt free by the end of 2021 on the back of a sound operating cash flow generation defined as 2 cash from operation before CapEx. Operating cash flow and free cash flow trajectories will be more pronounced in the latter part of the plan, mainly driven by an increase in adjusted EBITDA, up 30% between 22% 24% when our early investment acceleration will pay off.
Further reinforcing our position for a stronger investment grade rating. Despite an increase in working capital requirements, as a result of our revenue growth trajectory, our plan builds on initiatives like eightytwenty and asset optimization to improve efficiency of our current assets. Moving on to next slide, we have highlighted the main initiatives we will entertain to strengthen our balance sheet as follows. First, we expect to continue delivering gross debt in our industrial activities concurrent with our objective to further improve our rating. 2nd, we expect to maintain a strong liquidity level at 1,000,000,000 by 2024 to protect our balance sheet and support in organic and inorganic investments.
3rd, we intend to launch an amortization program of our 1,200,000,000 US pension plan, which is fully funded today, with the aim to de risk the plan going forward and expect non cash, nonrecurring, pre tax charges of about 300,000,000 over the period. While we plan to contribute cumulatively 200,000,000 during the plan period into the UK, pension plan. Lastly, due to recent sustained pretax profit achieved and the expectation of sustained profitability the future. We anticipate the recognition of deferred tax asset in certain key jurisdictions, at least 500,000,000 of which will happen in 2019. As a result, we expect to further stabilize our tax anticipated to be in the mid-20s range towards the end of the plan.
Turning to Slide 16 now, I would like to talk about our capital allocation priorities and cash deployment strategies. First, we see the continuous strengthening of our balance sheet to ensure a sound level of liquidity during the entire plan to constantly support our business needs and further improve our credit rating. 2nd, we want to foster growth via the execution of our organic investment strategy in megatrends, and new product service offering for a cumulative 5,900,000,000. We expect certain resources to be dedicated to specific bolt on acquisitions, complementing our product portfolio offering, and or to leverage on new strategic opportunities as we have just announced today. And lastly, we want to protect the return of capital to our shareholders through a consistent annual dividend growth of 18 percent CAGR and opportunistically through the execution of our buyback program.
These three priorities are equally important in our mind to maintain consistency with the stated goals of our Transform to Win strategy. We consider our strategic business plan as ambitious and yet very robust. In our base case, a assumes a degree of achievement of results for our initiatives of 60% of its full potential on average. Factoring in our view of the cycle in each of our businesses. We have run several simulations and alternative scenarios at various degrees of industry demand levels and initiative effectiveness to test the plan robustness.
As an example, looking at the left hand side matrix, flexing upwards the execution effectiveness from the 60% planned baseline could offset industry demand deterioration from the mid cycle levels that we have assumed in the plan. Conversely planned robustness can be assessed also from a perspective of the portfolio of our initiatives, whereby some may hit and some may lose. The matrix on the right hand side shows the offset potential among the various initiatives to deliver our, on our plan adjusted EBIT target. Let's now turn to Slide 18 to examine in more detail our plan for the separation of the businesses. Our intention is to separate the assets of CNH Industrial in the highway portion of the business and the on highway portion.
By doing this, we will unlock the fair value of our portfolio. As Hubertus mentioned, we are modeling specialty vehicles to stay with off highway business due to them being impacted by essentially similar cyclicality macro and megatrends. The foundational criteria put in place for this to happen are starting with the high risk business retaining investment grade status as well as the on highway business maintaining an appropriate and efficient capital structure and liquidity position post spin. We can preserve operational effectiveness by structuring a long term supply agreement on powertrain related components to off highway, and by guaranteeing continuous financial services support to both entities as a clear competitive advantage in tailoring the financial product offering to our customer needs. The complexity of this spin off is supposed to be modest as our segments are already are very much stand alone businesses also from a manufacturing footprint point of view, and the corporate umbrella is relatively lean.
In addition, the management of the company has been exposed to similar circumstances in the past and is accustomed to work in short service situations. Turning to Slide 19, we have here some extra details on the transaction. The company intends to adopt a pro rata location of on highway shares to existing shareholders. We expect the transaction to generate several benefits among which a dedicated management focus to deliver higher TSR, attract a differentiated investor base, and the preservation of the operational synergies within each individual business, with limited dis synergies caused by the duplication of corporate overheads. We have also hired selected advisors to help us proceed forward expeditiously towards our goal of completing the transaction January 1, 2021.
Having the separation of the entities effective at the beginning of a new financial year, will allow us to avoid redundant and resource intense financial reporting In conclusion, the Transform To Win Strategy will lead us to our 2024 targets by ensuring solid and into new technologies, robustness of our earnings and cash flow and a disciplined capital allocation. By leveraging the building blocks underpinned by these key strategic drivers, the company will be able to reach the 2024 plan targets of 20% right $2 of adjusted diluted EPS and a TSR above our peer average. While the plan is focused on mid cycle aspirational targets to be achieved over the next 5 years, the ultimate decision to separate the business will not represent a distraction and the focus of our management team will be to deliver on the plan from the get go. In time, we firmly believe that our initiatives are planned well with sufficient buffer and that the execution of the strategic initiatives will benefit both off highway and on highway beyond the spin off Thank you very much for your attention. And I would like to invite Hubertus back to the stage for his closing remarks.
So thank you very much Max and, hello again, and thanks for your patience. It has been a very, very long morning, but we hope a very interesting one. Before we go into the Q And A sessions right now, I just want to take a couple of minutes to review the key highlights from today. With our Transform to Win Strategy, I hope that you agree with us that we are delivering on our purpose and that we are truly powering sustainable transformation for all our stakeholders. We are transforming, as you can see here, CNH Industrial Tour realized its full potential.
We set ourselves robust targets. We have clear priorities and we have initiatives, that can deliver. And we have a relentless organization, upset, set it up to that guarantees the flawless execution of all our initiatives. In parallel, as Max has said, We are transforming our strategic portfolio, and we will execute on the spin. Let me briefly talk about each of those elements on this slide.
First, let me iterate the robust targets, 20 percent return on invested capital, more than doubling the EPS to $2 earnings per share and and above average total shareholder return. These are the financial metrics you should take away. We've also said very clear set of priorities and targets for our initiatives and I talked to some of you individually already, and I hope that you agree that's very helpful to basically cluster them into the grow performance, simplify and optimize categories. Because that also helps you to track us a little bit. To implement our strategy, we have set ourselves both an organization and processes will allow for a very, very efficient execution.
We have a strong governance that organizes and basically ensures a drumbeat within the organization for those strategic projects that are the enablers for the success. We basically review every existing and new strategic initiatives with our internal total shareholder return concept that has been outlined by Max And finally, we continue to align our short and long term incentives of this plan with management incentives because we do believe that this consistency is very, very important. So over the next 15 months, as Maxwell said, we will deliver on this transformation of the portfolio. We will share, as you see that after the announcement today, the leadership position for the off hire for the on highway and the Highway companies round about in the beginning of next year. We will then have an extraordinary shareholder meeting where we hope that our shareholders of course, supporting the spin.
And then in the second half of next year, you will see the 2 separate companies being on a roadshow perhaps we have similar events like this today by the end of 2020 with a view to be live as 2 publicly traded companies in the beginning of 2021. And finally, I'd like to remind us all that the Transform to Win Strategy will create 2 global leaders in their respective fields with the world class portfolio of leading brands and a vision to feed build, move, and connect and power the world. So to summarize for you, the investment thesis of this plan is really 1st based on top line growth through innovation and disruption, as you have seen with the fuel cell trucks, It's about margin improvement secondly through performance and simplification initiatives. And thirdly, it's a story around unlocking the portfolio value. And all of this, as you can see here, is based on a very solid plan with very, very clear accountabilities and I hope that you experienced that today a very, very aligned management.
We know what we have to do and we know that we can deliver. So going forward, we want to be seen as the creators of superior stakeholder value. Now before we start, the Q and A session. I'd like to take a moment and thank all our employees here in the room, but also the hundreds and thousands that are watching and listening in right now. And I have assure you, they have worked tirelessly and relentlessly in order to develop the strategic plan and to stage today's event, and they let us shine today on stage.
And therefore, I asked my Jack colleagues to give them a big round of applause.
Going forward,
Thank you very much. Going forward, we will be hosting various conferences and roadshows. Actually, we start tomorrow with Evercore, I guess, Max, right? So please reach out to our investor relations team, Federico, and you're going to be available for everybody who is interested to have a meeting or call we're going to be very, very open to your calls. And before I now turn it to Federator Nacho to basically open it up for Q and A sessions I would ask you to give us a couple of minutes.
We're going to rearrange the deck here, so to say, we're going to get chairs on. And, we're going to have the 2nd presidents with me here on stage. Also Suzanne is our chairperson. So we're going to have half an hour 45 minutes Q and A sessions. And as always, we would allow one question per participant and a potential follow-up question depending on the time.
And with that, thank you very much. One very, very last word I could have welcomed many people today, but there is one person, which is very, very important today, and that's our largest customer. It's the CEO of Titan. It's Dave Meyer. Where are you, Dave?
Where is he? Selling selling more than 1,000,000,000 of our wonderful equipment in America, but also in Europe and they feel very happy that you're here today. And I'm sure they're going to be also questions for you, but you're not allowed to answer today. Thank you very much. Give us a couple of minutes, sir.
Thank you. Thanks for coming.
Our world is changing. It's transforming right in front of our eyes. We see an increasingly urban world and ever growing population. We see our lives sheets by technology. And we see changes in our documents that we must face responsibly we also see a world of opportunities a world where new technologies allow us to reinvent ourselves Where digitalization and automation help us to serve and connect people around the globe.
A world which enables us to feed? Build, power, and connect. And we see a world where our industry leading innovations enable us to develop groundbreaking technical solutions solutions that help to make lives more efficient, more sustainable, more preventive
and safer.
Our world is changing, but we are helping to transform it for the better. A transformation to win. For today, and generations to come CNH Industrial, powering sustainable transformation.
So, for the benefit. Absolutely. Good.
I'm ready.
We're ready for questions.
Hi. Good afternoon. She skipped it from Stevens,
over here.
First question would be, what's embedded in the EPS guidance for 2020 in terms of the end markets? How you're thinking about ag versus construction and trucks? Thank you.
Yes. So we normally don't give the guidance out. So such early, So I'm not going to seminate the entire story here, but basically, we anticipate the situation not to move far away from where we are today. So we have benefits expecting to come from new product introductions with carryover impact into next year that will definitely drive a positive trajectory in our earnings. And we also have the benefit of this eighty-twenty initiatives and the other self help initiatives that we are in process of launching that will also provide additional benefits into next year.
So no improved end market guidance for now.
So would you be able to just clarify? Is it mostly being driven by more of it being driven by expenses or revenue growth. It's primarily self help.
Yeah. Hi. I noticed in the small print in the CFO presentation that the 2025 targets are based on hitting end markets at mid cycle in that year?
Yes.
Mid cycle over the planned period.
Can you explain exactly what you mean by that.
And That we looked into the 15 to 18 year long term average of TIV development for each segment in each industry. And basically, on the majority of our segments, we are below those lines. So it's a mid cycle plan. Fundamentally with very few exceptions. We have some markets in compact equipment, for example, in North America, is running above its long term average, and we expect the curve to flex down a bit, but not going below the long term average over the plan period, but there is something that is important for us to consider is that we are particularly active in the agricultural penetration in that business.
Which has been dramatically down to the last few years in livestock. And so the maybe demand is maybe moving down, but there is a potentially positive mix coming our way.
And to give more clarity, we basically have per segment as you have seen the positioning of our individual regional segments into the cycle and the size of the bubble gives you the importance of the business to us. And as Maxus said, we believe that in the course of the next 5 years, we're going to be on average mid cycle.
But do
you have another question?
Well, sure I understand, Europe truck?
Is that peak?
We have projected in flying in, Europe, both for light and for heavy for the next 2 years. And, and then the curve to flex below the long term average.
Which is the reason, by the way, why the commercial vehicle, truck business as we project kind of flattish. It has a 1% CAGR over the plan period. But I think noteworthy what we have said is we do believe that we will disrupt the European and the American truck market due to the partnership with Mikula. And there might be even better more fantasy on the top line, which we'd have a little into this plan purposefully.
Okay. And the penetration on alternative propulsion will play an important role in shifting the mix with the end of demand. Yes.
And on the front end of propulsion, there was one slide. I hope you saw that, we've not gone crazy on the LNG penetration in Europe. We modeled in a 6% to 8% Garrett said 7% on average, which I believe is extremely conservative given the high rate of adoption that we see right now in Europe. And if you're considering that China moves to 20 percent LNG penetration in the next year, I think there's a lot more to see in Europe, and we are the leader of that one. That's also not factored in his fantasy in the top line growth for the commercial vehicle side.
Steve Fisher, UBS. Thanks for the presentations today. At some a couple of points during the presentations we heard references to the targets being bold. Well, I think one of your executives said aggressive. What aspect of these targets And this plan, would you consider to be aggressive?
Is it more the growth side of things? Is it more the self help plan? Some combination of the overall numbers?
We believe it's a good, it's a good balance. Is it aggressive? No. We believe it is it is an ambitious yet achievable plan. I think we set this throughout.
We feel very, very confident that we can deliver on that plan. There was one slide in the presentation that probably answers your question with facts that was presented by Max, the colorful slide, where you kind of see where we position that plan. In that plan, we're assuming that we're only achieving 60% of our initiatives. And we kind of so I think that gives you a little bit an idea how much better we can be and how we can flex that plan. But we honestly believe that with the robust work that went into that development, And again, it's not only the people you on stage.
We had hundreds of people developing that plan, and we have real activity. So when we go out of this room here, we have, in every segment, 30 key projects that are worked on and that we are tracking, and I said this in the end, So we've really built up a very, very good strategic monitoring that we feel very confident that regardless what the market environment is going to be that we will deliver on this plan, specifically since the 1st years are really self help initiatives where we perform and simplify our operations and optimize our capital and asset structures.
Thank you.
Welcome. Perhaps from the back there. You touched on this in
the presentation, but I wanted to ask about the timing of the payoff from R&D, whether you received the full benefit of the investment the bold investments that you're making in the back half, whether it's after. And if there's anything in the pipeline currently that's going to help your margins over the next 2 or 3 years, you feel about the spending that's been done in the last 5 years prepping you for now?
Whatever is in the pipeline right now is reflected in our 5 year plan, obviously. Yes, there are initiatives that will have a shorter payback that will be, let me say, fully at run rate by the time we get to the 2nd part of the plan. There are other initiatives that have a longer tail, which will continue to provide benefits beyond 2024. Such, for example, in the transformation, to the alternative propulsion, a full fledged benefit on fuel cell.
Yeah. But I think we also said this in, in my opening remarks, what I found was really a pretty good pipeline. We had already a pretty good product pipeline that we're addressing the key trends. And when Derek talked about the CH26 high horsepower digital tractor, you know, introduction this year, This is, of course, embedded into this plan. We have had just very recently the introduction of our new combines.
And Dave Maier can talk about that that combine is gaining share this year because of a superior features versus all our competitors in the area of automation and digitalization. The S Way was mentioned by Garrett, the fact that we have now finally launched a heavy duty truck where we can make money with and also that is LNG powered is, of course, all positive benefits that we are harvesting already right now. Yes, Adam.
Thanks, Meredith. Adam Syme from Barclays. So, Susan, you spoke to the mission of the board gave the executive team at the onset, but I was wondering if you could talk about whether, the board was aligned with the strategy of a all the way through from your taking your leadership position there and, how that pacing came about?
So we were we went about this in a very deliberate way. So as you know, Hubertis came in as CEO in the fall of last year, and as a board, we were very determined then to take a step back and ask Hubertis to look with the management team at the business in a very thorough way so that we had a detailed understanding of what the potential would be of each of the different parts of the business, and of course, we had Garrett who came in in January. We didn't as a board want to rush to any sort of decision. Of course, this has been a question whether or not the business should be separated in some way, which has been around for a while, but we wanted to take the time with Hubertis and with Garrett and with the other key colleagues who are here in the room to really understand what the potential of that business could be. And that's one of the reasons why, as you saw today, the decision that we took as a board based on that analysis is this is a spin.
This is not a sale. This is a spin. And that's because we really believe in the future of both of these businesses. And I think that's been underlined as well today by the investment which we're making in Nicola. So we didn't go into this with a decision taken.
We went in with some questions, which I think have been there for a while. We actually came out much more, I think, enthusiastic about the potential for that business, as a kind of stand alone entity, and we're now very excited about the spin.
Excellent. That's great. Thanks.
Thank you. Yes.
You. Hi. Good afternoon, everyone. So I was hoping you could do a little bit more. Oh, sorry.
This is Chad Dillard from Deutsche Bank. So I was hoping you could dig a little bit more into cost savings, just quantify how much, will be realized over the that 5 year time period. Also, comment on just how much is structural versus variable And from the manufacturing footprint reduction, can you just talk about just how to think about that from a regional perspective? Yes.
I will give this question to Max. However, you can see it in the because everything that is structural and comes from the footprint is into optimize and everything which is around product line eightytwenty simplification is in our, perform, categories.
So as Alberto's clearly describing his presentation, we have a track record of cost saving programs that we have achieved in the past, such as world class manufacturing to the tune of 5% to 6% of annual savings, incremental savings each year. We are now modeled a run rate of incremental savings of about 4% on the world class manufacturing side. On the procurement side, we are expecting to be able to bring home about 1% of our APV annually as incremental cost savings. Those are two significant buckets that make up a portion, a relevant portion of the performance simplified combined with the eightytwenty initiatives and the benefit of the efficiency program, of 500,000,000. We expect to be able to basically get 600,000,000 by 2022 of self help initiatives.
That's helpful. And then on the, the parts and service side, can you talk about how you're aligning your distribution partners to, to realize that goal and in that total amount on the revenue side. Does that include the digitization telematics opportunities? Yes, absolutely. And perhaps,
Derek, do you want to talk about that a little bit? How we involved the Dave Meyers of the world in our digitization efforts? I mean, if we
look specifically in the agricultural business or parts penetration is compatible with our main competitors. So there's a modest gain to be taken there. But for sure, with the introduction of the digitalization, the services, the solutions, gives us another opportunity to capture growth in that as well. So again, and we're also exploring and we had an announcement only recently where we started to work on the, let's say, gray component sales, different lines of sourcing for parts components as well. So again, it's fairly well balanced between realization of penetration, digital opportunities in the future and other means to sell parts of the network as well.
Again, we are we start from a reasonably high, a very good base in that, less favorable and constructive environment by good base in terms penetration of parts sales versus overall revenues.
Kevin, from your side, anything to add for
the commercial vehicle side?
Yes, as a our parts penetration is very comparable. What we are now doing with the S Way, the fully connected truck, we have every data that sits on the Canvas in the cloud. We're going to do this preventive and predictive maintenance. So we're going to push from parts sales to MNR maintenance and repair contracts, which are giving us long term repetitive revenues across the entire life cycle of the product. So that's the transformation we're going to do now with the connected vehicles also obviously in buses and vans.
Yes. And I was talking about the investments into our aftermarket infrastructure and digital structure. And look the year, I said, is this leading that effort? Perhaps that you can
So we have today 60 percent of revenues are we doing in the aftermarket. We want to go to 20. And we can split up in 3 buckets. 2% is which what Derek referring to to more past portfolio. We want to go into more WEMA.
And other life cycle initiatives, 1% of digital, which we're not selling today, and 1% is services with the MNR after going 3 to 5 years contract. That's the split.
Martino De Ambroggi, Equita. Susan, you already answered to the question, but Is there any scenario? I understand that you are still thinking about it, but is there any scenario you totally rule out for, the two businesses tomorrow? And, should we wait for the demerger before seeing, I don't know, you talked about consolidation. You want to participate to the consolidation in the construction business and so on.
So should we wait until the finalization of the demerger before thinking about new initiatives. And back to the first, is there anything that can be absolutely rolled out?
Well, I think, I mean, I take the first one, of that one. I think what you see in that plan is that that we're not waiting now for the spin before we become active and bolt on acquisitions. I mean, As a matter of fact, we have announced a bolt on acquisition on digital agricultural just this morning, AgDNA. And you're going to see more announcements coming over the next weeks months. And that is for both business for the on and for the on or highway business because we both see these businesses as leader in their field and active consolidators.
And I think the bullish step in the partnership with Nikola from commercial vehicle shows that we want to basically play in that on highway segment. And we want to disrupt this segment. And I'm going to be very interested in reading the press tomorrow what our competitors have to say about that move, but I really think that this is going to be a wake up call for many of our Western competitors, what we do there with Nicola So you're going to see us continuing to plow ahead. We're not waiting for a spin. We continue to develop those companies.
And then I think what is also very important years, we're still going to be together. We're going to be fully accountable for the 1st year of that business plan. And then going forward, the 2, individual companies, of course, are going to implement those strategies that you have seen. That's the reason why we went through these segment strategies. So you will not see a completely differentiated business plan next year.
No. You will just see basically carved out financial numbers, but that is the strategy for the on and off highway business that you've seen today. I hope that clarifies that. Suzanne, anything to add from your side?
No, I think the very important thing is these businesses are operating incredibly fast moving market. And there are a lot of things happening. And what we're not saying today is that we're now going to halt and wait for the spin to happen. We're going to continue to look for opportunities to strengthen both of the businesses, and we're going to implement the plan alongside doing the spin. And I think that's very important because the world is moving too fast for us to wait for this to happen.
Okay.
Let's move to the left side.
Okay.
Hi, David Grosso. I'm a little unfair. You weren't there, but Michigan 5 years ago, we had targets of $38,000,000,000 of revenue in 2018 and markets did what they did and we were $10,000,000,000 short. The margins actually were pretty close, but just the lack of volume, the EBIT ended up being half of the target. So just trying to think through if the macro environment disappoints us the next couple of years, where is the management's head on how they would address it?
Is this a commitment in spending the next couple of years that sort of, regardless of the market volume, we have to beat out to 24 and beyond. Or there's some leverage you can pull to protect some of these savings?
The money is not going to go out the door on day 1, right? We're going to watch very carefully how the market develops in the short period. And we're going to take our bets, our, very well thought strategic decisions over time. Obviously, we have a tight time frame to bring them into actions, but we are going to need to juggle between the short term need and the long term need.
Yeah. And I think that, I mean
But we feel very accountable about holding ourselves to the targets that we have given out for 2019. And now the target at least at the bottom line that we are showing for 2020.
And I don't want to comment too much on the last 5 years plan, but I think the major difference to this plan now is that, we're not bringing up very positive market environments. Our ambition is to regain market share. Market share, and we want to regain leadership positions and innovation. That's the reason why we make those investments. And, and therefore, we feel very good, even in a kind of sloppy market environment that we are fully right now that we will be able to regain share and that, of course, in turn is going to drive sales.
And I think that's one big difference to the last plan. And the other one, I think it's a It's an extremely robust plan right now. And the framework that we set up of the strategic implementation with all the initiatives the consistent monitoring. I think we have stepped up there a little bit because we have learned, from the last time. And as you know, we have also reorganized our organization to create more individual accountability in our executive team.
We're a smaller team right now, but we basically have very, very clear accountabilities and behind every segment and behind every initiatives, there is a name that is responsible for that and the team that's developing it.
I mean, one difference coming off at 13 was a very high ag market? Absolutely. The ability to miss as much is not there, but just so I'm clear on how you're leading the company if the volume started to deteriorate versus the plan, is the thought to try to still push for that market share or is it preserve EBIT margin? Is it a return on capital? I'm just trying to get a sense of where is the bottom line on that is your key target to hit if everybody's going to be I
think you also need to have a good balance, and it's a bit hypothetically because we're going to be in different situations in different segments. But I think as, as Max has said, if the world is falling apart, we will not be stupidly running by throwing money out of the window. You can't eat market share. We need to basically earn also net income. That is very, very clear.
So I think it's going to be a good balance. As we have done in the last quarters already, I think we have balanced very nicely our spend and you saw us continuous spending on R And D, but still being profitable and with staying kind of the market uncertainty that we have right now in the Ag business, for example, in North America, And I think you see the same management going forward and the same logic going forward. I hope that's clear enough.
Yes. Yes. I mean, again, I remember the sort of comparison with the previous one. I think this thing was spreading the initiatives much more than just expecting the market to grow and capitalize on industry plus market share growth in the region. I mean, you saw in the agricultural presentation, but we expect in 1% CAGR over the period.
We think the mix of the product will be more than the unit industry. And we intend to take a larger market share and be, let's say, more profitable products, more profitable opportunities as well as the digital, which is a newer sort of value stream or revenue stream for us to take on as well. Plus the cost efficiency, which again, if the industry doesn't come, then we continue working on gross margin improvement as well. So it's much more spread bias. For sure, as we see things develop, we'll adjust the spend accordingly based on those multiple projects.
But as we were maybe a little more focused on 3 or 4 objectives last time our projects were much more diverse now to sort of balance those uncertainties going forward. Thanks.
So you guys had just mentioned that the spin comes with some very limited dis synergy dis synergies. If you could just quantify that for a little bit for us relative to some of the you know, 100,000,000 corporate cost cutting announcements that you've made. And then secondly, if you could also, you have the good chart in there of the top 15 initiatives really contributing to 60% of the value contribution. We obviously got a lot thrown at us today. If you can just isolate maybe the top 3 initiatives for us or any kind of, you know, the lowest hanging fruit?
I'll take it to
the side.
Yes, please.
Yes. So I mean, in connecting the dots between what we said during the second quarter and the presentation today, you understand now that the $100,000,000 that we announced there are part of the efficiency program that we fully fledged announced today. So that piece is already in motion. We have already started to reduce our headcount, particularly on the white collar side since May, June, and we're now seeing a run rate of reduction coming to fruition. So that comes independently from market being there or not.
In terms of the second question,
Well, instead on the first question, on the dis synergies, we don't want to throw out a number right now. However, the dis synergies on the general expense side, are going to be fairly limited would say because, I mean, again, we're splitting. We have pretty much all the management that we need here, and we're just splitting left and right. So we're going to create some more valuable jobs on the on the on highway side by promoting some people into higher into higher positions. And then the other that you saw there, on my slide was around procurement.
And there was one thing I didn't say. The interesting thing is the net very good to have one very, very steady anchor shareholder. Whenever we go to suppliers, they kind of, add up all the volumes, that they do with us, but also with FCA and with Ferrari. And I think there is an understanding that, that we can pull volumes. And needless to say that we're going to do this going forward.
Despite being an on highway and off highway company, I'm very, very sure that Tom Babatin, who is leading a supply chain we're going to be very, very sure that our suppliers understand that we're pooling our interests here and that we basically cooperate on the sourcing side. And then in terms of the key initiatives, what we're trying to do here in the presentation is, when you see the step chart with the, grow, perform and optimize categories, you have a couple of bullet points and those bullet points mentioned the first segment most important initiatives. But I think overall, and Max you can help me out there. The most important one I think is eightytwenty right now. I think that brings across the board, the biggest lift in savings, a couple of 100, 100 basis points.
And then followed by, the purchasing side by the manufacturing optimization side, and these are very, very important initiatives that we are driving and that we are centrally monitoring.
Hi, Ross Gilardi from Bank of America Merrill Lynch. So one of the challenges of breaking the company up always seemed like was how do you secure engine supply for the ag business, given the relationship powertrain and so forth. I want to understand how you're thinking about that. In your 5 year plan, you've got, fee up powertrain or sorry, powertrain growing faster than you have commercial vehicles growing. I think you've got powertrain growing 5 and in commercial vehicles is going 1.
So it implies either you're going to go for more external sales or you're going to go more off highway going forward. So how will you think about that and how will you balance that against securing capacity, engine capacity for the ag business? And can you just talk a little bit more about the supply agreement, we'll see up we'll make you keep saying for you. We'll powertrain B FPC, we
call it FPC, future powertrain? Yep.
Yep. Will they be Will
they be the sole supplier for Ag or, you know, what's and can you talk about the duration of that supply agreement?
A lot of questions come up in cheap and first of all, the decision where to put powertrain was really very difficult one as you can understand because it's highly synergistic. We're often on highway. Secondly, if you look at the last 5 year strategic business plan, FPT has overachieved that plan. They really have delivered it's a great engine business that we have there. That being said, in the end, we were kind of driven by a couple of, of items.
1 is the majority of the volume is on on highway. However, we are also one of the strongest off highway players, but still the majority of the volume is on on highway and you want and you want to have that. Secondly, we said that the emission regulations hit first on on highway, and that's the reason why the commercial vehicle side wants to be those to that engine. And then thirdly, the, relative cost of an engine in a truck is higher than it is into a construction equipment or to an agricultural equipment. And that's the reason why in the end, we led to believe that it's the right thing to put it together with our commercial vehicle.
Business. That being said, it's very, very clear that going forward, FPT is going to be a strong independent engine supplier as it was the whole last 5 years. And the success of FPT is really success that FPT had with the non captive sales. The sales outside And these are sales that go into on highway and off highway applications. And I think Annalisa will say yes, yes, yes, right now, She's going to be a very, very strong partner to all our off highway customers and of course also to us.
And I think we're going to be ensuring next year when we basically craft our TSA between the two companies that we have a very, very long term supply agreement with FPT in the first instance, 10 years, and I would see another 10 years following thereafter in order to make sure that we still get the best engines on the planet because this is what FPT really delivers. So that was a fairly lengthy answer, but we're going to have FPT engines in all our product lineup in the off highway and we have no intention to basically take, why should we take an inferior engine from a competitor if we have the best engine manufacturer within our partners? I hope that answers the question. He's going to continue to deliver world class engines into off highway applications.
But just in terms of FPT growing faster than the commercial vehicle business, I mean, you talked a lot about market share gains today. I mean, are you a lot of the on highway, truck makers obviously have got a captive strategy on engines also. Are you expecting to reverse or
It's partially wrong, not everybody has a captive strategy. They are off highway and on highway players that have engines and that basically buy it from our source, from us. Don't know whether we want to disclose all companies here, but most of them, you will know very well. And I think on Alisa's plan, as she has laid out very clearly, you should say something about it. Of course, based on growth of the non capital sales.
As I mentioned during my presentation, the growth, FPT will be based on the increase the portfolio and the resilience of our customers. And we are going to have more than half compared to today's of numerosity of the customer we are going to have. We are not considering to have a grow in the total industry, but as I mentioned that the fact that we are going to strict regulatory environment, our arena will be much, much more rich and also the investment that this new regulation that we require from the small OEM will allow us to be very competitive having already this solution available. And you're right, we are targeting to grow further on the off road application where this new emission regulation will go quickly compared to the own highway where these are already applied. Yes.
And I think the success that Analisa has created around the FPG business was around these growth in the non captive sales. And the way we're managing that business, of course, important to know for those other customers or competitors of us that are listening to it, we are really Chinese world. So Ana Liza is supplying engines to our fiercest competitors on the truck and on the, on the agricultural side. And we don't know what kind of development she's doing there. We're really trying to have and the bankers here in the room is going to appreciate that we have Chinese was there really in the development departments.
And I'm convinced that going forward.
And we will continue to have
the same between the commercial vehicle and the FPT side. It's going to be a standalone company that will serve independent in house customers captive, but also non captive customs with Chinese walls. Okay.
Hi, it's Joe O'Dea Vertical Research. First, just on the decision around the six to 8% LNG penetration and how that's embedded in the targets. And I think previously you've made some comments around potentially seeing better penetration rates than that. And so overall, as you were coming up with a plan, what it was that kind of influenced you to thinking that, you know, maybe this would be kind of more achievable over that time period?
Yes. That was all the same begging from Garrett. No, but Garrett, please?
No. Look, the market for LNG heavy duty long haulage this year is expected to be double to 2 to 2% about the heavy duty truck market. It is today in China, it's about 10 percent, and it's going to go to 20, as Hubertus said, very soon in China because of, obviously, the independence of, that country to have access to energy and to do on hold, on road trucking as well in an environmentally more conscious way. In Europe itself, it's driven by regulations, but it's also driven by the superior TCO. So it's it's the lowering in CO2 emissions.
And when bio methane gets blended into the LNG, that percentage of blend is going to, and that's still under review, going to be accounted in the CO2 emissions of the truck OEM. So that is a predominant factor to actually achieve upcoming emission regulations with bio methane blended into LNG. And that is an overall, accelerator for that segment in Europe, and I think 6% to 8%. This is a conservative number. It really depends, but this growth, this growth we see in this year is a plus 75% to 100% in small segment, but it's doubling.
And I think, Eric, it's fair to say that, that looking at market studies that come out every day, newly, I think the 6 to 8% is on the conservative side. That's kind of the bottom. There are other studies that are highlighting low single digits to 15%, 20% even. But we didn't want to be too crazy about that because again, we wanted to have a plan that we can really deliver on, and we see this as potential upside coming. So we want to be conservative on purpose on that side.
And then just one other on, liquidity. I think that was kind of one target from the 2013 mergers that we would see kind of improved liquidity. We're here at the NYSE where the minority of your shares actually trade. And so if you see anything through the potential in
opportunity for the shares? Definitely. I mean, one of the commentary that I added in my presentation is the adjustment to the investor base that is expected to happen with the separation that obviously would drive, would drive realignment on the stock as well where the stock is traded. It's too early to say how the two entities will be, where will be traded. I mean, obviously, when you have CNH Industrial today, very well where the company is traded.
And, the separation will kind of, force the creation of a second entity. But I think in that respect, it's too early to say, where it will be ultimately traded
That's exactly the reason why we asked for 15 months. Have very good advisors. Some of them are here in the room and we're going to answer that question at the due time that when we've done the, the another
is. Thanks.
Thanks. Tim Thine from Citigroup. First question for Derek, just on the He talked a lot about both consolidation as well as professionalization of the, of the dealer network. So maybe just talk a little bit about how the role that they play in terms of expanding the digital offering and ultimately revenue base for you And just what kind of investment needs you think will be a part of that?
Yes. I mean, for us, it's a fundamental part of the plan. I mean, just to be clear, we don't significantly see a change in the reduction of points of sales. So we think we're relatively well covered and fully competitive from an end sales point. But we are looking for much more capable robust dealers and partners that can invest heavily in this digital revolution and evolution as well.
I mean, Mr. Myers, a perfect example, he's a $1,000,000,000 dealer. He has, he is capital. He pushes us as much as we push him in terms of the investment as well. So again, I think we've got good coverage North America, Europe, South America in terms of endpoints of sale.
It's now to build the right partners to really fully capitalize on the digital growth opportunity. And we have a number of very, very good examples where we've been successful. Dave and his team had one of that as well. And again, I'd I don't want to give an impression that we're going to over consolidate. I think we are relatively healthy where we are.
But we have an opportunity with further consolidation. And the investment portion is baked into the plan. All the numbers that Max presented, there's a significant amount of capital in there. To support our consolidation. Yes.
And I think some of our competitors have very, very clear targets. They basically give like minimum threshold levels of sales for dealers, we don't want to go there. We want to basically tailor our dealers according also to our brand positioning. And that's the nice thing having more brands. Some of them are like case, fully professional cash crop, you need to have a certain dealer size.
But if you are a new Holland customer, you know, you're on your small life folk farmer, your dealer doesn't have to be a 1,000,000,000 organization is with Dave Meyer. So we want to have a differentiated approach to our dealer networks And when you look at the dealer standards, more than just the sales number. And it will differ by region and by how we position our products. I said in my presentation as well. So we've spent a lot of time sort of understanding the right blend, the right mix rather than just go with a blanket consolidation approach Yeah.
And what is also very interesting, I think what Derek presented in his plan, I think you saw that there was an ambition to grow in combines in Europe. And, and to grow also with Steyr. And I think if you look at our European representation, we are the leader in all of the European markets with exception of the Germanic and German speaking countries there. And I think that's basically where we're going to attack because we firmly believe that with our combine technology, have the best combined on the planet. And our market shares in Germany do not reflect that reality.
And, and our dealer network doesn't reflect it. So therefore, we are bringing dealers actively and getting new dealers on board also in Germany. And Dave Maier is a prime example where we've taken one of the most successful dealers that we have in North America very successfully into Germany to grow with us jointly market share, and you're going to see more of that happening. And also around the Steyer brand, which is kind of a it was a sleeping brand in our portfolio. Shire has the potential to really, really be a technology driver and, and an innovation driver.
And it's an independent short liner. So we have 2 longliners and we have a short liner. And if you see the squeeze out that all the long, short longliners with the shortliners, we have a lot of very large implement manufacturers in Europe that need distribution and need a tractor, and Shire is a perfect partner for that. And Derek said that and we will gain share because of that strategy. We're actually really excited about that.
So that's why we feel very confident about our Aga on the ag side. Hi.
Brian Swan on with GAMCO. You mentioned having an efficient, leverage ratio for the Spinco company. I just wonder if you could elaborate on that. And then if we're thinking about the businesses after they separate and the capital intensity, of the off highway business versus the on highway, which will have FPT. Can you maybe directionalize that?
Yeah. So what what I mentioned was an efficient access to capital markets. So that's the minimum that we aspire to on day 1 for SPIN for the own highway business. So that's what we want to achieve as a minimum. But let me say, the ultimate position of the 2 business, it's too early to say where they will sit from a capital structure perspective.
We need to go through our exercise and come back to you with a more definitive position.
And just the respective capital intensity of the businesses, the R and D, the CapEx, etcetera, your thoughts
Definitely. We want that business to be well, well, capitalized and funded with, sufficient liquidity adequate liquidity. Yes. And capital returns today.
I mean, I mean, FPT is a high investment business with a lot of capital employed. However, the return on this capital that we have is above 30% already today. So you see that it's really a function of both the capital that you employ and the profitability that you make. And needless to say, I think we know what we have to invest into the end of the truck business. The issue that we have is on our heavy duty truck side.
We have to make them more profitable. And I hope that Garrett had really explained a very clear pathway how we can turn that piece of our commercial vehicle business into profitability And I hope it became also very clear that in all the other business lines in commercial vehicles, we are already benchmarked performance. I mean, like commercial vehicles, we are generating nice returns. Buses is industry standard. It's really just in this heavy duty truck segment where we are kind of not at benchmark and profitability and hence have this crack on capital productivity.
And I honestly hope you have seen today that we have activities to change this dramatically going forward.
Curious first of all, the ag DNA announcement, does that represent any kind of fundamental shift in strategy maybe to be more captive on the ag tech side? And secondly, I'm curious as you went through this process, even over the last couple of years, did you ever consider, seriously consider selling CB business given that fairly significant investments over 4,000,000,000, but their sales partially because of the cyclical downturn only going to increase at $1,000,000,000. So we're ever close to selling this or considering that?
So I would say that, that Derek takes the first question on AgDNA and our commitment to physician farming and then Suzanne and I take second one.
So again, I would try and envisage the act DNA is we already have within our 2 brands, case IH and New Holland, a suite of tools in the toolbox, it can be used in terms of digital applications. AT and A just gives us more tools in the toolbox. So it's going to be sold through factory through our systems, for example, in case I age, it comes through our AFS Connect and our PLM services through New Holland. So again, it's just further enhancing the tools and the toolbox that we currently provide. And what we find with ID and A because we scouted the market for perspective partners or bolt on acquisitions for last period.
It's very well with the applications I said earlier in my presentation. We have very good field applications. And why DNA will bring a very positive complimentary suite of tools to run that as well. And it doesn't stop there. We're going to continue bolting on bolting on bolting on bolting on.
Until our suite of tools is industry standard best in class. And in case the most value we can't get from that digitalization,
I mean, they've just developed a very, very nice software. It's very easy to use. It's very, very well received by the customers and by the dealers. And we're gonna we're gonna move forward and closed that gap very, very fast enough for now that we had to proceed gap with our own AFS and PLM services. And then on the second question, on I think the question was answered.
Our commercial vehicle business is not for sale. We firmly believe that this is a great business. We want to just set it up for success. And we wouldn't, we wouldn't basically sell a business. At the same time, we invest a quarter of 1,000,000,000 in it.
So I think that answer was given already by Susan. I don't know whether they want to add something to that, but
Well, just to say, we started the process as a board. We said we asked the questions at the start of the year through the course of that process, I think, pretty much every possibility we look at at some point in time, including the various permutations of how you could put those businesses together or separate them whether or not you'd want to sell them. Think the answer that we came to was a very, very clear answer. You know, once we could see what the potential was in the commercial vehicles business, I think it was laid out very, very clearly, I, Garrett, when Garrett came in working very closely with FPT, it made much, much more sense for that business to be a stand alone business. And I think we're very committed to it as a board.
And I think as Exor has said this morning as well, very committed to continue to be an anchor reference shareholder in both of the businesses going forward?
What about your sales target of 5% growth over the plan period? What are your underlying assumption for on pricing? Could you give an indication about your expectations for the agricultural equipment and those on the other segments? And then also on profitability, how much of your expected improvement in profitability is attributable to product mix given that you are you have announced a quite important investment plan on your product portfolio. Thank you.
So I'll
try to answer your questions. Because we don't give out, for a plan period of this kind of details. But again, the logic that you typically apply when you develop a plan on you assume that any inflationary cost increases offset with pricing. So the only pricing that we have built into the plan right now is the carryover impact from 2019 to 2020. And that's what we expect to get as a pricing function.
The rest is kind of flattish and will rebalance the inflationary cost increase that we may experience down the road.
And the positive mix impact you have into this grow bucket And, it's baked into that. But again, it will be too much detail to carve out how much of that. I think we've been already extremely over transparent perhaps with the investor world. But so a little bit of fantasy, you need to have to basically see the relative portion, which is mix in the grow bucket. Or the EBIT improvement.
If I may have a very quick one on the construction equipment business, you are talking about bolt on acquisitions, would you completely rule out any, let's say, bigger deal or transformational deal given that it's a critical mass. It's still relatively lower compared to many competitors.
Well, Roan wasn't built in a day. We want to do it step by first, we have to show that this turnaround is sustainable. And, and Gagul's 17 have to earn the right to grow. And then you're going to see us doing smaller buying builds. And then transformational deals might happen or might not happen at a later point in time, but first, this business has to deliver.
And we have been very directly with the business segment leadership on that one. And we want to see that turnaround first. And then we can talk further. So at the roadshow next year, next we are step ahead and then we can talk about more. But our ambition is to be an active consolidator long term in that segment because I think if you look at all our segments we're operating in, they are already highly consolidated.
This is the least consolidated segment that we're in. And that's also the reason why we think that with 1,000,000,000, we do have the critical mass to have a base for consolidation. So in AG, I would question that, but in Construction Equipment, I think that is a critical base that you have. And you can be profitable with 1,000,000,000 We have to show that we're profitable and then we basically do buy and build. And now one last question.
Yes.
Yes. Alexandre Ingel from BNP Paribas. In the past, you set up, agreements with Supin Tomo and Hitachi in the Construction Equipment segment. And I wondered, how the transformation would impact these agreements and how you see these agreements evolve in the future?
Yes. Where we look at these agreements in detail, actually, we have a very very close relationship with Sumitomo. And I think, Carlos has said that we move our crawlers, and the manufacturing with Sumitomo into India, and that's exactly that partnership that we talking about. We kind of like all these partnerships because at the same time, we don't have to invest so much ourselves. We do it in partnership.
However, the margin is a bit less. And it's a it's a trade off of lower margin. At the same time, lower cap, if you know lower spending capital employed, we do 8% ROA right now. Going forward, it's clear that we have to have a decent margin based on a solid capital employed. So we are reviewing these partnerships right now.
And, and basically, I believe going forward, if something is really core to our offering, we also want to own, at least, have, as equity and skin in the game. That's kind of a pretty open answer to that question. Anything to add on that one, Kai, was there? Okay. Yes.
And what about the Me? Yeah. The simplification of, I mean, the AT2020 simplification might have an impact on the on your agreement with Sumitomo, for example?
Well, it has impact on, but it's in our hand to basically what we want to sell and what we don't want to sell. And if we don't want to offer specific variants, we're just not taking them. But the impact of eightytwenty is far more relevant to those products that we do in in house, the skid steer loaders, for example. So our Wixita plant, our fiber plants, they will feel this far more because The ripple on effects in the value chain as everybody here in the room knows is far more if you own those companies rather than just taking products from them. Okay.
Thank you.
And with that, we'd like to thank you very much. We hope that you liked today's, Investor Day Capital Markets Day. And Let's see you soon at some of the investor conferences and latest than next year for the 2 roadshows of the two strong leaders in their respective fields.