“In the fourth quarter of 2008, CNH delivered another quarter of year-over-year increases in operating profit, while for the full year our Equipment Operations Gross and Operating Margins hit their highest levels in the history of the company,” said Harold Boyanovsky, CNH President and Chief Executive Officer. “That’s a solid track record, achieved through constant focus on our brands, our products and our results.

Our Agricultural Equipment business growth continued in the quarter, especially in the cash grain segments. Sales of Construction Equipment were lower than fourth quarter 2007 as global markets declined precipitously, leading us to substantially reduce production. In light of continuing volatility in financial markets and consequent uncertainty in the equipment market, we are preparing for a turbulent 2009 and expect the first quarter to be particularly challenging.”

Fourth Quarter and Full Year 2008 Operating Review – Equipment Operations

Strong worldwide agricultural equipment industry retail unit sales growth of higher horsepower tractors and combines in the fourth quarter and full year, combined with improved CNH market share, drove Agricultural Equipment’s Net Sales up 8% for the quarter and 30% for the full year compared with 2007. On a constant currency basis net sales were up 18% for the quarter and up 27% for the year. For the year, growth in industry sales of higher horsepower tractors and combines exceeded the growth of the overall agricultural equipment market.

Net Sales of Equipment    Quarter Ended           Full Years Ended
(Unaudited, US$         ----------------- Percent ----------------- Percent
 in millions,           12/31/08 12/31/07 Change  12/31/08 12/31/07 Change
 except percents)       -------- -------- ------  -------- -------- ------
Agricultural Equipment  $  2,967 $  2,743   8.2 % $ 12,902 $  9,948  29.7 %
Construction Equipment  $    695 $  1,334 (47.9)% $  4,464 $  5,023 (11.1)%
                        -------- --------         -------- --------
Total Net Sales of
 Equipment              $  3,662 $  4,077 (10.2)% $ 17,366 $ 14,971  16.0 %

Construction Equipment’s Net Sales declined 48% in the fourth quarter, including a reduction of approximately 10% due to changes in exchange rates. Worldwide construction equipment industry retail unit sales declined approximately 37%, with industry retail unit sales of light construction equipment, where CNH has a stronger market position, down approximately 44% and industry retail unit sales of heavy equipment down 27%. In anticipation of the market decline, CNH idled most of its construction equipment production facilities for part of the quarter to reduce inventories and destock dealers, under-producing retail unit sales by 18%. Industry retail unit sales in Latin American and Rest-of-World markets, which had been strong through September, declined dramatically in the fourth quarter, 10% and 32% respectively. The fourth quarter worldwide industry retail unit sales decline brought the full year total industry retail unit sales decline to approximately 11% below 2007 levels. Construction Equipment’s Net Sales for the year declined 11%, including positive effects of exchange rate changes (3%), which were offset by industry volume declines and our destocking actions. Construction Equipment’s market share was stable for both the quarter and the year.

2009 Market Outlook

For the first quarter of 2009, CNH expects global agricultural equipment industry retail unit sales to be weaker than in the full year, reflecting increased levels of farmer uncertainty related to financial and economic conditions, tight financial and credit conditions in certain markets and adverse weather impacts in the southern hemisphere. Consequently, in the first quarter, we expect worldwide industry retail unit sales of Over-40 horsepower tractors to decline by 10 to 15% and industry retail unit sales of combines to be down 20 to 25%. We expect the Under-40 horsepower tractor segment in North America to be down approximately 20%.

We expect the weakness in global construction equipment industry sales to continue into 2009, with industry retail unit sales down a further 15 to 20% compared with full year 2008, although we anticipate that light equipment markets, where CNH has a stronger presence, will decline by more than the heavy equipment markets. We expect declines to occur in all major markets, including significant declines in Western European and Latin American markets. We do not expect that global or OECD GDP will grow and we expect construction activity levels will continue to weaken, due to the tight global financial and credit conditions. Although unprecedented levels of governmental stimulus actions are being enacted throughout the world, we expect that such actions will have an impact in late 2009 or possibly into 2010, and may only serve as an offset to new declines in other construction equipment market segments.

For the first quarter of 2009, CNH expects global construction equipment industry retail unit sales to be down approximately 35 to 40% compared with the first quarter of 2008. We expect that industry retail unit sales of light construction equipment, where CNH has a stronger market presence, will be down about 45%, with heavy construction equipment sales down 25 to 30%. The most significant declines are expected to be in the Western European and Latin American markets.

Link to full report

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