Plants and Environmental performance

As of December 31, 2013, the Group owned 62 manufacturing facilities, of which 14 were located in Italy, 9 in the United States, 8 in France, 6 in Brazil. The Group also owns other significant properties including spare parts centers, research laboratories, test tracks, warehouses and office buildings.

A number of the Group’s manufacturing facilities (land and industrial buildings) are subject to mortgages and other security interests granted to secure indebtedness to certain financial institutions. This indebtedness equaled approximately €73 million at December 31, 2013, as compared to €67 million at the end of 2012.

The Group makes capital investments in the regions in which it operates principally related to initiatives to introduce new products, enhance manufacturing efficiency, improve capacity, and for maintenance and engineering. In 2013, the Group’s total capital expenditures were €1,495 million of which 20% was spent in NAFTA, 14% in Latin America, and 58% in EMEA and 8% in APAC. These capital expenditures were funded through a combination of cash generated from operating activities and borrowings under short-term facilities. In 2012, the Group’s total capital expenditures were €1,349 million. The Group continually analyzes the allocation of its industrial resources taking into account such things as relative currency values, existing and anticipated industry and product demand, the location of suppliers, the cost of goods and labor, and plant utilization levels.

The following table provides information about the Group’s significant manufacturing and engineering facilities as of December 31, 2013:

LocationPrimary Functions Approximate Covered Area (Sqm/000)
Italy
S. MauroExcavators; R&D center57.0
ModenaComponents (AG & CE)102.0
S. MatteoR&D center (AG & CE)51.0
JesiTractors77.0
LecceConstruction equipment; R&D center130.0
PiacenzaSpecial purpose vehicles; R&D center63.0
BresciaMedium vehicles, cabs, chassis; R&D center275.0
SuzzaraLight vehicles; R&D center157.0
BresciaFirefighting vehicles; R&D center28.0
BolzanoDefense vehicles; R&D center81.0
Pregnana MilaneseDiesel engines31.0
TorinoR&D center (Truck & CV)100.0
TorinoR&D center (Powertrain)28.0
TorinoDiesel engines142.0
TorinoProduction of transmissions and axles239.0
FoggiaDiesel engines; drive shafts151.0
United States  
New HollandAgricultural equipment; R&D center104.0
Grand IslandAgricultural equipment and combines128.0
BensonSprayers, cotton pickers; R&D center41.0
BurlingtonBackoe loaders, forklift trucks; R&D center91.0
FargoTractors, wheeled loaders; R&D center88.0
GoodfieldSoil management equipment; R&D center39.0
RacineTractors, transmissions105.0
Mt. JoyR&D center (AG & CE)11.0
WichitaSkid steer loaders; R&D center46.0
Burr Ridge (Hinsdale)R&D center (AG & CE)43.0
CalhounCrawler excavators, dozers; R&D center31.0
Burr RidgeR&D center (Diesel engine)1.0
France  
CoexGrape harvesters; R&D center26.0
CroixCabins (AG & CE)12.0
Tracy-Le-MontHydraulic cylinders (AG & CE)16.0
AnnonayBuses; R&D center137.0
VenissieuxR&D center (Truck & CV)11.0
RorthaisBuses; R&D center29.0
FourchambaultEngines22.0
Bourbon LancyDiesel engines; R&D center102.0
FecampDiesel engines25.0
Brazil   
Belo HorizonteConstruction Equipment; R&D center70.0
CuritibaCombines and tractors; R&D center103.0
PiracicabaSugar cane harvesters; R&D center12.0
SorocabaCrawler loaders, backhoe loaders, excavators, agricultural equipment160.0
Sete LagoasHeavy and light vehicles, defense vehicles; R&D center128
Sete LagoasEngines; R&D center14
Germany  
BerlinConstruction Equipment; R&D center59.0
UlmFirefighting vehicles; R&D center35.0
UlmR&D center144.0
Argentina    
CordobaDiesel Engines20.0
FerreiraProduction of trucks and buses44.0
CordobaAgricultural equipment - Tractors30.0
Belgium    
AntwerpComponents (AG & CE)79.0
ZedelgemCombines, agricultural equipment; R&D center159.0
Spain    
MadridHeavy vehicles; R&D center165.0
ValladolidLight vehicles74.0
China    
HarbinTractors, balers; R&D center7.0
ShanghaiTractors, Components68.0
ChongqingDiesel Engine; R&D centers76.0
India    
PithampurBackoe loaders, earth compactors29.0
New DelhiTractors; R&D center82.0
Others    
Basildon (U.K.)Tractors; R&D center129.0
Plock (Poland)Combines; R&D center95.0
Saskatoon (Canada)Agricultural equipment (sprayers, seeders); R&D center61.0
Dandenong (Australia)Production of trucks; R&D center37.0
St. Valentin (Austria)Tractors; R&D center56.0
Vysoke Myto (Czech Republic)Production of buses; R&D center121.0
Queretaro (Mexico)Components (AG & CE)15.0
Naberezhnye Chelny (Russia)Agricultural equipment50.0
La Victoria (Venezuela)Assembly of light and heavy vehicles and buses56.0
Arbon (Switzerland)R&D (Powertrain)6.0

Environmental performance

The Group manufactures and sells its products and offers its services in several continents and numerous countries around the world. The Group’s manufacturing facilities are subject to a variety of laws designed to protect the environment, particularly with respect to solid and liquid wastes, air emissions, energy usage and water consumption. The vehicles that the Group manufactures, and the engines that power them, must also comply with extensive regional (e.g., European Union), national and local laws and regulations, industry self-regulations (e.g., those of the European Automobile Manufacturers Association–ACEA), including those that regulate vehicle safety, end-of-life vehicles, emissions and noise.

The Group regularly monitors such requirements and adjusts affected operations.

Moreover, CNH Industrial is committed to continuously improving the environmental performance of its manufacturing processes, beyond the requirements of legislation, adopting the best technologies available and operating responsibly to fight climate change and protect natural resources.

For additional information on the Group’s policies on sustainability and environmental matters, see “Corporate Governance — Sustainability Practices”.

Emissions

Since the use phase of its products can generate up to 85% of the CO2 emissions of their entire life cycle, CNH Industrial strives to ensure a portfolio of products ever more eco-designed, performant and environmentally friendly, by increasing efficiency and by reducing consumptions and subsequent polluting and CO2 emissions. The latest regulations in force (Tier final and Stage IV) have reduced polluting emissions, i.e., nitrogen oxides and particulate matter, to the minimum measurable levels; hence, the challenge for the future is to reduce CO2 emissions by optimizing the management of the energy produced by vehicles through the following strategies:

  • optimizing consumption and energy efficiency;
  • increasing the use of alternative fuels;
  • developing non-conventional propulsion systems;
  • offering telematics systems that improve productivity;
  • helping customers to use vehicles as efficiently as possible.

As regards the use of alternative fuels, the main constituent of natural gas is methane (between 83% and 99%) and its immediate usability makes it a promising alternative fuel. Whether in the form of gas (CNG) or liquefied (LNG), the basic fuel is the same; what changes is the method of storage, distribution, and use in vehicles. Furthermore, the current availability of technologies enabling the independent production of biomethane makes natural gas engines an attractive option for tractors as well. In fact, biogas from waste agricultural biomass can easily be exploited to produce 98-99% pure methane. As regards alternative drives, CNH Industrial oversees hybrid and electric technologies mainly in the EMEA market, where the European Commission is urging their spread. Telematics systems, especially when applied to agriculture, help optimize vehicle use and therefore productivity. This also brings positive environmental impacts: from lower polluting emissions, to the accurate dosing of fertilizers, pesticides, and irrigation.

Government Stimulus Programmes for the Group’s Products

Following the global financial crisis of 2008-2009 and the related economic downturn in many countries in which the Group operates, several governments established programmes designed to stimulate demand for certain categories of products, including products sold by the Group. Such stimulus programmes provided rebate or other  purchase incentives or favourable tax treatment for the purchase of new vehicles or equipment and were also designed to promote the sale of new, more environmentally-friendly and fuel-efficient vehicles while removing less fuel-efficient vehicles from operation/circulation. The duration of the programmes that remain in effect and the introduction, if any, of new programmes or government policies intended to stimulate the market for the Group’s products or that indirectly stimulate demand for the Group’s products and the effect of such policies on the Group’s revenue generation are unpredictable.

Ergonomy and safe use of CNH Industrial products

The CNH Industrial Group is committed to producing and selling, in full compliance with legal and regulatory requirements, products of the highest standard in terms of environmental and safety performance. Protecting operators during their work has always been a key factor in CNH Industrial's design and product development. In fact, the Company strives not only to ensure and comply with high safety standards, but also to direct its innovations according to the cognitive understanding of users. Company products serve as work equipment, hence the simpler the interaction between operator and machine, the safer the work performed. Furthermore, construction and agricultural equipment is often used under difficult circumstances: steep slopes and extreme weather conditions require products designed for safety and maximum comfort, to minimize the risk of human error caused by excessive fatigue. For this reason, all CNH Industrial products are designed to shift the user's attention from how a machine works to how a task is done. Furthermore, ergonomics are combined with comfort for increasingly intuitive and user-friendly controls. Spacious and quiet cabs, fewer vibrations, good climate control, and radio systems with Bluetooth for hands-free calls are just some of the features that enable the operator to work with greater ease and safety.

Environmental impacts of manufacturing processes

CNH Industrial is committed to continuous improvement in the environmental performance of its production processes, adopting the best technologies available and operating responsibly to mitigate climate change and conserve natural resources.

One of its objectives is to achieve and maintain the highest possible standards of excellence in production processes, through implementation of the principles of World Class Manufacturing (WCM), the innovative Japanese methodology based on a philosophy of continuous improvement. At year-end 2013, 56 plants had implemented WCM, representing 90% of total Company plants worldwide.

The primary purpose of the WCM program is to eliminate all waste and loss through the rigorous application of a range of methods and standards. Targets include: zero defects, zero breakdowns, zero waste, zero accidents, inventory reduction, as well as on-time delivery from suppliers, to the dealer network and the customer. Actions for continuous improvement are based on cost deployment analysis, which identifies waste and loss at the plant, guides actions for other functions within the organization responsible for eliminating sources of waste, evaluates the viability of projects, and uses specific performance indicators to assess and validate the results of those projects. Such a methodical and structured approach ensures a genuinely effective process to evaluate interventions, in that it measures and correlates all factors affected by the intervention itself.

Application of this system at all plants facilitates a wide culture, based on efficient processes and a language that is universally recognized at all plants and in all countries where CNH Industrial operates. Another strong point is that it encourages employees to get involved and take responsibility by contributing to the improvement of processes through a system of suggestions and direct feedback. The best ideas generated through this process are also shared with other plants. WCM involves the entire organization and, by eliminating barriers, opens the way for sharing of ideas, know- how and skills within each plant and even between plants. In 2013, a total of around 375,000 suggestions were submitted by employees at plants participating in the WCM program, with an average of 10 suggestions per employee, generating savings of €154 million.

One of the pillars of the WCM system is the environmental pillar, which utilizes the principles of environmental management to create a series of coordinated measures aimed at reducing the environmental impact of a plant. Beyond compliance with legal and regulatory requirements, the process begins with a rigorous analysis of accidents, risks and waste (energy consumption, water usage, air emissions and waste generation) to identify corrective actions that will enable cost reductions.

Achievement of these targets requires a significant commitment in terms of both improvements in technical and operational performance, as well as financial investment.

All targets set out in the Group’s 2010-2014 Environmental Plan for 2013 were achieved and the principal environmental KPIs showed a continuation of the positive trend recorded in recent years, reconfirming CNH Industrial’s significant emphasis on the environment. With regard to the principal indicators, per unit produced1 VOC emissions were down 2% over 2012, water withdrawal down 16%, hazardous waste generation down 22%, energy consumption down 5% and CO2 emissions down 9%.

Group expenditure on environmental protection measures totaled approximately €37 million in 2013 (5% over 2012) and included: €23 million on waste disposal and emissions treatment and €14 million for prevention and environmental management.

Investment to improve energy performance represented 7.6% of the total energy expenditure and led to a reduction of more than 194 thousand GJ in energy consumed for the year.

Most of the Company’s manufacturing operations voluntarily participate in the ISO 14001 and ISO 50001 certification process. Receipt of a certification for environmental or energy management confirms that an organisation has a system capable of keeping the impacts of its operations under control, and that it systematically seeks to improve this system in a way that is coherent, effective and, above all, sustainable.

As of December 31, 2013, 53 plants were ISO 14001 certified and 34 sites, accounting for 90% of total energy consumption, had been ISO 50001 certified.

Numerous initiatives were rolled out in 2013 to optimize environmental and energy management. A significant intervention,  which  has  yielded  interesting  results  in  terms  of  reduction  of  both  waste  generation and product consumption, was carried out at the Trucks and Commercial Vehicles plant in Suzzara (Italy), where the electrophoresis process was enhanced by installing a control system detecting tank bacterial loads through continuous irradiation of high-frequency electromagnetic waves. This intervention led to the elimination of bactericides (about 8,500 kg/year), and to the subsequent reduction, in terms of hazardous waste production, by more than 800 kilos per year of packaging containing bactericide residues. It also brought over €100 thousand in annual savings. Regarding energy management, of particular interest is the CROV pneumatic transformer project at the Engine plant in Turin (Italy). The technology, now patented worldwide, is based on the principle of reducing lamination, responsible for the energy consumption of a fluid. The compressed air is in fact produced by the compressors and stored at a pressure of 8-12 bar, while operating pressure is 4-6 bar. This causes pressure jumps within the pneumatic network, where the excess energy is  dissipated in the form of heat, due to the  phenomenon of lamination. The CROV pneumatic transformer uses this excess energy to draw air from outside, recompressing and reusing it. This enables significant savings on the energy required by air compressors. Monitoring activities showed energy savings of 89%, equivalent to 422 GJ/year. The investment of about €24 thousand led to economic benefits worth €15 thousand, with a payback period of a little over a year and a half. Following the first phase in 2013, a second one will be developed in 2014 to apply this technology to the second of two loops of the assembly line.

(1) The indicators used relate to production hours, except for those for Volatile Organic Compounds which refer to emissions for painted square meter.