Q2 2024 CNH Industrial NV Earnings Call

Operator: Good morning, and welcome to the CNH second quarter results conference call. At this time, all participants are in a listen-only mode.

Operator: Good morning and welcome to the CNH second quarter results conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session.

Good morning, and welcome to the C N H second quarter results conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

After the Speakers' remarks, there will be a question and answer session.

Operator: If you would like to ask a question during this time, please press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

Speaker Change: If you'd like to ask a question. During this time. Please press Star then the number one on your telephone keypad to withdraw your question Press Star one again.

Jason Omerza: I would now like to turn the call over to Jason Omerza, Vice President of Investor Relations.

Operator: I would now like to turn the call over to Jason Omerza, Vice President of Investor Relations. Thank you, Brianna, and good morning, everyone. We'd like to welcome you to the webcast and conference call for CNH Industrial's second quarter results for the period ending June 30, 2024. This call is being broadcast live on our website and is copyrighted by CNH. Any other use, recording, or transmission of any portion of this broadcast without the express written consent of CNH is strictly prohibited.

Jason Omerza: I would now like to turn the call over to Jason Oh, MRSA, Vice President of Investor Relations.

Jason Omerza: Thank you, Brianna.

Jason Omerza: Thank you Briana and good morning, everyone, we'd like to welcome you to the webcast conference call for <unk> Industrial second quarter results for the period ending June 32020 for this call is being broadcast live on her website, there's copyrighted by C. N H any other use recording or transmission of.

Jason Omerza: Good morning, everyone. We'd like to welcome you to the webcast conference call for CNH Industrial's second quarter results for the period ending June 30th, 2024. This call is being broadcast live on our website as copyrighted by CNH. Any other use, recording, or transmission of any portion of this broadcast without the express written consent of CNH is strictly prohibited.

Speaker Change: Any portion of this broadcast without the express written consent of <unk> is strictly prohibited.

Jason Omerza: Posting today's call are our new CEO, Gerrit Marx, and our CFO, Adona and Cheezah. They will use the material available for download from the CNH website.

Jason Omerza: Hosting today's call are our new CEO, Garrett Marks, and our CFO, Oddone Anchiza. They will use the materials available for download from the CNH website. Please note that any forward-looking statements that we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor Statement included in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission. The company presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP financial measures, is included in the presentation material. I will now turn the call over to Garrett.

Speaker Change: During today's call, our new CEO, Garrett marks and our CFO Donnie and she's a.

Speaker Change: They will use the material available for download from the <unk> website.

Jason Omerza: Please note that any forward-looking statements that we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K as well as other periodic reports and filings with the U.S. Securities Exchange Commission.

Speaker Change: Please note that any forward looking statements that we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included in the presentation material additional information.

Speaker Change: Information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U S Securities Exchange Commission.

Jason Omerza: The company presentation includes certain non-GAAP financial measures. Additional information, including reconciliation to the most directly comparable U.S. GAAP financial measures is included in the presentation material.

Speaker Change: The company presentation includes certain non-GAAP financial measures additional information, including reconciliations to the most directly comparable U S. GAAP financial measures is included in the presentation material I will now turn the call over to Garrett.

Gerrit Marx: I will now turn the call over to Gerrit.

Gerrit A. Marx: Thank you, Jason, and thanks to everyone for joining our call today. Before I begin with the earnings results, I want to say that I'm excited and energized to be back at CNH after two and a half years at the helm of CNH's spun-off on-highway business. I want to thank everyone for joining this call and look forward to working with this great team around the world. My first 30 days have been spent getting myself reacquainted with CNH.

Gerrit Marx: Thank you, Jason, and thanks to everyone for joining our call today.

Garrett: Thank you, Jason and thanks to everyone for joining our call today.

Gerrit Marx: Before I begin with the earnings results, I want to say that I'm excited and energized to be back at CNH after two and a half years at the helm of CNH spun off on highway business. I want to thank everyone for joining this call and look forward to working with this great team around the world. My first 30 days have been spent getting myself reacquainted with CNH. While I was CEO at Iveco Group, CNH was my single largest custom of engines, and we enjoyed the global partnership with financial services in Europe and Latin America. As such, I always remained up to speed on what was happening in the agriculture and construction industries.

Garrett: Before I begin with the earnings results I want to say that I'm excited and energized to be back at CNA H. After two five years at the helm of <unk> spun off on highway business.

Speaker Change: I want to thank everyone for joining this call and look forward to working with this great team around the world.

My first 30 days have been spend getting myself reacquainted with CNA itch. When it was C. O N E vehicle group <unk> was my single largest customer of engines and we enjoyed the global partnership with financial services in Europe, and Latin America.

Gerrit A. Marx: While I was CEO at Iveco Group, CNH was my single largest customer for engines, and we enjoyed a global partnership with financial services in Europe and Latin America. As such, I always remained up to speed on what was happening in the agriculture and construction industries.

Speaker Change: As such I always remained up to speed on what was happening in the agriculture and construction industries.

Gerrit Marx: So, in a way, I don't feel like I ever really left CNH, and the welcome I have received has been truly moving. But as I have gone, I've been going through around the world, touring our manufacturing plants in our decenters, meeting with our employees and visiting dealers and farmers. I've been really impressed and recharged with the spirit and dedication of this collective team of practitioners to advance the noble work of farmers and builders.

Gerrit A. Marx: So, in a way, I don't feel like I ever really left CNH, and the welcome I have received has been truly moving. But as I have gone, I've been going around the world, touring our manufacturing plants and R&D centers, meeting with our employees, and visiting dealers and farmers. I've been really impressed and recharged with the spirit and dedication of this collective team of practitioners to advance the noble work of farmers and builders.

Speaker Change: So in a way I don't feel like I ever really left C. N H and the welcome I have received has been truly moving.

Garrett: As I have gone I've been going through around the world touring all manufacturing plants, and R&D centers meeting with our employees and visiting dealers and farmers.

Speaker Change: I've been really impressed and recharged with its spirit and dedication of this collective team of practitioners to advanced the noble work of farmers and build us I'm humbled and privileged to have this opportunity to lead this great company and to pick up and further refine the delivery of an ambitious plan from Scott wine for whom are all the best in his future.

Gerrit Marx: I'm humbled and privileged to have this opportunity to lead this great company and to pick up and further refine the delivery of an ambitious plan from Scott Wein, for whom I wish all the best in his future endeavors.

Gerrit A. Marx: I'm humbled and privileged to have this opportunity to lead this great company and to pick up and further refine the delivery of an ambitious plan from Scott Wine, for whom I wish all the best in his future endeavors. I'll come back to some of my near-term priorities at the end, but first, let's look at the second quarter results. The agriculture industry is going through a down cycle, and Scott and the leadership team addressed this well in advance with decisive actions on structural costs, production cadence, and dedicated efforts such as our strategic sourcing program.

Gerrit Marx: I'll come back to some of my near-term priorities at the end, but first let's look at the second-quarter results. The agriculture industry is going through a down cycle, and Scott and the leadership team had addressed this well in advance with decisive actions on structural costs, production cadence, and dedicated efforts such as our strategic sourcing program. All of this will be obviously continued as we add additional elements to these improvements. I'm also very pleased with the innovative products and technology that our team continues to unveil. These innovations showcase the world class R&D and technology capabilities that are only found at CNH, and I'm committed to ensuring our business continues to embrace this creative and ingenious spirit.

Speaker Change: Endeavors.

Speaker Change: Come back to some of my near term priorities at the end, but first let's look at the second quarter results.

Speaker Change: The agriculture industry is going through a down cycle and Scott and the leadership team had to address this well in advance with decisive actions on structural costs production cadence and dedicated efforts such as our strategic sourcing program.

Gerrit A. Marx: All of this will obviously be continued as we add additional elements to these improvements. I'm also very pleased with the innovative products and technology that our team continues to unveil. These innovations showcase the world-class R&D and technology capabilities that are only found at CNH, and I'm committed to ensuring our business continues to embrace this creative and ingenious spirit. Companies are made of people, and how we play as a team will determine how well we compete and gain in the end markets. Team play is driven by shared values and behaviors, all based on a profound sense of trust and a sense of belonging and performance.

Speaker Change: All of this will be obviously continued as we add additional elements to these improvements.

Speaker Change: I'm also very pleased with the innovative products and technology that our team continues to unveil. These innovation showcase the world class R&D and technology capabilities that are only found at CNA and I am committed to ensuring our business continues to embrace these creative and ingenious spirit.

Gerrit Marx: Companies are made of people, and how we play as a team we determine and how well we compete and gain in the end markets. Teamplay is driven by shared values and behaviors, all based on a profound sense of trust and sense of belonging and performance. This will be a primary focus of mine while delivering financial results quarter by quarter.

Speaker Change: Companies have made of people and how we play as a team we determine how well we compete and gain in the end markets team play is driven by shared values and behaviors all based on a profound sense of trust and sense of belonging and performance.

Gerrit A. Marx: This will be a primary focus of mine while delivering financial results quarter by quarter. In order to create an even greater business focus and effective execution on key priorities, the board and I agreed to further streamline our governance by designating agriculture as CNH's core business and my primary focus. Our reinvigorated construction business will be managed as a distinct and fairly independent operation for its own agility and optionality to seek opportunities in its industry.

Speaker Change: This would be a primary focus of mine, while delivering financial results quarter by quarter.

Gerrit Marx: In order to create an even greater business focus and effective execution on key priorities, the board and I agreed to further streamline our governance by designating agriculture as CNH's core business and my primary focus. Our reinvigorated construction business will be managed as a distinct and fairly independent operation for its own agility and optionality to seek opportunities in its industry. We will obviously keep nurturing the synergies with construction, both downstream and upstream, but we need to recognize that agriculture is and will remain our home turf.

Speaker Change: In order to create an even greater business focus and effective execution on key priorities the board and I agreed to further streamline our governance by designating agriculture, <unk> core business and my primary focus.

Speaker Change: Our reinvigorated construction business will be managed as a distinct and fairly independent operation for its own agility and optionality to seek opportunities in its industry.

Gerrit A. Marx: We will obviously keep nurturing the synergies with construction, both downstream and upstream, but we need to recognize that agriculture is and will remain our home turf. The second quarter was very challenging, and that is reflected in the financial results. Low industry retail demand coupled with the need for delivery stocking resulted in lower production and shipment volumes. Consolidated revenues were down 16%, and industrial net sales were down 19% while maintaining our pricing discipline. Sales were down in all regions for both agriculture and construction.

Speaker Change: We will obviously keep nurturing the synergies with construction, both downstream and upstream, but we need to recognize that agriculture is and will remain our home turf.

Gerrit Marx: The second quarter was very challenging, and that is reflected in the financial results. Low industry retail demand coupled with the need for dealer is stocking resulted in lower production and shipment volumes. Consolidated revenues were down 16%, and industrial net sales were down 19% while maintaining our pricing discipline. Sales were down in all regions in both agriculture and construction. To counter this on our bottom line, we will remain focused on cost optimization on all levels and retail efficacy throughout the second half of this year. Industrial adjusted EBIT margin was 11.2% out of 16 basis points compared to last year.

Speaker Change: The second quarter was very challenging and that is reflected in the financial results low industry retail demand coupled with the need for dealer Destocking resulted in lower production and shipment volumes.

Speaker Change: Consolidated revenues were down 16% and industrial net sales were down 19%, while maintaining our pricing discipline.

Speaker Change: Sales were down in all regions in both agriculture and construction to counter this on our bottom line, we will remain focused on cost optimization.

Gerrit A. Marx: To counter this on our bottom line, we will remain focused on cost optimization on all levels and retail efficacy throughout the second half of this year. Industrial adjusted EBIT margin was 11.2%, down 260 basis points compared to last year. While lower sales and production affected revenues and fixed cost absorption, CNH was able to contain the impact on its bottom line compared to previous downturns with its production cost and SG&A restructuring actions.

Speaker Change: Immigration on all levels and retail efficacy throughout the second half of this year.

Speaker Change: Industrial adjusted EBIT margin was 11, 2%.

Speaker Change: And six basis points compared to last year, while the lower sales and production effected revenues and fixed cost absorption <unk> was able to contain the impact on bottom line compared to previous downturns with our production costs and SG&A restructuring actions adjusted EPS was <unk> 38 compared to <unk>.

Gerrit Marx: While the lower sales and production affected revenues and fixed cost absorption, CNH was able to contain the impact on bottom line compared to previous downturns with our production cost and SG&A restructuring actions. Adjusted EPS was 38 cents compared to 52 cents last year.

Gerrit A. Marx: Adjusted EPS was $0.38 compared to $0.52 last year. Now, going into a bit more qualitative detail about the quarter, both the agriculture and construction industries deteriorated during the quarter, with ag-to-retail demand further weakening amid depressed soft commodity prices.

Speaker Change: <unk> two <unk> last year.

Gerrit Marx: Now going into a bit more qualitative detail of the quarter. Both the agriculture and construction industries deteriorated during the quarter, with act retail demand further weakening amid depressed soft commodity prices. We continued our lower production output in an effort to support our dealers as they worked with their inventory. Act production hours were 30% lower than in the second quarter of 2023. With construction also down 20%, and we will continue adjusting our manufacturing output as needed to further reduce our dealer and company inventory levels. We also continue to assist dealers with marketing their used inventory through pool fund access, financing incentives, and technology rate refits.

Speaker Change: Now going into a bit more qualitative detail of the quarter.

Speaker Change: Both the agriculture and construction industries deteriorated during the quarter with act retail demand further weakening amid depressed soft commodity prices. We continued our lower production output in an effort to support our dealers as they work through their inventory.

Gerrit A. Marx: We continued our lower production output in an effort to support our dealers as they work through their inventory. Ag production hours were 30% lower than in the second quarter of 2023, with construction also down 20%, and we will continue adjusting our manufacturing output as needed to further reduce our dealer and company inventory levels. We also continue to assist dealers with marketing their used inventory through pooled fund access, financing incentives, and technology retrofits.

Speaker Change: AG production hours were 30% lower than in the second quarter of 2023 with construction also down 20% and we will continue adjusting our manufacturing output as needed to further reduce our dealer and company inventory levels. We also continued to assist dealers with marketing.

Speaker Change: <unk>, they're used inventories through pooled fund excess financing incentives and technology retrofits.

Gerrit Marx: We cannot control the broader market, but we can control how we react and respond to it. The team has worked tirelessly to protect margins, and even in this period of diminishing volumes, we were disciplined on pricing. As the personal champion of continuous improvement and operational excellence, I'm committed to ensuring that we operate with an eye forward towards efficiency across the company through our structural cost reduction programs. Oddone will give you a more detailed update on these programs a little later.

Gerrit A. Marx: We cannot control the broader market, but we can control how we react and respond to it. The team has worked tirelessly to protect margins, and even in this period of diminishing volumes, we were disciplined on pricing. As the personal champion of continuous improvement and operational excellence, I'm committed to ensuring that we operate with an eye forward to efficiency across the company through our structural cost reduction programs. Oddone will give you a more detailed update on these programs a little later.

Speaker Change: We cannot control the broader markets, but we can control, how we react and respond to it.

Speaker Change: The team has worked tirelessly to protect margins and even in this period of diminishing volumes, we were disciplined on pricing.

Speaker Change: Personal champion of continuous improvement and operational excellence I am committed to ensuring that we operate with an eye forward.

Speaker Change: Towards efficiency across the company through our structural cost reduction programs. Although we will give you a more detailed update on these programs a little later.

Gerrit Marx: Another one of my big focal points is product and service quality, adding the role of quality and customer advocacy to my top team. And while product quality has always been a priority at CNH, our Q2 results were negatively impacted by higher warranty costs as we expedited repairs in the field for product manufactured at our recent plant during the recent strike. In total, these warranties wait on our reported financials by over 40 million U.S. dollars in incremental cost in the quarter, and about 70 million U.S. dollars for the first half of 2024. Recene today is back to top quality output levels, and we are well prepared to work diligently through the pipeline of challenges jointly with our network partners.

Gerrit A. Marx: Another one of my big focal points is product and service quality, adding the role of quality and customer advocacy to my top team. And while product quality has always been a priority at CNH, our Q2 results were negatively impacted by higher warranty costs as we expedited repairs in the field for products manufactured at our Racine plant during the recent strike. In total, these warranties weight on our reported financials by over 40 million U.S. dollars in incremental cost in the quarter and about 70 million U.S. dollars for the first half of 2024.

Speaker Change: Another one of my big focal points as product and service quality, adding the role of quality and customer advocacy to my top team and while product quality has always been a priority at CN H. Our Q2 results were negatively impacted by higher warranty costs as we expedited re pass in the <unk>.

Speaker Change: Field for products manufactured at our Racine plant during the recent strike.

Speaker Change: In total these warranties weighed on our reported financials by over $40 million in incremental cost in the quarter and about $70 million for the first half of 2024 received today is back to top quality output levels.

Gerrit A. Marx: Racine today is back to top quality output levels, and we are well prepared to work diligently through the pipeline of challenges jointly with our network partners. We will heighten our efforts in this area, making quality a mindset throughout the company. During the quarter, our restructuring program proceeded according to plan, and substantially all the remaining actions needed to be taken have been identified. Now, this does not mean that we are concluding our focus on cost and efficiency, but we are starting to see the impact of the changes that were made over the last six months, and this helped to reduce our SG&A costs by over 100 million U.S. dollars compared to the first half of 2023. The streamlined leadership structure will help maintain spending discipline and deliver synergies from a simplified and more direct governance structure.

Speaker Change: And we are well prepared to work diligently through the pipeline of challenges jointly with our network partners, we will heighten our efforts in this area, making quality our mindset throughout the company.

Gerrit Marx: We will heighten our efforts in this area, making quality a mindset throughout the company.

Gerrit Marx: During the quarter, our restructuring program proceeded according to plan, and substantially all the remaining actions needed to be taken have been identified. Now, this does not mean that we are concluding our focus on cost and efficiency, but we are starting to see the impact of the changes that were made over the last six months. And this helped to reduce our SG&A costs by over 100 million U.S. dollars compared to the first half of 2023. The streamlined leadership structure will help maintain spending discipline and deliver synergies from a simplified and more direct governance.

Speaker Change: During the quarter, our restructuring program proceeded according to plan and substantially all the remaining actions needed to be taken have been identified now. This does not mean that we are concluding our focus on cost and efficiency, but we are starting to see the impact of the changes that were made over the last six.

Speaker Change: Months, and this helped to reduce our SG&A costs by over $100 million compared to the first half of 2023 the.

Speaker Change: The streamlined leadership structure will help maintain spending discipline and deliver synergies from our simplified and more direct governance I will now turn the call over to Dana to take us through the financial results. Thank you and welcome Garett and good morning, good afternoon to everyone on the call.

Oddone Della Rocchetta: I will now turn the call over to Odone to take us through the financial results. Thank you and welcome, Gary, and good morning, good afternoon to everyone on the call. Second quarter industrial net sales were down 19% year-over-year to $4.8 billion.

Oddone Rocchetta: I will now turn the call over to a donor to take us through the financial results.

Oddone Rocchetta: Thank you and welcome, Gary. Good morning, good afternoon, to everyone on the call. Second quarter industrial sales were down 19% year over year to $4.8 billion. This decline was mainly due to lower shipment volumes on lower industry demand, compounded by reduced your inventory requirements year over year. Addressant income was $485 million for the quarter, with an adjusted earnings per share of 30 cents, than 14 cents from Q2 2023. Second quarter industrial free cash flow was $140 million, down to $146 million compared to Q2 of last year, as a consequence of the lower sales and lower production levels.

Oddone Della Rocchetta: This decline was mainly due to lower shipment volumes on lower industry demand compounded by reduced inventory requirements year over year. Adjusted net income was $485 million for the quarter with an adjusted diluted earnings per share of $0.38, down $0.14 from Q2 2020. Second quarter industrial free cash flow was $140 million, down $246 million compared to Q2 of last year, as a consequence of lower sales and lower production levels. Turning to agriculture, net sales decreased 20% in the quarter, with lower volumes in all regions.

Dana: Second quarter industrial net sales were down 19% year over year to $4 8 billion.

Dana: This decline was mainly due to lower shipment volumes on lower industry demand compounded by reduced dealer inventory requirements year over year.

Dana: Adjusted net income was $485 million for the quarter with an adjusted diluted earnings per share of <unk> 38.

Dana: <unk> 14 from Q2 2028.

Dana: Second quarter industrial free cash flow was $140 million down to $146 million compared to Q2 of last year as a consequence of the lower sales and lower production levels.

Oddone Rocchetta: Turned to every culture, net sales decreased 20% in the quarter with lower volumes in no regions. Although they continued realizing price, mainly North America, the lower volumes and lower production levels were the main drivers for the contraction in growth margin, which was down 260 basis points at 24.4%. The continuing improvements from purchasing and from our cost of denitization program are shown in the chart in the product cost category, which is 20 million positive net of the $44 million increase in one of the expenses that Gary mentioned before. I'd like to remark here that at a 24.4%, the gross margin we're presenting today is the second highest 42 after the record we said last year in completely different market conditions.

Dana: Turning to agriculture, net sales decreased 20% in the quarter with lower lower volumes in all regions.

Oddone Della Rocchetta: Although the team continued realizing prices, mainly in North America, the lower volumes and lower production levels were the main drivers for the contraction in gross margin, which was down 260 basis points at 24.4%. The continuing improvements from purchasing and from our cost optimization program are shown in the chart in the product cost category, which is 20 million dollars positive net of the 44 million dollar increase in warranty expenses that Garrett mentioned before. I'd like to remark here that at 24.4%, the gross margin we're presenting today is the second highest for Q2 after the record we set last year in a completely different market condition.

Dana: Although the heme continue realizing price, mainly North America, the lower volumes and lower production levels were the main drivers for the contraction in gross margin, which was down 160 basis points at 24%.

Speaker Change: The continuing improvements from purchasing and from our cost optimization program are forming the chart in the product cost category, which is 20 million positive net of the $44 million increase in warranty expenses that get it mentioned before.

Speaker Change: Like to remark here.

Speaker Change: The 24, 4% the gross margin we're presenting today is the second highest 42 after the record we set last year in a completely different market conditions.

Oddone Della Rocchetta: As G&A expenses were $35 million lower year over year from the execution of our restructuring program, reducing non-labor costs and lower viable compensation. R&D expense was $28 million less than last year, mainly coming from engineering efficiencies, as we did not cut any development programs. Agricultural adjusted EBIT margin ended at 13.7, down 310 basis points compared to Q2 of last year.

Speaker Change: SG&A expenses were $35 million lower year over year from the execution of our restructuring program.

Speaker Change: Our use of non labor costs and lower variable compensation R&D.

Speaker Change: R&D expense was $28 million less than last year, mainly coming from engineering efficiencies as we did not put any development program.

Oddone Rocchetta: As year, many coming from engineering efficiencies as we did not cut any development program. Agriculture adjusted a bit margin and at a 13.7, down 310 basis points compared to Q2 of last year. Moving on to construction, net sales for the second quarter were $890 million, down about 60%, driven by lower volumes in regions. This decrease was larger than anticipated and lowers our expectation for the second half. Net pricing was essentially flat, with positive pricing in our market after market price offsetting high incentive to our dealers in support of retail equipment sales. Despite the lower sales volume, our cost reduction program made it possible to improve the gross margin by 50 basis points to 16.5%.

Speaker Change: Agriculture, adjusted EBIT margin ended at $13 seven down 310 basis points compared to Q2 of last year.

Oddone Della Rocchetta: Moving on to cost fractions, net sales for the second quarter were $890 million, down about 60%, driven by lower volumes in all regions. This decrease was larger than anticipated and lowers our expectations for the second half. Net pricing was essentially flat, with positive pricing in aftermarket parts, offsetting higher incentives to our dealers in support of retail equipment sales. Despite the lower sales volume, our cost reduction program made it possible to improve the gross margin by 50 business points to 16.5%.

Speaker Change: Moving onto construction net sales for the second quarter were $890 million down about 60% driven by lower volumes in all regions.

Speaker Change: This decrease was larger than anticipated and lower than our expectation for the second half.

Speaker Change: Net pricing was essentially flat with positive pricing in after market for aftermarket parts offset the higher incentives to our ddos in support of retail equivalent sales.

Speaker Change: Despite the lower sales volume our cost reduction program made it possible to improve the gross margin by 50 basis points to 16, 5%.

Oddone Rocchetta: SGNA expenses were down $8 million compared to last year, and that in the expense was down $3 million. With $60 million of adjusted a bit in Q2, adjusted a bit margin was nearly flat year per year at 6.7%. In our financial service business, net income in the second quarter was $91 million, a $3 million decrease compared to 2020. Higher revenues and yields were offset by higher risk cost driven by increased delinquencies. Most of the growth in the past few payments was in South America from the seasonal concentration of yielding installments due from agricultural customers, compounded by some of the economic and environmental factors out there.

Oddone Della Rocchetta: SG&A expenses were down $8 million compared to last year, and R&D expense was down $3 million. With $60 million of adjusted EBIT in Q2, adjusted EBIT margin was nearly flat year-over-year at 6.7%. In our financial service business, net income in the second quarter was $91 million, a $3 million decrease compared to last year. Higher revenues and yields were offset by higher risk costs driven by increased delinquency.

Speaker Change: SG&A expenses were down $8 million compared to last year, and R&D expense was down $3 million with $60 million of adjusted EBIT to adjusted EBIT margin was nearly flat year over year at six 7%.

Speaker Change: In our financial services business net income in the second quarter was $91 million or.

Speaker Change: A $3 million decrease compared to 2020.

Speaker Change: Higher revenues and yields were offset by higher risk cost driven by increased delinquencies.

Oddone Della Rocchetta: Most of the growth in the past few payments was in South America from the seasonal concentration of yearly installments due from agricultural customers compounded by some of the economic and environmental factors out there. We continue to feel confident in the quality of our credit portfolio globally, and delinquency rates are better than in previous industry downturns. Retail originations in the quarter were $2.9 billion, slightly compared to the same period of 2023.

Speaker Change: Most of the growth in the past due payments was in South and South America from the seasonal concentration of yearly installments from agriculture customers compounded by some of the economic and environmental factors out there.

Oddone Rocchetta: We continue to feel confident in the quality of our credit portfolio globally, and the rates are better than in previous industry downturns. Retail originations in the quarter were $2.9 billion, up slightly compared to the same period of 2023, and the management portfolio at the end of the quarter was $28.5 billion. Back to the industrial activities, our cost reduction programs are continue to yield results, and we reaffirmed our commitment to driving structural cost improvements throughout the company. On the cost of goods sold side, we have saved $128 million a year to a year into date to focus efforts on reducing logistics, manufactures, manufacturing and material costs.

Speaker Change: We continue to feel confident in the quality of our portfolio globally and delinquency rates are better than in previous weakness in downturns.

Speaker Change: Retained originations in the quarter were $2 9 billion up slightly compared to the same period of 2023 and the managed portfolio at the end of the quarter was $28 $5 billion.

Oddone Della Rocchetta: And the managed portfolio at the end of the quarter was $28.5 billion. Back to industry activities, our cost reduction programs are continuing to yield results, and we reaffirm our commitment to driving structural cost improvements throughout the company. On the cost of goods sold side, we have saved $128 million year-to-date through focused efforts on reducing logistics, manufacturing, and material costs. These savings show up in the agriculture and construction EBIT walks in the product cost categories.

Speaker Change: After the industrial activities, our cost reduction programs continue to yield results and we reaffirm our commitment to driving structural cost improvements throughout the company.

Speaker Change: On the cost of goods sold side, we have saved $128 million year to year to date to focus our efforts on reducing logistics manufactories manufacturing and material costs.

Oddone Rocchetta: These savings show up in the agricultural and construction EBIT walks in the product cost categories, but they are partially offset by labor cost increases and high warranty cost we discussed earlier.

Speaker Change: These savings show up in the agriculture, and construction EBIT walks in the product cost categories, but they are partially offset by labor cost increases and higher warranty costs, we discussed earlier.

Oddone Della Rocchetta: But they are partially upset by labor cost increases and higher warranty costs we discussed earlier. We're progressing in our strategic sourcing program, and as we implement Wave 1, we look forward to meeting many of our current and prospective suppliers as we kick off Phase 2 in September. Year-to-date, we have saved $105 million in SG&A versus 2023, and we will continue to realize savings in the second half as we implement the final steps of our restructuring program, and we will maintain our spending discipline going forward.

Oddone Rocchetta: We are progressing in our strategic forces program, and as we implement the wave 1, we look forward to meeting many of our current and prospective suppliers as we kick off phase 2 in September. Here today we have saved $105 million of SUNA versus 2023, and we will continue to realize savings in the second half as we implement the final steps of our, and we will maintain our spending discipline going forward. Moving to our capital location priorities, in June, we issued 750 million euros under updated medium-term notes program and we renewed our core long-term revolving trade facility.

Speaker Change: We are progressing in our strategic sourcing program and as we implement the wave one we look forward to meeting many of our current and prospective suppliers as we kick off phase II in September.

Speaker Change: Year to date, we have saved $105 million of SG&A versus 2023, and we will continue to realize savings in the second half as we implement the final steps of our restructuring program.

Speaker Change: And we will maintain our spending discipline going forward.

Oddone Della Rocchetta: Moving to our capital allocation priorities, in June, we issued 750 million euros under our updated Median Return Notes program, and we renewed our core long-term revolving credit facility. This demonstrates CNH's strong credit position, and we want to thank the banks who assisted with this transaction. During the quarter, we repurchased $60 million worth of shares and paid $593 million for our annual dividend.

Speaker Change: Moving to our capital allocation priorities in June we issued 750 million euros under our updated medium term notes program and we renewed our core long term revolving credit facility.

Oddone Rocchetta: This demonstrates CNH strong credit positions, and we want to thank the banks for assisted with these transactions. During the quarter, we repurchased $60 million worth of shares and paid $593 million for our annual dividend. To the first output of 2024, we have returned a total of 1.2 billion dollars to shareholders, individuals, and share buy-backs. Despite the lower sales, CNH remains a castrenary in business and our commitment to return free cash flow to shareholders remains unchanged.

Speaker Change: This demonstrates the strong cash position and we want to thank the banks was is that what this transactions.

Speaker Change: During the quarter, we repurchased $60 million worth of shares and paid $593 million.

Speaker Change: For our annual dividend.

Oddone Della Rocchetta: Through the first half of 2024, we have returned a total of $1.2 billion to shareholders in dividends and share buybacks. Despite the slower sales, CNH remains a cash-generating business, and our commitment to return free cash flow to our shareholders remains unchanged. Lastly, a point related to our recent transition to single listing on the New York Stock Exchange. Based on the most recent market data, CNH will be a U.S. domestic filer for the purposes of U.S. federal security laws and exchange requirements as of January 1, 2025.

Speaker Change: Through the first half of 2024, we have returned a total of $1 2 billion to shareholders in dividends and share buybacks. Despite.

Speaker Change: Despite the lowest does lower sales <unk> remains a cash generating business and our commitment to return free cash flow to shareholders remains unchanged.

Oddone Rocchetta: Lastly, a point related to a recent transition to single listing on the New York Stock Exchange. Based on the most recent market data, CNH will be a U.S. domestic filer for the purposes of U.S. federal security laws and exchange requirements as of January 1st, 2025. As you know, starting from the third quarter of 2022, we began voluntarily filing for our financial results under the periodic Thank You and 10K report imports. So this change will not alter the structure of our financial finance.

Speaker Change: Lastly, unrelated to our recent transition to single listing to the New York Stock Exchange.

Speaker Change: As in the most recent market data <unk> will be a U S. Domestic filer for the purposes of the U S. Federal security laws and exchange requirements as of January one 2025.

Oddone Della Rocchetta: As you know, starting in the third quarter of 2022, we began voluntarily filing our financial results under the periodic 10-Q and 10-K reporting standards. So this change would not alter the structure of our financial findings. With that, I turn it back to Gary.

Speaker Change: As you know starting from the third quarter of 2022, we began voluntarily filing for our financial results under the periodic 10-Q and 10-K reporting for US. So this change will not altered the structure of our financial filings.

Gerrit Marx: With that, I turn it back to Garrett.

Speaker Change: With that I'll turn it back to Gary.

Gerrit Marx: Thank you, Adona, for running us through the financials. Moving to the agriculture outlook, given the further weakening of farmer demand, we project fully industry retail levels to be lower than previously forecasted. We have further lowered our projections for end-market demand in North America, India, and South America. As a result, we are lowering our 2024 agriculture net sales forecast to a decrease between 15 and 20% versus 2023.

Gerrit A. Marx: Thank you, Odone, for running us through the financials. Moving to the agriculture outlook, given the further weakening of farmer demand, we project full-year industry retail levels to be lower than previously forecasted. We have further lowered our projections for end market demand in North America, EMEA, and South America.

Gary: Thank you Donna for running us through the financials moving.

Gary: Moving to the agricultural outlook given the further weakening of pharma demand we.

Gary: We project full year industry retail levels to be lower than previously forecasted we have further lowered our projections for end market demand in North America, EMEA and South America. As a result, we are lowering our 2020 for agriculture net sales forecast to decrease between 15 and 20% versus 2002.

Gerrit A. Marx: As a result, we are lowering our 2024 agriculture net sales forecast to a decrease between 15 and 20 percent versus 2023. This is in response solely to industry demand. Based on our expectations for lower volume with modestly positive pricing, partially offset by continued cost reductions, we are lowering our EBIT margin guidance by 50 basis points to be between 13 and 14 percent. Production hours in the second half of 2024 will be down around 25% when compared to the second half of 2023.

Gerrit Marx: This is in responsibility to industry demand. Based on our expectations for lower volume with modestly positive pricing, partially offset by continued cost reductions, we are lowering our EBIT margin guidance by 50 basis points to be between 13 and 14%. Production hours in the second half of 2024 will be down around 25% when compared to the second half of 2023. And that reflects our plans to underproduce retail demand for the remainder of the year. Q3 production slots are almost fully covered by orders in all regions. We are already taking orders for modally a 25 row crop products in North America, but it is still too early to draw any conclusion about 2025 demand.

Speaker Change: 'twenty three.

Speaker Change: This isn't rebound solidly to industry demand based on our expectations for first for lower volume with modestly positive pricing, partially offset by continued cost reductions we are lowering our EBIT margin guidance by 50 basis points to be between 13 and 14%.

Gary: Production hours in the second half of 2024 will be down around 25% when compared to the second half of 2023 and that reflects our plans to underproduce retail demand for the remainder of the year.

Gerrit A. Marx: And that reflects our plans to underproduce retail demand for the remainder of the year. Q3 production slots are almost fully covered by orders in all regions. We are already taking orders for model year 25 row crop products in North America, but it is still too early to draw any conclusions about 2025 demand. Turning to construction, sentimental and leading indicators have trended negative during the quarter, and we have seen industry channel inventories start to tick up.

Gary: Q3 production slots are almost fully covered by orders in all regions. We are already taking orders for model year 'twenty five row crop products in North America, but it is still too early to draw any conclusion about 2025 demand.

Gerrit Marx: Turning to construction, sentiment and leading indicators have trended negative during the quarter. And we have seen industry channel inventories start to pick up. This trend, along with expected lower demand through the rental channel, has brought us to re-evaluate our sales outlook. Therefore, we are lowering our 2024 construction net sales forecast to be down 15 to 20% versus 2023. Despite this, we are reaffirming our previous EBIT margin guidance of 5 to 6% for the year on the strength of our cost reduction programs, compensating pricing pressures, and lower production levels. Production hours in the second half of 2024 are being rebalanced with significant reductions in North America and Europe.

Gary: Turning to construction sentiment and leading indicators have trended negative during the quarter and we have seen industry channel inventory start to tick up this trend along with expected lower demand through the rebrand to channel has brought us to reevaluate our sales outlook.

Gerrit A. Marx: This trend, along with expected lower demand through the rental channel, has led us to re-evaluate our sales outlook. Therefore, we are lowering our 2024 construction net sales forecast to be down 15-20% versus 2023. Despite this, we are reaffirming our previous EBIT margin guidance of 5-6% for the year on the strength of our cost reduction programs compensating for pricing pressures and lower production levels. Production hours in the second half of 2024 are being rebalanced with significant reductions in North America and Europe.

Speaker Change: Therefore, we are lowering our 2024 construction net sales forecast to be down 15% to 20% versus 2023. Despite this we are reaffirming our previous EBIT margin guidance of 5% to 6% for the year on the strength of our cost reduction programs compensating pricing <unk>.

Speaker Change: <unk> and lower production levels.

Speaker Change: <unk> in the second half of 2024 are being rebalanced with significant reductions in North America, and Europe worldwide production will be down around 20% compared to the second half of 2023, assuming underproduction compared to retail demand for the remainder of the year through three production slots are mostly.

Gerrit Marx: Worldwide production will be down around 20% compared to the second half of 2023, assuming underproduction compared to retail demand for the remainder of the year. Q3 production slots are mostly covered by orders, and order collection is in progress for Q4.

Gerrit A. Marx: Worldwide production will be down around 20% compared to the second half of 2023, assuming underproduction compared to retail demand for the remainder of the year. Q3 production slots are mostly covered by orders, and order collection is in progress for Q4. Turning to slide 15, combining these updated segment forecasts, we now anticipate industrial net sales to be down between 15 to 20 percent compared to last year. Industrial free cash flow is now estimated to be between 700 million and 900 million U.S. dollars, reflecting the lower sales and the impact on networking capital of the lower production levels.

Speaker Change: Covered by orders and order collection is in progress for Q4.

Gerrit Marx: Turning to slide 15, combining these updates, segment forecasts. We now anticipate industrial net sales to be down between 15 to 20% compared to last year. Industry free cash flow is now estimated to be between 700 million and 900 million US dollars, reflecting the lower sales and the impact on networking capital of the lower production levels. We now forecast adjusted EPS to be between 1 US dollar and 30 cents and 1 US dollar and 40 cents.

Speaker Change: Turning to slide 15, combining these updated segment forecasts, we now anticipate industrial net sales to be down between 15% to 20% compared to last year industrial free cash flow is now estimated to be <unk> to be between $700 million and $900 million, reflecting the lower sales in the.

Speaker Change: Pact on net working capital of the lower production levels, we now forecast adjusted EPS to be between $1 30, and $1 40.

Gerrit A. Marx: We now forecast adjusted EPS to be between $1.30 and $1.40. I will conclude with a few words on my priorities for the next 90 days. While there's a lot going on at CNH right now, we will not take our focus off delivering results in this challenging market environment. Our global leadership team was announced on Monday this week, built on far more than 100 years of combined experience in our industry, and is empowered to carry out faster and more effective delivery of the strategic priorities for profitable long-term growth with a simplified matrix structure and clearer accountability.

Gerrit Marx: I will conclude with a few words on my priorities for the next 90 days. While there's a lot going on at CNH right now, we will not take our focus off delivering results in this challenging market environment. Our global leadership team was announced on Monday this week, builds on way more than 100 years of combined experience in our industry and is empowered to carry out faster and more effective delivery of the strategic priorities for profitable long-term growth with the simplified matrix structure and clearer accountabilities. As we focus on agriculture, as our core business, our brand's KSIH, New Holland, Raven, and Steyer, to name only the largest, will claim their rightful turf and leave an enduring mark in their respective fields.

Speaker Change: I will conclude with a few words on my priorities for the next 90 days.

Speaker Change: While there is a lot going on at <unk> right now we will not take our focus of delivering results in this challenging market environment. Our global leadership team was announced on Monday. This week builds on on way more than 100 years of combined experience in our industry and is empowered to carry out faster and more effective delivery of the straw.

Speaker Change: T J priorities for profitable long term growth with this simplified matrix structure clearer accountabilities.

Gerrit A. Marx: As we focus on agriculture as our core business, our brands KCIH, New Holland, Raven, and Steyr, to name only the largest, will claim their rightful turf and leave an enduring mark in their respective fields. We do not aim to follow anyone, but we will break new ground every day with every step we take.

Speaker Change: As we focus on agriculture, as our core business, our brands case, IH, New Holland, Raven and Shire to name only the largest will claim their rightful turf and leave an enduring mark in their respective fields. We do not aim to follow anyone but we will break our new ground everyday with every step.

Gerrit Marx: We do not aim to follow anyone, but we will break our new ground every day with every step we take. We will work jointly with our network partners to improve our commercial and brand effectiveness. By allowing our construction business to run more autonomously and to explore optional paths on their strategic map, we empower them to unlock even more value while retaining their synergistic benefits with AC. In 2021, CNH began its journey to bring its tax stack in-house with the acquisition of Raven. A tremendous amount of work has been done to marry our world-class iron with our enhanced suite of precision tech.

Speaker Change: We take we will work jointly with our network partners to improve our commercial and brand effectiveness by.

Gerrit A. Marx: We will work jointly with our network partners to improve our commercial and brand effectiveness. By allowing our construction business to run more autonomously and to explore optional paths on their strategic map, we empower them to unlock even more value while retaining their synergistic benefits with ag. In 2021, CNH began its journey to bring its tech stack in-house with the acquisition of Raven. A tremendous amount of work has been done to marry our world-class iron with our enhanced suite of precision tech.

Speaker Change: By allowing our construction business to run more autonomously and to explore optional path on their strategic map, we empower them to unlock even more value while retaining their synergistic benefits with act.

Speaker Change: In 2021, <unk> began its journey to bring its tech stack in house with the acquisition of Raven, a tremendous amount of work has been done to marry our world class Iron with our enhanced suite of precision Tech and integrated approach to having technology embedded into our equipment from each new products inception.

Gerrit Marx: An integrated approach to having technology embedded into our equipment from each new product's inception will see our now combined engineering teams deliver more consistent results. We will accelerate our innovation engine and the convergence of iron and precision into a seamless user experience.

Gerrit A. Marx: An integrated approach to having technology embedded into our equipment from each new product's inception will see our now combined engineering teams deliver more consistent results. We will accelerate our innovation engine and the convergence of iron and precision into a seamless user experience. Finally, I'm looking forward to meeting with many of our shareholders. During the second half of the year, I hope to be able to engage with most of you in person or virtually.

Speaker Change: See our now combined engineering teams deliver more consistent results.

Speaker Change: We will accelerate our innovation innovation engine and the convergence of iron and precision into a seamless user experience.

Gerrit Marx: Finally, I'm looking forward to meeting with many of our shareholders. Over the second half of the year, I hope to be able to engage with most of you in person overtually. I want you to feel as confident as I do that CNH is a great company and team with tremendous potential for value creation.

Speaker Change: Finally, I am looking forward to meeting with many of our shareholders over the second half of the year I hope to be able to engage with most of you in person or virtually I want you to feel as confident as I do that <unk> is a great company and team with tremendous potential for value creation, we are planning our investor day.

Gerrit A. Marx: I want you to feel as confident as I do that CNH is a great company and a team with tremendous potential for value creation. We are planning our investor day for early 2025 and will let you know as soon as we have set a date and location. I look forward to going into much greater detail around my vision for strengthening the company's value proposition and demonstrating how we win in a competitive marketplace.

Gerrit Marx: We are planning our investor day for early 2025 and will let you know as soon as we have set a date and location. I look forward to going into much greater detail around my vision for strengthening the company's value position and demonstrating how we win in a competitive marketplace.

Speaker Change: For early 2025, and we'll let you know as soon as we have set a date and location.

Speaker Change: I look forward to going into much greater detail around my vision for strengthening the company's value proposition and demonstrating how we win in a competitive marketplace.

Gerrit Marx: As I have traveled to our offices, plants, dealer facilities, and our customer farms to meet with the many people who make up the CNH ecosystem, I have gotten up to speed on where most of our priorities sit. Our people are moving the most knowledgeable, capable, and hard-roading individual individuals I have encountered during my professional career. My goal over the coming months and years is to weave together our competitive advantages and overcome hurdles to unlock growth, value, and industry leadership. I want to express my deep appreciation and gratitude towards everyone who is a part of the CNH family for welcoming me with open arms. I very much look forward to the journey ahead.

Gerrit A. Marx: As I've traveled to our offices, plants, dealer facilities, and our customer farms to meet with the many people who make up the CNH ecosystem, I've gotten up to speed on where most of our priorities sit. Our employees are the most knowledgeable, capable, and hard-working individuals I've encountered during my professional career. My goal over the coming months and years is to weave together our competitive advantages and overcome hurdles to unlock growth, value, and industry leadership. I want to express my deep appreciation and gratitude towards everyone who is a part of the CNH family for welcoming me with open arms.

Speaker Change: As I have traveled to our offices planned steal a facilities and our customer farms to meet with the many people who make up the <unk> ecosystem has gotten up to speed on where most of our priorities sit.

Speaker Change: Our people are moving the most knowledge knowledgeable capable and hardworking individuals I've encountered during my professional career.

Speaker Change: My goal over the coming months and years is to weaves together, our competitive advantages and overcome hurdles to unlock growth value and industry leadership I want to express my deep appreciation and gratitude towards everyone, who is a part of the <unk> family for welcoming me with open arms I very much look forward to the journey.

Operator: I very much look forward to the journey ahead, which includes our prepared remarks, and we will now open the line for questions. Thank you. We will now begin the question and answer session of the call. If you would like to ask a question, please press star and then the number 1 on your telephone keypad. To withdraw your question, press star 1 again.

Operator: That includes our prepared remarks, and we will now open the line for questions. Thank you.

Speaker Change: That includes our prepared remarks, and we will now open the line for questions.

Operator: We will now begin the question and answer session of the call. If you would like to ask a question, please press star number one on your telephone keypad. To withdraw your question, press star one again. Please limit yourself to one question and one follow-up to allow time for as many participants as possible. Again, that's star one to ask a question.

Speaker Change: Thank you we will now begin the question and answer session of the call.

Speaker Change: I would like to ask a question. Please press Star then the number one on your telephone keypad to withdraw your question Press Star one again.

Speaker Change: Please limit yourself to one question and one follow up to allow time for as many participants as possible.

Speaker Change: Again, Thats star one to ask a question.

Jamie Cook: We will take our first question from Jamie Cook with True Securities.

Operator: Please limit yourself to one question and one follow-up to allow time for as many participants as possible. Again, that's star number one to ask. We will take our first question from Jamie Cook with Truist Securities. Good morning, and congratulations on a nice quarter, given the environment that's out there. I guess just two questions.

Speaker Change: We will take our first question from Jamie Cook with Trust Securities. Please go ahead.

Jamie Cook: Good morning, and congrats on a nice quarter given the environment that's out there. I guess just two questions. Can you talk to what's implied in your guidance in terms of pricing for the full year? One of your competitors yesterday lowered their pricing assumptions, and this is specific to farm equipment from 1% to now flat. I'm just trying to understand how you're balancing price versus market share going forward.

Jamie Cook: Good morning <unk>.

Jamie Cook: <unk> on a nice quarter given the environment that's out there I guess just two questions can you talk to.

Jamie Cook: Can you talk about what's implied in your guidance in terms of pricing for the full year? One of your competitors yesterday lowered their pricing assumptions, and this is specific to farm equipment, from 1% to now flat, so I'm just trying to understand how you're balancing price versus market share, you know, going forward. And then I guess my second question, you know, on the production cuts. I think you said 20%. And it would be more concentrated in North America and Europe.

Jamie Cook: What what's implied in your guidance in terms of pricing for the full year one of your competitor yesterday lowered their pricing assumptions for NSE specific to farm equipment.

Speaker Change: You know, 1% to now flat so I'm just trying to understand how you are balancing.

Speaker Change: Rice versus market share.

Speaker Change: Going forward and then I guess my second question on.

Jamie Cook: Then I guess my second question on the production cuts, I think you said down 20%. It would be more concentrated in North America and Europe. Does that imply South America, Brazil, is where you want to be now? We've right-sized that.

Speaker Change: On the production cuts I think you said down 20%.

Speaker Change: It'd be more concentrated in North America, and Europe does that imply South America, Brazil is where you want to be now we've we've right sized that and then sort of how are you thinking about.

Oddone Della Rocchetta: Does that imply South America or Brazil is where you want to be now? We've right-sized that. And then sort of how are you thinking about, you know, if the markets get worse, to what degree is the strategy to, you know, continue to cut production in 2024 or to set you up for a better 2025? Thank you.

Jamie Cook: Then how are you thinking about if the markets get worse? To what degree is the strategy to continue to cut production in 2024 or to set you up for a better 2025?

Speaker Change: If the markets get worse to to what degree is the strategy to continue to cut production in 2024, our Q.

Speaker Change: Set yet for a better 2025, thank you.

Gerrit Marx: Thank you.

Gerrit Marx: Let me take the price in Jamie. We confirm very low single digit price potential, price increase in agriculture, whereas we confirm that we are less confident on pricing on construction, so we are prepared to set it to be negative in construction for the balance of the year because of the competitive position. On the production cuts, as we said, we have 25% in agriculture production cut in the second half of the year and 20% in construction for the second half of the year. Most notably, that is because of the weakness in the US residential sector, while the base infrastructure construction is obviously continuing to go reasonably well.

Speaker Change: So let me take the pricing Jamie.

Speaker Change: We confirm.

Oddone Della Rocchetta: Very low single-digit prices, and a potential price increase in agriculture, whereas we confirm that we are less confident about pricing in construction. So we are prepared to accept it to be negative in construction for the balance of the year because of the competitive position. Yeah, and on the production cuts, as we said, we have 25% in agriculture production cuts for the second half of the year and 20% in construction for the second half of the year on a year-over-year view.

Speaker Change: Very low single digit.

Speaker Change: Price potential price increase in agriculture, whereas we confirm that we are less confident on pricing on construction. So we.

Speaker Change: Our prepared to accept it to be negative in construction for the balance of the year.

Speaker Change: Because of the competitive position.

Speaker Change: Yes.

Speaker Change: On the production cuts as well.

Speaker Change: We have 25% and agriculture production cuts in the second half of the year and 20% in construction for the second half of the year and the year over year view and on the construction side I mean, most notably that is because of the weakness in the U S residential sector, while the base infrastructure construction.

Oddone Della Rocchetta: And on the construction side, I mean, most notably that is because of the weakness in the U.S. residential sector, while base infrastructure construction is obviously continuing to go reasonably well. Production cuts in LATAM are around those numbers as well. We have taken them down slightly earlier than the others, and we keep traveling on a very careful level of production there to continue lowering our dealer inventory globally, where we see, for the agriculture segment, about a billion-plus dealer inventory to be reduced by year-end to reach where we want to be entering into a certainly flattish 2025.

Speaker Change: Is obviously continuing to go reasonably well.

Gerrit Marx: Production cuts in Latin are around those numbers as well. We have taken them down slightly earlier than the others, and we keep traveling on a very careful level of production there to continue lowering our dealer inventory globally, where we see still for the agriculture segment about a billion plus dealer inventory to be reduced by year and to reach where we want to be entering into a certainly flatish 2025 to be seen now. But we need to have the inventory significantly lower than today by about a billion plus.

Speaker Change: Production cuts in Latam are around those numbers is where we've taken them down.

Speaker Change: Slightly earlier than the others and we keep traveling on a very careful our level of production there to continue lowering our dealer inventory globally, where we see.

Speaker Change: Still for the agriculture segment about $1 billion plus.

Speaker Change: Dealer inventory to be reduced by year end to reach where we want to be entering into.

Speaker Change: Certainly.

Speaker Change: <unk> 2025 to be seen now, but we need to have the dealer inventories significantly lower than today by about 1 billion plus.

Oddone Della Rocchetta: But we need to have dealer inventories significantly lower than today, by about a billion-plus. But is the strategy to make sure that we take the pain in 2024 to set you up for a better 2025? So if the market gets weaker, would you cut production further? That's the question.

Gerrit Marx: But is the strategy to make sure that we take the pain in 2024 to set you up for a better 2025? So if the market gets weaker, would you cut production further? That's the question. We get ready for a good start into 2025, expecting similar levels of muted customer demand. I mean, obviously, we can react quite swiftly if that is to change either way. But we get ready.

Speaker Change: Globally. This is the strategy to make sure we take attained in 2024 to set you up for a better 2025 cell and module maker.

Speaker Change: You cut production further.

Speaker Change: It is.

Speaker Change: That's the question.

Gerrit A. Marx: We get ready for a good start into 2025, expecting similar levels of muted, you know, customer demand. And I mean, obviously, we can react quite swiftly if that is, if that is to change either way, but we get ready for 2025. Okay, thank you. Our next question comes from Daniela Costa with Goldman. Go ahead. Hi. Good morning.

Speaker Change: We get ready for a for a good start into 2025 expecting.

Speaker Change: Similar levels of muted customer demand and I mean, obviously, we can react quite swiftly if that is.

Speaker Change: Is that has to change either way, but we get ready for 2025.

Gerrit Marx: Okay.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Daniela Costa: Our next question comes from Daniela Costa with Goldman Sachs. Please go ahead. Hi. Good morning. Thanks for taking my question. I have two questions.

Speaker Change: Our next question comes from Daniela Costa with Goldman Sachs. Please go ahead.

Daniela Costa: Hi, Good morning, Thanks for taking my question I have two questions more regarding the announcement two days ago.

Daniela Costa: Thanks for taking my question. I have two questions, more regarding the announcement two days ago. One is, you created this new role of chief of quality, and I guess sort of what prompted you to create that? Was there something that you saw that was missing? Why do we need that now, or maybe that's the first question, and then I'll ask the second one. Hi, Daniela.

Daniela Costa: More regarding the announcement two days ago. One on the you created this new role of Chief of Quality. And I guess sort of what prompted you to create that was there's something that you've seen that was missing. Why do we need that?

Daniela Costa: One on the you created this new role of chief of quality, and I guess sort of what prompted you to create that was that something that you've seen that that was missing.

Daniela Costa: Now or maybe that's the first question, and then I'll ask the second one.

Speaker Change: We need that now or.

Speaker Change: Maybe that's the first question and then I'll ask the second one.

Gerrit Marx: Hi, Daniela. Well, I mean, head of quality was certainly there before in the segment. And now that I put myself on top of the act segment, that position moves to a direct report. And we further strengthen this position across the globe because we believe that there is more work to be done in creating custom products that delight our customers. And, as I said, we might prepare remarks. We have gone through a quality challenge with the production from the received plan following the strikes, and hence now we are clearing this and cleaning this. And we have successfully returned the received plan to very good quality output levels, but you know, maintaining that and also bringing everyone else around the, you know, CNH world to levels of world class is a constant.

Gerrit A. Marx: Well, the Head of Quality was certainly there before in the segment, and now that I put myself on top of the Ag segment, that position moves to a direct report, and we further strengthen this position across the globe because we believe that there is more work to be done in creating products that delight our customers. And as I said in my prepared remarks, we have gone through a quality challenge with production from the Racine plant following the strikes, and hence now we are clearing this and cleaning this.

Danielle: Hi, Danielle.

Danielle: Well I mean head of quality was certainly there before in the in the segment and now that I put myself on top of the AG segment that position moves through a direct report and we further strengthened this position across the globe because we believe that there is more work to be done in creating customer.

Danielle: <unk> that delight, our customers and as I said in my prepared remarks, we have gone through.

Danielle: Our quality challenge with the production from the receipt plan following the strikes and hence now we are clearing this in cleaning this.

Gerrit A. Marx: And we have successfully returned the Racine plant to very good quality output levels. But maintaining that and also bringing everyone else around the CNH world to levels of world class is a constant ambition that we need to live up to. And hence, having quality in a direct line is something I'm very much used to, and quality is the voice of the customer. And that person shall always be present in every discussion that we have.

Danielle: We have successfully returned the routine planned to very good quality output levels, but maintaining that and also bringing everyone else around the.

Danielle: <unk> world to levels.

Speaker Change: Of World Class is is a constant ambition that we need to live up to enhance having quality and her direct line is something I'm very much used to and quality as the voice of the customer and that person shall always be in every discussion that we have so therefore, we call it quality and customer advocacy and that is a very needed position.

Gerrit Marx: Ambition that we need to live up to, and hence having quality in a direct line is something I'm very much used to, and quality is the voice of the customer. And that person shall always be in every discussion that we have. So therefore we call it quality and customer advocacy, and that is a very needed position.

Gerrit A. Marx: So therefore, we call it quality and customer advocacy. And that is a very needed position, I think, in any manufacturing company. And then, sort of, regarding construction equipment and the relation with the group, I guess you were back there in 2021 when the decision to separate IVECO was there, and construction equipment was considered a core part; it had some synergies with the rest. The language now seems to slightly shift.

Gerrit Marx: I think in any manufacturing company understood and then I guess sort of regarding construction equipment and the relation with the group. I guess you were back there on in 2021 when the decision to separate Yveko was there and construction equipment was considered a core part. It had some synergies with the rest. Your language now seems to slightly shift. Can you talk about like what has changed and how sizable are these synergies with the group and could something change to make those synergies less relevant? How should we think about the roadmap for construction equipment? Yeah, then I think that when we spun off the on-highway business or the trucks and engine business back in the days, that was truly, you know, different in most of its aspects from CNH, I can see.

Speaker Change: I think in any manufacturing company.

Speaker Change: Understood.

Speaker Change: And then I guess.

Speaker Change: Regarding construction equipment and the relation with the group I guess you are back there on 2021, when the decision to separate Iveco was there and construction equipment was considered a core part had some synergies with the rest.

Speaker Change: The language now seems to slightly shift can you talk about like what has changed and how sizable are the synergies with the group and could something change to make those synergies less relevant how should we think about the roadmap for construction equipment.

Daniela Costa: Can you talk about what has changed and how sizable these synergies are with the group, and could something change to make those synergies less relevant? What should we think about the roadmap for construction equipment? Yeah, Daniela, I think when we spun off the on-highway business or the trucks and engine business back in the old days, that was truly, you know, different in most of its aspects from CNH, ACK, and CE. And while here with construction, I think it is to give this business that has led a tremendous turnaround and is a very good success story the freedom to explore all the options around in its ecosystem to develop its full potential. The two businesses, ACK and construction today, already have separate manufacturing footprints.

Speaker Change: Sure.

Speaker Change: Yes, I think the when we spun off the on highway business, all the trucks and engine business back in the days that was truly.

Speaker Change: A different and most of its aspects from from <unk> occupancy.

Gerrit Marx: And while here with construction, I think it is to give this business that has led a tremendous turnaround and a very good success story. The freedom to explore all the options around it's in its ecosystem to develop its full potential. The two businesses, Ag and construction today have today already separate manufacturing footprints that have dedicated R&D resources. We have separate dealer networks and even separate sales organizations. We have the back end synergies are predominantly and they are sizable, they are predominantly around procurement, joint procurement and back office functions like finance, IT and the likes. But the industrial businesses are already separated today, and giving this team the agility it takes to capture the opportunities in their playground is requiring them to be at arm's length. I will focus my time on act while having regular business reviews with CE, obviously.

Speaker Change: And why is it why here with construction I think it is to give this business that has led to a tremendous turnaround in a very good success story.

Speaker Change: The freedom to explore all the options around it and its ecosystem to develop its full potential of the two businesses AG and construction today.

Speaker Change: Have today already separate manufacturing footprints that have dedicated R&D resources, we have separate dealer networks and even separate sales organizations.

Gerrit A. Marx: They have dedicated R&D resources. We have separate dealer networks and even separate sales organizations. The back-end synergies are predominantly, and they are sizable; they are predominantly around procurement, joint procurement, and back-office functions like finance, IT, and the likes. But the industrial businesses are already separated today, and giving this team the agility it takes to capture the opportunities in their playground is requiring them to be at arm's length. And I will focus my time on ACT while having regular business reviews with CE, obviously.

Speaker Change: We have the backend synergies are predominantly and they are sizable they are predominantly around procurement joint procurement and.

Speaker Change: Back office functions like finance, it and the likes but the industrial businesses.

Speaker Change: Already separated today and given this team the agility it takes two.

Speaker Change: To capture the opportunities in their playground is requiring them to be at arm's length, and I will focus my time on act, while having regular business reviews with CE obviously.

Daniela Costa: Okay, thank you very much.

Speaker Change: Okay. Thank you very much.

Mircea Dobre: Our next question comes from Mick Dobre with Baird.

Gerrit A. Marx: Okay, thank you very much. Our next question comes from Meg Dobre with Baird. Please go ahead. Good morning. Thank you for taking the question. I want to follow up on Jamie. Tori is in a production cut.

Mig <unk>: Our next question comes from Mig <unk> with Baird. Please go ahead.

Mircea Dobre: Please go ahead. Good morning. Thank you for taking a question. I want to follow up on Jamie's question on inventories and a production cut. If I look at your slide 18 where you're discussing dealer inventories, looking at those charts, I struggled to see much evidence of dealer destocking thus far.

Mig: Good morning, Thank you for taking my question.

Mig: I wanted to follow up on Jamie's question on.

Mircea Dobre: If I look at your Slide 18, where you're discussing your employees, and looking at those charts, I struggle to see much evidence of dealer destocking thus far. You have a goal to take out $1 billion worth of inventory over the next couple of quarters, and I'm sort of curious if the 25% production cut will be enough to deliver on that goal considering the fact that production hours were down 30% in Q2. So are we doing enough here?

Speaker Change #120: Inventories on a production cut.

Speaker Change: I look at your.

Speaker Change: Slide 18, where you are discussing dealer inventories.

Speaker Change: Looking at those charts I struggled to see.

Speaker Change #116: Ah much evidence of dealer Destocking, thus far.

Gerrit Marx: You have a goal to take out a billion dollars' worth of inventory over the next couple of quarters, and I'm sort of curious if the 25% production cut will be enough to deliver on that goal. Considering the fact that production hours were down 30% into two. So are we are we doing enough here? How can we get the comfort that this cost is going to cheat back? Yeah, there is a certain time delay between production production cost cuts and until that leads to actually retail inventory or dealer inventories to drop. So we have taken a 30% production cut in an act in Q2 versus prior year, and this is going to shine in already in shows already impact in the early innings of a Q3.

Speaker Change: You have a goal to take out $1 billion worth of inventory over the next couple of quarters.

Speaker Change: Sort of curious if the 25% production cost will be enough to deliver on that goal considering the fact that production hours were down 30%. In Q2. So are we are we doing enough here how can we get the comfort.

Scott Wine: This is Scott.

Scott Wine: Got to achieve that.

Oddone Della Rocchetta: Yeah, there is a certain time delay between production costs and until that leads to actually retail inventory or deal inventories dropping. So we have taken a 30% production cut in ag in Q2 versus prior year, and this is going to shine through already, and shows already an impact in the early innings of Q3. So there's a certain time delay between those effects, and as we continue with the 25 production cut in ag in Q3, we are carefully watching what we might need to do as well in Q4. Maybe we won't need to add further cuts. Maybe we need to do it.

Scott Wine: Yes.

Speaker Change: There is a certain time delay between production production cost cuts and until that leads to actually retail inventory dealer inventories to drop so we have taken 30% production cut in and.

Speaker Change: Enact in Q2 versus prior year and this is going to shine in already and it shows already impact in the early innings of a Q3. So there is a certain time delay between those effects and as we continue with the 25 production cut in AG in Q3 are carefully watching what we might need to do as well in Q4.

Gerrit Marx: So that's a certain time delay between those effects, and as we continue with the 25 production cut and act in a Q3, carefully watching what we might need to do as well in Q4. Maybe we don't need to add further cuts; maybe we need to we can take that decision in a few weeks for now. We are pretty confident that we're going to reach those inventory levels on retail level. The impact of Q2 starts to shine already. And make don't forget that last year, the second half of the year, we had already taken down production, particularly in the low horsepower tractors globally, in a quite significant way.

Speaker Change: For maybe we don't need to add further cuts maybe we need to we can take that decision in a few weeks from now.

Oddone Della Rocchetta: We can take that decision in a few weeks from now. We are pretty confident that we're going to reach those inventory levels and retail levels. The impact of Q2 starts to shine already. And don't forget that last year, in the second half of the year, we had already taken down production, particularly for low horsepower tractors globally, in quite a significant way. I appreciate that, Adonai, but given the fact that... So the reduction that we're showing is not sequentially zero per year, right? No, I get that.

Speaker Change: We are pretty confident that we're going to reach those inventory levels on retail the impact of Q2 starts to shine already and.

Speaker Change: And don't forget that last year, the second half of the year, we have already taken down production, particularly in the low horsepower tractors globally.

Scott Wine: On a quite significant way.

Gerrit Marx: I appreciate that a lot, but given the fact that there is actually that we're showing is not so quite 30 years over a year, right?

Speaker Change: I appreciate that.

Speaker Change: Given the fact that there is.

Speaker Change: Actually that we're showing is not sequentially the year over year right.

Mircea Dobre: I'm just a little bit confused with why we really have more of an impact already from your prior production Kotlin dealer inventory. But I guess my follow-up here, just to kind of move on, is construction. Again, your language around this segment is very different, and I'm wondering if, at the analyst aid that's going to be coming up in 2025, we're going to be hearing something more concrete around strategic alternatives for this segment.

Gerrit Marx: No, I guess that I'm just a little bit confused why we really haven't seen more of an impact already from your prior production cut on dealer inventories.

Speaker Change: No.

Speaker Change #128: I get that.

Speaker Change: A little bit confused why we really haven't seen more of an impact already from.

Speaker Change: From your prior production compound dealer inventories.

Gerrit Marx: But I guess my follow up here, just to kind of move on, is on construction, and again, your language around this segment is very different. And I'm wondering if at the analyst that's going to be upcoming in 2025, we're going to be hearing something more concrete around strategic alternatives developing for this segment. Thank you. Yes, I think we were working diligently on the full potential of both of our businesses. And I think on construction side, the optionality and the trajectory that team has created will set the stage for an interesting capital market stay next year.

Speaker Change #138: But I guess my follow up here just to kind of move on.

Speaker Change: Is.

Speaker Change: On construction and.

Speaker Change: Your language around this segment is very different.

Speaker Change: And I'm wondering if.

Speaker Change: At the analyst day, that's going to be upcoming in 2025, we're going to be hearing something more concrete around strategic alternatives developing for this segment. Thank you.

Speaker Change: Yes, I think we are working.

Mircea Dobre: Thank you. I think we are working diligently to reach the full potential of both of our businesses, and I think on the construction side, the optionality and the trajectory the team has created will set the stage for an interesting Capital Markets Day next year, sorry, Investor Day next year. Thank you. Our next question comes from Kristen Owen with Oppenheimer. Please go ahead. Good morning.

Speaker Change #113: Diligently on on the full potential of both of our businesses and I think on construction site, the optionality and the trajectory the team has created.

Speaker Change: We'll set the stage for an interest in capital markets Day next year is our Investor day next year.

Gerrit Marx: But it's our Investor Day next year.

Speaker Change: Thank you.

Kristen Owen: Our next question comes from Kristen Owen with Oppenheimer. Please go ahead. Good morning, thank you for taking a question. Also looking to maybe double-click on the production and inventory levels and more specifically on the ag inventory levels maybe a bit by region. You know, given the outlook for under production relative to demand, if you can maybe help us break down where the inventory levels are, where you might be oversupplied versus regions or types of equipment where you feel like you're more comfortably in the right range. Yeah, so I think in Europe we destocked in due to mostly combines, and we intend to reduce this even more in the second half.

Christian <unk>: Our next question comes from Christian <unk> with Oppenheimer. Please go ahead.

Christian <unk>: Good morning, Thank you for taking the question.

Kristen Owen: I'm also looking to maybe double-click on the production and inventory levels, and more specifically on the ag inventory levels, maybe a bit by region, you know, given the outlook for underproduction relative to demand, if you can maybe help us break down where the inventory levels are, where you might be oversupplied versus regions or types of equipment where you feel like you're more... Yeah, so I think, look, in Europe, we just talked And let's see how the year will change, whether it will happen then.

Christian <unk>: We're also looking to maybe double click on the production and inventory levels and more specifically on on the AG inventory levels, maybe a bit by region.

Christian <unk>: Given the outlook for underproduction relative to demand if you can maybe help us break down.

Speaker Change #101: The inventory levels are where you might be over supplied versus regions or types of equipment, where you feel like youre more comfortably in the right range.

Scott Wine:

Speaker Change: Yeah. So I think look in Europe, we just stopped in Q2, mostly combines and we intend to reduce it this even more than in the second half.

Gerrit Marx: And let's see whether the year change, the year or change will happen then. And why we actually have reduced the inventories in APEC already versus the beginning of the year. So I think here we are well set up. In the North America tractors, we are planning to destock in Q3 and Q4 significantly under producing retail that is planned for the second half. While we for combined, we are lower than Q4 overall and in summary, we are pretty much aligned with our expectations as we have summarized on global level here.

Scott Wine: And let's see how the change to the changed euro of change whether it would happen then and why we actually have reduced dealer inventories and APAC already versus beginning of the of the year. So I think here we are.

Kristen Owen: And while we actually have reduced deal inventories in APAC already versus the beginning of the year, so I think here we are well set up. In North America, we are planning to destock in Q3 and Q4 significantly underproducing retail. That is planned for the second half.

Scott Wine: Well set up in the North America tractors, we are planning to destock in Q3, and Q4 significantly under producing retail.

Scott Wine: That is planned for the second half while we for combines.

Oddone Della Rocchetta: For combines, we are lower than Q4 and, overall, in summary, we are pretty much aligned with our expectations, as we have summarized on a global level. That's very helpful.

Scott Wine: We are lower than Q4, and overall and in summary, we are pretty much aligned with our expectations as we have summarized on global level here.

Gerrit Marx: That's very helpful.

Kristen Owen: And then my follow-up question, I think you mentioned in the prepared remarks that you've opened up the early order program for row crops in North America, and any early indication understanding it's not necessarily representative for 2025. But with the book pricing is assumed for that 2025 early order. But we put in some modest pricing in the price lead that we put out for our row crop in North America. It's really early to say to give Annie, Annie's expectation for 25 days on where we are right now. Our next question comes from Andrea Bologna with Radio Banco. Please go ahead. Yes, good afternoon, everybody.

Speaker Change: That's very helpful. And then my follow up I think you mentioned in the prepared remarks.

Gerrit Marx: And then my follow up, I think you mentioned in the prepared remarks, you know, that you've opened up the early order program for row crop in North America. Just any early indication, understanding it's not necessarily representative for 2025, but with the book pricing is assumed for that 2025 early order program. Thank you. But we're putting some pricing, modest pricing, in the price that we put out for our row crop in North America.

Speaker Change: <unk> opened up the early order program for row crop.

Speaker Change: In North America, any early indication understanding it's not necessarily representative for 2025, but what would the book pricing is assumed for that that 2025 early order program. Thank you.

Speaker Change: But we're putting some pricing modest pricing A&D in the pricing that we put out for our raw crop in North America.

Gerrit Marx: It's really early to say to give any expectation for 25 days on where we are right now.

Speaker Change: It's really early to say to give.

Speaker Change: Any any.

Scott Wine: Expectation for 25 based on where we are right now.

Andrea Balloni: Our next question comes from Andrea below me with Idiobanko.

Scott Wine: Our next question comes from Andrea <unk> alone.

Speaker Change #145: <unk> Banco Please go ahead.

Andrea Balloni: Please go ahead.

Andrea Balloni: Yes, good afternoon, everybody. Thanks for taking my question, and welcome back again. My first question is on, because if I look at the midpoint of your guidance range, you basically reduce the target by circa 400 million dollars. What does this play in this reduction? If we consider whether cutting the net in Australia, it is only 200 million.

Andrea Balloni: Thanks for taking my question. And welcome back, Gary. My first question is on free cash flow. If I look at the midpoint of your guidance range, you basically reduced the target by circa $400 million. What does this explain this reduction if we consider that the cut in the net industrial limit is only 200 million? And again, on free cash flow, if you can give us an idea about the CAPEX target, we should expect for this year. My second question is on restructuring cost. If you can give us an update on the total pre-exemptive amount we should expect.

Andrea: Yes, good afternoon, everybody and thanks for taking my question and then well come back to you guys.

Andrea Balloni: And my very last question is on the warranty costs you have experienced, totaling $14 million. I'm really sorry I didn't understand what these costs were, if you could explain them again. Thank you. Andrea.

Andrea: My first question is on free cash flow if I look at the mid point of your guidance range.

Speaker Change: Basically I'd use with target to buy E check a $400 million what does explain visa adoption. If a question regarding the net industrial EBIT is only $12 million and a gain on free cash flow. If you can give us any idea about the capex target.

Oddone Rocchetta: And again, I'm pretty sure if you can give us an idea about the capital target, we should expect for this year.

Speaker Change: We should expect for this year.

Oddone Rocchetta: My second question is on the stretching cost. If you can give us an update on the total probability of the amount we should expect.

Speaker Change #126: My second question is on the fashion cross. Thank you can give us an update on the total.

Speaker Change #151: The amount we should expect.

Oddone Rocchetta: And my very last question is on the warranty cost you have experienced in Q2, totaling the $14 million. I'm really sorry. I didn't get what this cost are if you can explain it again. Thank you.

Speaker Change: And Mike if I can ask the question is on the warranty cost.

Speaker Change #102: You have experienced in Q2, starting the $40 million number can you just talk to you then get this cost if you can explain it again thank you.

Oddone Della Rocchetta: The warranty costs that are inside our reported adjusted financial results for the second quarter are related predominantly to quality campaigns, fixing campaigns that we have already launched, and they are well underway, correcting quality issues that came out of the Racine plant as a result of the strikes that we endured last year. Those are topics we know and we are on top of, and in the interest of the customers, we very proactively are out there and fixing those issues as we speak, and that number is around 70 million for the first half of this year already. This is the reason why.

Oddone Rocchetta: Andrea, let me take the last question first. The warranty costs that are inside our reported adjusted financial results for the... For the second quarter, are related predominantly to quality campaigns, fixing campaigns that we have already launched and they are well underway, correcting quality issues that came out of the recent plants as a result of the strikes that we had endured last year. In the interest of the customers, we very proactively are out there and fixing those issues as we speak, and that number is around 70 million for the first half of this year already.

Speaker Change #102: Andrew Let me take the last question first the.

Andrew: The warranty costs that are inside our.

Speaker Change: Reported adjusted for.

Speaker Change: <unk> financial results for the.

Scott Wine: For the second quarter.

Scott Wine: Our related predominantly to our quality campaigns of fixing campaigns that we have already launched and are well underway.

Scott Wine: Correcting quality issues that came out of the receipt plans as a result of the strikes that we had endured last year.

Scott Wine: Those.

Scott Wine: Topics were no and we are on top of and in the interest of the customers be very proactively are out there and fixing those issues as we speak and that number is around $70 million for the first half of this year already.

Oddone Della Rocchetta: And on free cash flow? On free cash flow, I would say the reduction is part of it, through EBITDA, as you mentioned, and the other part is in working capital dynamics when we reduce production, and we reduce sales. And on CapEx, we are confirming the guidance that we gave at the beginning of the year. So we're not, we don't have big changes. Okay, thank you. Our next question comes from David Raso with Evercore ISI. Please go ahead.

Oddone Rocchetta: This is the reason.

Scott Wine: This is the this is the reason and on free cash flow free cash flow I would say.

Oddone Rocchetta: And on free cash flow. On free cash flow, I would say the reduction is part of it through the ABDAP, as you mentioned, and the other part is in working capital dynamics when we reduce production and we reduce sales. And on topics, we are confirming the guidance that we gave at the beginning of the year, so we don't have big changes there.

Speaker Change #104: The reduction is part of it through the EBITDA as you as you mentioned and then the other part isn't working capital dynamics, when we reduced production and will reduce sales.

Scott Wine: Yeah.

Scott Wine: And on Capex. We are we are confirming the guidance that we gave at the beginning of the year. So we're not we don't have big changes there.

Speaker Change #109: Yeah, Okay. Thank.

Oddone Rocchetta: Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

David Razo: Our next question comes from David Razo with Evercore ISI.

Scott Wine: Our next question comes from David Raso with Evercore ISI. Please go ahead.

David Razo: Please go ahead. Hi, thank you. On slide 11, I just want to make sure I'm reading it correctly on the savings. So, for example, on the COGS, the 128 million listed in 2Q, that's an aggregate year-to-date, right? So the idea is correct. Okay, so basically if you do both those fresh G&A and COGS, the second half of the year has an incremental 255 million of savings, right? That's what the back half provides.

David Raso: Hi, thank you. On slide 11, I... For example, on the COGS, the 128 million... That's an agg- That's correct. So basically, if you do both those for SG&A and COGS, the second half of the year has an incremental $255 million of savings, right, that's what the back half provides. The spirit of the question..., margin, so for example, the second half drag margins are

David Raso: Hi, Thank you on slide 11, I, just want to make sure I'm reading it correctly on the savings.

Speaker Change: So for example on the Cogs to $128 million listed into Q.

Speaker Change #122: That's an aggregate year to date right. So so the idea correct all year. Okay. So basically if you do both of those for SG&A.

Speaker Change: Cogs.

Speaker Change: Second half of the year has an incremental $255 million of savings.

Speaker Change: Alright, that's what the back half provides.

David Razo: The spirit of the question is looking at your margins. For example, the second half of the year, your ag margins are implied at 13.8. Before last year, the company had never done 13.8. I mean, the margins are close in 22. So I think we're all just sort of trying to figure out is 25 another leg down or can these margins be viewed as, you know, at least close to a bottom. But obviously, make sure you're nervous; you look back and go. This company's never done 13.8 before except for one year, and now people are trying to figure out it's a bottom.

Speaker Change #107: The spirit of the question is is looking at your margins like for example, the second half of the year.

Speaker Change #110: Your AG margins are implied at 13.8.

David Raso: Before last year, the company had never done this. Basically, the margins are close in 22. So, I think we're all just sort of trying to figure out. 5, another leg down, or Kemi's margin, please close to a bottom, but it obviously makes you nervous. You look back and go, this company's never done, Except for one year, and now people are trying to figure out it's a box. So, the safe... The Back Half, and Run The Map.

Speaker Change #110: Before last year the company never done 13.8.

Speaker Change: Alright.

Speaker Change: Basically the margins were close in 'twenty two so I think we're all just sort of trying to figure out is 25, another leg down or.

Speaker Change #103: Can these margins be viewed as.

Speaker Change: At least at least close to a bottom, but obviously makes you nervous you'll look back and go this company's ever done 13, eight before except for one year and now people are trying to figure out what's a bottom.

David Razo: So the savings in the back half of the year, I can run the math and I get it. At the back half of the year, the decrementals for the whole company are only 16, right? It's impressive. The comp is easier. But even if you pull out the 255, it's still less than 30% decrementals, which is still pretty impressive.

Speaker Change: The savings and.

Speaker Change: In the back half of the year I can run the math and.

David Raso: The back half of the year, the decrementals for the whole company. Impressive. The comp... But even if you pull out...

Speaker Change: I get it the back half of the year.

Speaker Change #115: The decrementals for the whole company or only 16 alright.

Speaker Change #115: Alright, it's impressive the comp is easier.

Speaker Change #105: But even if you pull out the $2 55.

David Raso: Still less than 30% decremental, which is still pretty impressive. That's a long-winded way of asking. Going into 2025, what is left on the savings programs from actions already taken? You'll want to model... A couple hundred bips pressure on pricing or another leg down. What are some of the same? There are a couple of opportunities for 2025, and let me name three. I mean, we have this strategic sourcing program. We are structured in four waves.

Speaker Change #105: It's still less than 30% Decrementals, which is still pretty impressive so.

Gerrit Marx: So that's a long window way of asking, going into 25, what is left on the savings programs from actions that are already taken? Just in case we want a model, you know, a couple hundred bips pressure on pricing or another leg down. What are some of the savings that are already baked in the 25 from actions taken? There are a couple of opportunities for 2025. And let me name three opportunities. I mean, we have this strategic sourcing program. We're structured in four waves. We've just done wave one, which is under implementation as we speak, and we have kicked off and will accelerate on wave two in September later this year.

Speaker Change: That's a long winded way of asking.

Speaker Change #112: Going into 25, what is left on the savings programs from actions already taken just in case, we want to model.

Speaker Change #119: Couple of hundred bps pressure on pricing or another leg down what are some of the savings that are already baked into twenty-five from actions taken.

Speaker Change #112: There are a couple of opportunities for 2025.

Speaker Change #111: Let me, let me name three.

Speaker Change: For two opportunities.

Speaker Change #106: We have the strategic sourcing program, we are structured in four waves. We've just on wave one which is under implementation as we speak and we have kicked off.

Gerrit A. Marx: We've just done wave one, which is under implementation as we speak, and we have kicked off and will accelerate wave two in September later this year when we have all our strategic suppliers together at our annual supplier conference. And that will continue with waves three and four throughout 25. So there is a continuous cost reduction coming year over year from these procurement programs. So procurement itself has obviously already contributed in 2024, but it only really starts to show in the years 25 and after.

Speaker Change #106: We'll accelerate on wave two in September later this year when we have all our strategic suppliers together at our annual supplier conference and that will continue with the wave three and four throughout 25. So there is a continuous cost reduction coming year over year from these.

Gerrit Marx: And we have all our strategic suppliers together at our annual Supplier conference. And that will continue with the wave three and four throughout 25. So there's a continuous cost reduction coming year by year from these procurement programs. So the procurement itself has obviously already contributed in 2024. But it only really starts to show in the years 25 and after. So this is reason one, or let's say confident level number one on additional cost reductions. And the second point was related to the quality side of things. As we said, we have in the first half of this year in the reported adjusted financial 70 million drag in the numbers from quality issues that we have in the current production of received face.

Speaker Change #100: Procurement programs. So the procurement itself has obviously already contributed in 2024, but it only really starts to show in the year 2005 and after it. So this is <unk>.

Gerrit A. Marx: So this is reason one, or let's say confidence level number one, for additional cost reductions. And the second point is related to the quality side of things. As we said, we had 70 million drag on the numbers from quality issues that we have in the current production of received fixed.

Speaker Change #108: Reason, one or let's say confidence level number one.

Speaker Change #108: On additional cost reductions in the second point was related to the quality side of things as we said we have in the first half of this year and the reported adjusted financials $17 million drag in the numbers from quality issues that we have in the current production of Racine fixed.

Gerrit A. Marx: Okay, so we are living through this, and it is going to come to a close at some point next year when we have basically those products hitting the market on a larger scale at the quality levels that we want. So in today's numbers, there is, I don't want to call it a one-off, but there is a quality fix in, and that is obviously now a target not to repeat again, okay, so this is something that will certainly help 2025. And on the third element, which is..., is not to be underestimated.

Gerrit Marx: So we are living through this, and it is going to come to a closure at some point next year when we have basically those products hitting the market at large scale, at quality levels that we want. So in today's numbers, there is, I don't want to call it a one-off, but there is a quality fix in, and that is obviously now a target; it's not to repeat again. Okay, so this is something that will certainly help in 2025. And on the third element, and that is, it's not to be underestimated. We are going to have a full year impact of the SGNA restructuring that Oddone also commented on, which was the program launched by Scott and the team here that is under implementation and it's last innings.

Speaker Change #108: Okay. So we're living through this and it is going to come to a closure at some point next year, when we have basically those products hitting the market.

Speaker Change #108: At larger scale at quality levels that we want so in today's numbers.

Speaker Change #108: There is I don't want to call. It a one off but there is a quality fix in and that is obviously our target is not to repeat again. Okay. So this is something that will certainly help the 2025.

Speaker Change #108: And on a third element and that is.

Gerrit A. Marx: We are going to have a full year impact of the SG&A restructuring that Oddone also commented on, which was the program launched by Scott and the team here that is in its last innings, and with that, we get the full year impact next year. So there is quite some cost reduction ongoing and in the pipeline to help 2025. I'll try to quantify it.

Speaker Change #108: As not to be underestimated, we're going to have a full year impact of the SG&A restructuring that or don't also commented on which was the program launched with by Scott and the team here.

Speaker Change #108: That is under implementation in its last earnings and with that we get the full year impact next year. So there is quite some cost reduction ongoing and in the pipeline to help 2025.

Gerrit Marx: And with that, we get the full year impact next year.

Gerrit Marx: So there is, I don't know, I don't know, I'm not sure if I'm going to be able to do that. I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that, but I'm not sure if I'm going to be able to do that.

Speaker Change: Your thoughts about the obvious question would.

Speaker Change #118: Would you like to try to quantify a little bit when you think of the potential cost savings like this year is a $488 million.

Speaker Change: Very significant number is it.

Speaker Change #136: I mean, roughly half that so I'm, just curious how youre thinking about the magnitude of potential savings from that.

Gerrit A. Marx: That's I'm just curious how you're thinking about the magnitude of potential savings from those, We will not quantify it yet because on the supplier side we will have quite some work to do and I'm pushing for the upside as you can imagine and on the quality side I need to see the timing on when we are through this and while on the SG&A we obviously have a number but if at all I would like to give you all three together and we have sufficient time at our investor day next year to go deeper into those numbers and reduction opportunities supporting 25 and the years to come. Our next question comes from Nicole DeBlase with Deutsche Bank. Please go ahead. Yeah, thanks. Good morning, everyone.

Gerrit Marx: Well, we'll not quantify it yet because, on the supplier side, we will have quite some work to do. And I'm pushing for the upside, as you can imagine, and on the quality side, I need to see the timing on when we are through this.

Speaker Change #114: We will not quantify.

Speaker Change #124: We're not quantified yet because.

Speaker Change #127: On the supplier side, we will.

Speaker Change #132: Have quite some work to do and I am pushing for the upside as you can imagine and on the quality side I need to see the timing on when we are through this and while on the SG&A. We obviously have a number but if at all I would like to give you all three together and we have sufficient time at our Investor Day next year to go deeper into those.

Gerrit Marx: And while on the SGNA, we obviously have a number, but if at all, I would like to give you all three together. And we have sufficient time at our Investor Day. Next year to go deeper into those into those numbers and reduction opportunities supporting 25 and the years to come. I can appreciate that.

Speaker Change: And to those numbers and reduction opportunities supporting 25 in the years to come.

Speaker Change #129: I can appreciate that thank you so much.

Gerrit Marx: Thank you so much.

Nicole DeBlase: Our next question comes from Nicole DeBlade with Deutsche Bank. Please go ahead. Yeah, thanks. Good morning, everyone.

Nicole DeBlase: Our next question comes from Nicole <unk> with Deutsche Bank. Please go ahead, yes.

Gerrit Marx: Welcome, Garrett. I guess maybe just starting with the cadence of earnings, how to think about the third quarter versus the fourth quarter. Any hope that you can give us on the expectation for production cuts in add versus construction and any delta in the expected decriminal margins between 3Q and 4Q. Thank you.

Nicole DeBlase: Yes, Thanks, good morning, everyone and welcome Gary.

Nicole DeBlase: Welcome, Garrett. I guess I'm just starting with the cadence of earnings, how to think about the third quarter versus the fourth quarter. Any help that you can give us on the expectation for production cuts in ag versus construction and any delta in the expected decremental margin? Q&4 Q. Yeah, so when you prepare remarks, we had the size of the production cuts in agriculture and construction is around 25% in agriculture and around 20% in construction year over year.

Nicole: I guess, maybe just starting with the cadence of earnings how do you think about the third quarter versus the fourth quarter any help that you can give us on the expectation for production cuts in AG versus construction and any delta and the expected decremental margins between <unk> and <unk>. Thank you.

Gerrit Marx: Yeah, so I think we need to prepare remarks. We had the size of the production cuts in agriculture and construction is around 25% in agriculture and around 20% in construction year over year. We had a difficult Q4 last year. We expect all things considered from a profitability standpoint to be more balanced in the Q4 of this year. On Q3 is where we have most of the production cuts, and Q3 typically a quarter where we have. We have our plants basically down in the month of August, so it's a more difficult order to from a profitability standpoint, but I would say if we compared to last year, we expect to be more balanced on the fourth quarter.

Speaker Change #161: Yes, so I think we in the prepared remarks, we had.

Speaker Change #125: The size of the production cuts in agriculture, and construction is around 25% in agriculture and around 20% in in construction year over year.

Nicole DeBlase: We had a difficult Q4 last year. We expect all things considered from a profitability standpoint to be more balanced in the Q4 of this year. In Q3 is where we have most of the production cuts, and Q3 is typically a quarter where we have our plans basically down in the month of August, so it's a more..., difficult quarter from a profitability standpoint. But I would say if we compare to last year, we expect to be more balanced in the fourth quarter, where last year, we started to make the big adjustment in our production. I got it.

Speaker Change #137: We had a difficult Q4 last year.

Speaker Change #135: We expect all things considered.

Speaker Change #121: From a profitability standpoint to be more balance in the Q4 update here.

Speaker Change: In Q3 is where we have most of the.

Speaker Change: Production costs in Q3 is typically a quarter, where we have.

Speaker Change: We have our plants basically down in the month of August so.

Speaker Change: It's more.

Speaker Change: Difficult quarter tool.

Speaker Change: From a profitability standpoint.

Speaker Change: But I would say if we go back to last year, we expect to be more balanced on the fourth quarter, where last year, we started to take the <unk> adjustments.

Gerrit Marx: We're last year, we started to take the big adjustments in our production.

Speaker Change: In our production.

Gerrit Marx: That makes sense, and then Gerrit, I know you probably have a lot more to share at the investor day next year, but any early thoughts on capital deployment, priorities that balance sheet is in a pretty strong position, and thoughts around share buyback, etc. Thank you. Nicole, we're certainly going to return cash and value to shareholders, to share buybacks and dividends as for policies in place, and prior distributions, as, for you can imagine. It's pretty consistent how this group has performed, and I think we have no reason to change that as we move forward.

Speaker Change: In our South Korea.

Oddone Della Rocchetta: Okay. That makes sense. And then, Garrett, I know you probably have a lot more to share at Investor Day next year, but any early thoughts on capital deployment, priorities, the balance sheet is in a pretty strong position, and, you know, thoughts around share buyback, etc. Thank you.

Gary: That makes sense and then Gary I know you probably have a lot Mario share at the Investor Day next year, but any early thoughts on capital deployment priority is the balance sheet is in a pretty strong position and thoughts around share buyback et cetera. Thank you.

Gerrit A. Marx: Look, Nicole, we're certainly going to return cash and value to shareholders through share buybacks and dividends as per policies in place and prior distributions, as you can imagine. It's pretty consistent with how this group has performed, and I think we have no reason to change that as we move forward. So the, I mean, okay, yep, go ahead. Our next question comes from Angel Castillo with Morgan Stanley. Please go ahead. Hi, this is Grace for Angel.

Gary: Okay.

Gary: Nicole we certainly going to return.

Speaker Change #142: Cash too and value to shareholders through share buybacks and dividends as for policies policies.

Speaker Change #147: Place in prior distributions as you can imagine.

Bill: It's bill.

Speaker Change #133: It's pretty consistent how this group has performed and I think we have no reason to change that as we move forward.

Speaker Change: So the I mean.

Speaker Change: Okay.

Angel Castillo: Our next question comes from Angel Castillo with Morgan Stanley. Please go ahead. Hi, this is Grace on for Angel. Thank you for the question.

Speaker Change: All right.

Speaker Change #146: Our next question comes from Angel Castillo with Morgan Stanley. Please go ahead.

Angel Castillo: Thank you for the question. Can you talk a bit more about the competitive environment you're seeing in large ag and small ag, and where are you seeing competitors be more aggressive? So the competitive situation right now, I mean, we have seen a pretty steep decline in this market now, not competition, but the market for combines stronger than globally, actually, combines more than in high horsepower or large tractors, where we are leaders on the combine side, and we haven't really seen competitive intensity go up.

Greg: Hi, This is Greg.

Speaker Change: Andrew Thank you for the question can.

Angel Castillo: Can you talk a bit more about a competitive environment you are seeing in large market and we are using competitors to be more aggressive. Thank you. So the competitive situation right now, I mean, we have seen a pretty steep decline in market, now not competition but market, in combines stronger than globally actually. Combines more than in high horsepower or large tractors, where we are leaders on the combine side, and we haven't really seen competitive intensity to go up. We have just recently launched our CR11, our new flagship combine, or we call it the next generation, and that will next year also translate into CR10 and the CR9. With that, we are super well positioned in the combine segment where we are real leaders with these new products to keep further grow our market share. So that is, but that's not that much.

Greg: Can you talk a bit more about the competitive environment.

George: George This is mark.

Speaker Change #139: And where are you seeing competitors be more aggressive thank you.

Greg: So the.

Mark: Competitive situation right now I mean, we have seen a pretty steep decline this market now not competition, but market in combines.

Speaker Change #144: Stronger than globally actually.

Speaker Change #140: More than in high horsepower large tractors.

Speaker Change #140: Where we are leaders in on the combine side and we haven't really seen competitive intensity to go up and we have just recently launched our CRA 11, our new flagship.

Angel Castillo: And we have just recently launched our CR11, our new flagship combine, or we call it the next generation. And that will also translate into CR10 and CR9. And with that, we are super well positioned in the combine segment where, again, we are leaders with these new products to keep and further grow our market share. But that's not that much.

Speaker Change #140: Combined we call it the next generation and that next year also translate into CR 10, and this year nine and with that we are super well.

Mark: The physician and the combined segment, where again, where we are leaders over this new product suite to keep.

Mark: Further grow our market share so that is.

Speaker Change #150: But that's not that that much I mean on the on the high horsepower tractors as competitive intensity is always quite strong as you can imagine. This is a very it's a focused product and segment for all of us.

Gerrit A. Marx: I mean, on the high horsepower tractors, competitive intensity is always quite strong, as you can imagine. This is a very, it's a focus product and segment for all of us. But I haven't seen that really changing much on a global scale.

Gerrit Marx: On the high horsepower tractors, competitive intensity is always quite strong, as you can imagine. This is a very, it's a focused product and segment for all of us, but I haven't seen that really changing much on a global scale. I mean, we after now that we have recene in our cash crop high or heavy horsepower tractors, back in the market with really good quality, I think we'll gain back market share there, which takes time, but that is something I think we will follow through. We will explain also during the investor day how we regain on that end, but I would not say that competitive intensity in the high horsepower, a large equipment has significantly changed.

Speaker Change #150: But I haven't seen that really changing much.

Gerrit A. Marx: I mean, now that we have seen high or heavy horsepower tractors back in the market with really good quality, I think we'll gain back market share there, which takes time. But that is something I think we will follow through. We will also explain during investor day how we regain on that end. But I would not say that competitive intensity in high horsepower or large equipment has significantly changed. On the small turf, on the very small ag, in the compact segment.

Mark: On a global scale and we also know that we have received in our cash crop hi.

Mark: Our heavier horsepower tractors.

Mark: Back in the market with really good quality I think will gain back market share there, which takes time, but that is something I think we will follow through we will explain also during the investor day, we regain on that on that end, but I would not say that competitive intensity in the high <unk>.

Mark: <unk> power, our large equipment has significantly changed.

Gerrit Marx: On the small turf, on the very small act, on the compact segment, when you start at that end of the market, we clearly see competitors from Asia in some of the markets coming stronger into our markets. And we feel very well positioned with the lineup that we have recently renewed. And we continue to add to with products that will be also engineered and designed in Asia, most notably India, as you might have noticed from the organizational announcement that came out two days ago. I will have India as a market, specifically called out from Asia Pacific as a separate market and member of our global leadership team.

Mark: On the small turf on the very small lack on the compact segment.

Gerrit A. Marx: When you start at that end of the market, we clearly see competitors from Asia in some of the markets coming stronger into our markets, and we feel very well positioned with the lineup that we have recently renewed, and we continue to add, too, with products that will also be engineered and designed. In Asia, most notably India, as you might have noticed from the organizational announcement that came out two days ago, I will have India as a market specifically called out from Asia Pacific as a separate market and member of our global leadership team.

Mark: We just started at the end of the market, we clearly see competitors from Asia.

Mark: And some of the markets coming stronger into into our into our markets and we feel very well positioned with the lineup that we have recently renewed and we continue.

Mark: To add to with products that will be also engineered and designed.

Mark: In.

Mark: Asia <unk> most.

Mark: Most notably India as you might have noticed from the from the organization.

Mark: Announcement that came out two days ago.

Mark: Have India as a market specifically called out from Asia Pacific as a separate market and member of our global leadership team and that is also a reason.

Gerrit Marx: And that is also a reason related to not only the massive potential that India has been in India in terms of volume offers, but it's also home to some players that we already see globally in the small act, segment, small turf. And being there, giving it the right level of priority is, for us, a necessity to counter competitive moves in the future from players that come out of Asia. In this case, most notably India for us.

Gerrit A. Marx: And that is also a reason related to not only the massive potential that India in terms of volume offers, but it's also home to some players that we already see globally in the small act, segment, and small turf, and being there, giving it the right level of priority is, for us, a necessity to counter competitive moves in the future from players that come out of Asia, in this case, most notably India.

Mark: Related to not only the massive potential that India in terms of volume offers but it is also home to some players that we already see globally and the small act segment small turf and being there giving at the right level of priority is for us a necessity to count.

Speaker Change #148: Competitive moves.

Mark: In the future from players that come out of Asia in this case, most notably.

Gerrit A. Marx: For us, I mean, if you allow me that analogy, I believe that India for agriculture is probably comparable to China 15 years ago for the passenger car industry, slightly not in the focus, but differently treated. And hence, we here at CNH take India extremely seriously as a place to source, as we have already said before, cost opportunities from sourcing components, from hiring talent, from engineering products in India, which we do already today, but also as a market to sell.

Mark: India for US I mean, if you allow me that analogy I believe that India for agriculture.

Gerrit Marx: I mean, if you allow me that analogy, I believe that India for agriculture is probably comparable to China as it was 15 years ago for the passenger car industry, right, slightly not in the focus, but are differently treated. And hence we here at CNH, we take India extremely serious as a place to source, as we already said before cost opportunities from sourcing components, from hiring talent, from engineering products in India, which we do already today, but also as a market to sell. And in the end, it's also the home of some uprising competitors that push onto global markets from the small turf, and being there is key for us to counter that competition once they reach our home markets and also higher horsepower segments, which is not the case today, just to be, just to be clear.

Mark: Is probably comparable to China as it was 15 years ago for the passenger car industry right slightly.

Speaker Change #149: Not in.

Speaker Change #163: And the focus but differently treated and hence we here at <unk>, we take India extremely serious as a place to source as we already said before cost opportunities from sourcing components from hiring talent from engineering products in India, which we do already today, but also as a market to sell.

Gerrit A. Marx: And in the end, it's also the home of some uprising competitors that push into global markets from the small turf. And being there is key for us to counter that competition once they reach our home markets and also higher horsepower segments, which is not the case today, just to be clear. So, fairly unchanged competitive dynamics on the high horsepower and large equipment. On the smaller ones, we see some moves, and we counter them also, not only not limited, but also including our structural realignments and priorities, predominantly in India. That's very helpful.

Speaker Change #163: And in the end. It's also the home of some uprising competitors that push into global markets from the small turf and being there is key for us to counter that competition once they reach our home markets and also higher horsepower segments, which is not the case today just to be there.

Gerrit Marx: So fairly unchanged competitive dynamics on the high horsepower and large equipment on the smaller ones. Because we see some moves and we counter them also, you know, not only not limited, but also including our structural realignments and priorities predominantly on India.

Speaker Change #149: To be clear, so fairly unchanged competitive dynamics on the high horsepower and large equipment on the smaller ones, we see some some moves and we counted them also.

Speaker Change #149: Not only not limited, but also including our structural realignment and priorities predominantly on India.

Gerrit Marx: God, that's very helpful.

Oddone Della Rocchetta: And can you also talk about the level of incentives that you are seeing in the market and where you see the greatest pressure or potential for higher levels of incentives in 2024? So we have seen some increased levels of incentives, in particular in South America, where there has been an overhang on supply starting last year. We have reacted to that, as we as we said by reducing production very early, but definitely, that has been a very competitive market in terms of incentives. We're very proud of our team in South America who has been able to remain profitable across borders.

Speaker Change #159: Got it very helpful and can you also talk about the level of incentives that you're seeing in the market.

Gerrit Marx: And can you also talk about a level of incentives that you are seeing in the market and the where you see the greatest pressure or potential for higher levels of incentives in 204? Thank you. So we have seen some increased level of incentives, in particular in South America, where there has been in the market an overhang on supply started last year. We have reacted to that, as we said, in bad reducing production very early. But definitely, that has been a very competitive market in terms of. of incentives. We're very proud of our team in South America.

Speaker Change #141: You see the greatest pressure or potential for higher levels of incentives.

Speaker Change #154: Sure. Thank you.

Speaker Change #154: Okay.

Speaker Change #160: So we have seen some increased level of incentives in particular in South America, where there has been in the market an overhang on supply.

Speaker Change #160: Starting last year, we have reacted to that as we as we as we said in that reducing production by early.

Speaker Change #160: But but definitely that that has been a very competitive market in terms of.

Speaker Change #154: Of incentives.

Speaker Change #154: We're very proud of our team in South America has been able to remain.

Gerrit Marx: It has been able to remain profitable across the borders. And in the rest of the world, what we see is some higher, as we mentioned in Nicole, some higher financial support in terms of the transiting incentives. We are giving some incentives for supporting the leaders on working on their using veterans and on trade aids. But I would say it's ready; normal conditions, nothing excessive. And you see that on our pricing performance, right?

Speaker Change #154: Profitable.

Speaker Change #154: Across the quarters.

Oddone Della Rocchetta: And in the rest of the world, what we see is some higher, as we mentioned, Nicole, some higher financial support in terms of financing incentives. We are giving some incentives for supporting the dealers in working on their used inventories and on trade-ins. But I would say they're pretty normal conditions.

Mark: And.

Mark: And in the rest of the World what we see is some higher as we mentioned in the call some higher financial support.

Mark: In terms of the financing incentives, we are giving some incentives on the.

Mark: Supporting the dealers on working on they're using <unk> and on tradings.

Mark: But I would say is already normal conditions nothing.

Mark: Yes.

Speaker Change #158: And that's you'll see that in our pricing performance right.

Tami Zakaria: Our next question comes from Tami Zakaria with JP Morgan.

Oddone Della Rocchetta: And that's, you see that on our pricing. Our next question comes from Tami Zakaria with J.P. Morgan. Please go ahead. Hey, good morning.

Mark: Our next question comes from Tami Zakaria with JP Morgan. Please go ahead.

Tami Zakaria: Please go ahead.

Tami Zakaria: Hey, good morning. Thank you so much for taking my question.

Tami Zakaria: Thank you so much for taking my question. So my first question is, I was hoping you could help me conceptualize this year as it relates to the theoretical mid-cycle level. Where do you expect to end this year's production volume? and also in the construction segment versus your estimate of the mid-cycle number. Well, I mean, we expect the industry to be below the mid, what we can define as the mid cycle, let's say the average of the last 10 years; we expect the industry to be at 90-95% of that, and we are producing less than the industry because we are adapting, we're adjusting our inventory less. Is this for air?

Tami Zakaria: Hey, good morning. Thank you so much for taking my question.

Oddone Della Rocchetta: or Ag and Construction. That will save me for agriculture. Construction is, I mean, given also our market presence, is much more difficult when compared to a global industry if you compare it to some of our peers that have a much more global presence, got it, thank you, so I don't, I don't think I don't, sorry, go ahead, no, sorry, go ahead, I just wouldn't say that I don't know how much it can be helpful in your macro analysis of Okay. Thank you for the color.

Gerrit Marx: So my first question is, I was hoping you could help me conceptualize this year as it relates to the theoretical mid-cycle level. Where do you expect to end this year's production volume in the ag and also in the construction segment versus your estimate of the mid-cycle number for these two industries? Well, I mean, we expect the industry to be below the mid, what we can define the mid-cycle, let's say the average of less than years. We expect the industry to be at 95% of that. And we are producing less than the industry because we're adapting; we're addressing our advisory levels.

Tami Zakaria: So my first question is I was hoping you could help me conceptualize this year as it relates yeah.

Speaker Change #165: The theoretical mid cycle.

Tami Zakaria: <unk> level, where do you expect to end this year production volume.

Speaker Change #169: And also in the construction segment versus your.

Tami Zakaria: Estimate of the mid cycle.

James: And James.

James: Well I mean, we expect the industry to be below.

James: But what we can defend the mid cycle, let's say the average of less than yes.

Speaker Change #152: That agency to be at 90% 95% of that.

Speaker Change #164: And we are crude youll see less that the industry because we are adapting we're adjusting our inventory levels.

Gerrit Marx: Is that for ag or ag and construction both? That will save any for Ag.

Speaker Change #173: Is that for an hour.

Speaker Change #173: Our AG and construction.

Speaker Change #164: That that will save any for AG.

Gerrit Marx: Construction is, I mean, given also our market presence, is much more difficult to define this compared to a global industry if you compare to some of our peers that I have one much more global presence. Got it. Thank you.

Speaker Change #164: Construction is I mean, given also our market presence.

Speaker Change #152: Much more difficult to the fab.

Speaker Change #152: Part of our global agent to say, if you compared to several of our peers that have been much more global presence.

Speaker Change #180: Got it thank you.

Gerrit Marx: So I don't I don't think I don't I don't know. Sorry, go ahead.

Speaker Change #171: I don't think iron I don't know us.

Speaker Change #152: Okay.

Speaker Change #176: Sorry go ahead.

Gerrit Marx: I just wouldn't say that I don't know how much it can be helpful in your macro analysis is getting our data of construction. Got it. Okay.

Speaker Change #172: I just wanted to say that I don't know how much it can be helpful. In your market.

Speaker Change #172: Macro analysis getting our data set from that standpoint.

Tami Zakaria: And then a quick follow-up on what you just said about competition around pricing and incentives. I think you see it as being pretty normal. We've heard about some stepped-up price investments and discounts by OEMs and dealers in both new and used equipment markets. In the current guide, do you have any sort of buffers? to react to increased competitive pricing pressure for the ag segment. Should it come to that at some point? Yes. That's the way we manage the business, and we feel confident with the assumptions that we have in a market that is down and that is competitive.

Speaker Change #178: Got it got it okay. Thank you for that color and then a quick follow up one on what you just said.

Gerrit Marx: Thank you for the color. And then a quick follow-up on what you just said about a competition around pricing and incentives. I think you see it as being pretty normal. We've heard some, we've heard about some steps of price investments and discounts by only and dealers in both new and the equipment market. So do you and the crime guy do you have any sort of buffer to react to increase competitive pricing pressure for the ag segment for the back back. Have should it come to that at some point? Yes, that's the way we manage the business, and we feel confident with the assumptions that we have.

Speaker Change #179: About competition on pricing and incentives I think you see it as being created than normal.

Speaker Change #152: Hi.

Speaker Change #189: We've heard about some stepped up investments in discounts by Oems and dealers in both new and mid market.

Speaker Change #170: Do you and the current guide do you have any sort of backfired.

Speaker Change #183: We'll react to increased competitive pricing pressure for the AG segment, where the back half should it come to that at some point.

Speaker Change #170: Yes.

Speaker Change #166: That's the way we manage the business.

Speaker Change #166: We feel confident with the assumptions that we have.

Gerrit Marx: Yeah. on a market that is down and that is competitive.

Speaker Change #152: On a market that as that is down and that is competitive.

Gerrit Marx: God, thank you.

Speaker Change #167: Got it thank you.

Michael Shlisky: Our next question comes from Mike Shlisky with DA Davidson. Please go ahead. Hi, good morning.

Oddone Della Rocchetta: Thank you. Our next question comes from Mike Shlisky with D.A. Davidson. Please go ahead. Hi, good morning.

Speaker Change #152: Our next question comes from Mike Slutzky with D. A Davidson. Please go ahead.

Michael Shlisky: Thanks for taking my question. My first question, Garrett, I don't know how far along you've gone with this, but what is your view on the Precision Ag offerings that CNH offers at the current time? And more recently, can you just tell us a little bit about whether farmers this year have been more cautious about adopting any of your tech stack, maybe because they're kind of very busy or worried about their current year and not worried about future stuff? Just some thoughts as to whether it's been... are wrapping up, according to...

Michael Shlisky: Hi, good morning, Thanks for taking my questions.

Michael Shlisky: I should take my questions. My first question, Gerrit, I don't know how far along you've gone in this, but what is your view on the precision ag offering that teenage office of the current time? And more recently, can you just tell us a little bit about how farmers this year have been more cautious on adopting any of your tech stack, maybe because they're kind of very busy, worried about their current year and not worried about future stuff? Just some thoughts on whether it's been wrapping up according to our plan here. Thanks, Mike, for the question.

Michael Shlisky: My first question, Karen I don't know how far along you are gone in this but.

Michael Shlisky: What is your view on the precision AG offerings that teenage August at the current time and more recently can you just tell us little bit about have farmers this year and more cautious on adopting any of your tech stack.

Speaker Change #182: They are kind of very busy worried about their current year and not worried about future stuff.

Speaker Change #162: Thoughts as to whether it's been.

Speaker Change #157: Our ramping up according to our plan here.

Gerrit A. Marx: Thanks, Mike, for the question. Look, I've also been following the precision side of CNH while not necessarily being here, but because, being at the neighboring company, we did similar yet very different tech, and we had obviously, you know, fruitful exchanges on what was going on. But my real foot on the ground, let's say, started weeks ago. Nevertheless, precision is a key priority, and I'm, thanks to John Preheim and the team in Raven, to whom I paid my very first visit, I'm going to spend a few days up there. I am pretty clear on the timeline and on the benefits that our Precision Act offering will bring and brings today.

Speaker Change #157: Thanks, Mike for the question look.

Gerrit Marx: Look, I've been following also the precision side of CNH, why not being here necessarily, but because being on the neighboring company, we've done similar yet very different tech, and we had obviously fruitful exchanges on what was going on. But my real foot on the ground, let's say, started four weeks ago. Nevertheless, precision is a key priority, and I'm thanks to John Preheim and the team in Raven, whom I paid my very first visit. I'm going to spend a few days up there. I am pretty clear on the timeline on and on the benefits that our precision ag offering will bring and brings today. You know, we have today's system, which is an NGMA; it's our current system that we have running.

Speaker Change #157: I've been following also the precision side of.

Speaker Change #157: <unk>, while not being here necessarily but because.

Speaker Change #168: Being on the neighboring company we've done.

Speaker Change #156: You had very different.

Speaker Change #156: And we had obviously.

Speaker Change #156: Fruitful exchanges on what was going on but my real foot on the ground to let's say started.

Speaker Change #156: Four weeks ago. Nevertheless, precision is a key priority and I'm.

Speaker Change #156: John <unk> and the team and Raven, whom I made my paid my very first visits and to spend a few days up there.

Speaker Change #156: I am pretty clear on the timeline on.

Speaker Change #156: On the benefits that our precision AG offering.

Speaker Change #156: We'll bring and brings today with today's system, which is our <unk>. Our current system that we have running we have a roadmap. Thanks to a precision team, where we bring upgrades now to that system. All the way until we are growing loans, we are launching live our new <unk> operating system.

Gerrit A. Marx: You know, we have today's system, which is NGMA, our current system that we have running. We have a roadmap, thanks to a precision team, where we bring upgrades now to that system all the way until we are launching live our new CNH operating system a few years from now.

Gerrit Marx: We have a roadmap. Thanks to a precision team where we bring upgrades now to that system all the way until we are going long, we are launching life, our new CNH operating system in a few years from now, more details, not in a few years from now, but in the near future. And that is going to be, and I'm pretty certain, gets pretty close to a software-defined tractor, and with that offers great functionality for our farmers. So our offering today, again, thanks to the Raven team, thanks to the M&A work that we have done, tucking in other companies like Hemisphere or of Menta and other things, is really coming together quite nicely, offering a nice suite of precision offering on board and off board.

Speaker Change #156: In a few years from now more details in a few years from now.

Gerrit A. Marx: More details, not in a few years from now, but in the near future. And that is going to be, and I'm pretty certain, get pretty close to a software-defined tractor. And with that, offers great functionality for our farmers. So our offering today, again, thanks to the Raven team, thanks to the M&A work that we have done, tucking in other companies like Hemisphere or Augmenta and other things is really coming together quite nicely, offering a nice suite of precision services on board and off board.

Speaker Change #156: In the near future.

Speaker Change #184: And that is going to be and I'm pretty certain of gets pretty close to a software defined tractor and with that offers great functionality for our farmers so offering today.

Speaker Change #186: Again, thanks to the Raven team thanks to the M&A work that we've done tucking in other companies like hemisphere are a mentor and other things is really coming together quite nicely.

Speaker Change #184: Offering a nice suite of precision offering.

Speaker Change #156: Onboard and off board.

Gerrit Marx: So that's a good roadmap. You've seen the recent organization move, putting precision on the one single leader, our CTO. J. further has been with the company for more than 25 years, leading the AC engineering for quite a while and bringing this two together on the one lead offers greater effectiveness, bringing the innovations to life and responding even faster to what our customers and our farmers expect from our digital customer interface in our machines, may be a tractor or a combine. So the roadmap is clearly laid out. We'll give you more color during the Investor Day.

J <unk>: So that's a good roadmap you have seen the recent organization move putting precision under one single leader, our CTO J <unk>, who has been with the company for more than.

Gerrit A. Marx: So that's a good roadmap. You've seen the recent organization move, putting Precision under one single leader, our CTO, Jay Froeder, who has been with the company for more than 25 years, leading ag engineering for quite a while, and bringing these two together under one leader offers greater effectiveness, bringing the innovations to life and responding even faster to what our customers and our farmers expect from our digital customer interface in our machines, maybe a tractor or a combine.

J <unk>: 25 years, leading the engineering for quite a while.

Speaker Change #156: And bringing this two together under one lead offers greater.

Speaker Change #156: Effectiveness, bringing the innovations to live from responding even faster towards our customers and our farmers expect from our digital customer interface in the in our machines may be a tractor or.

Gerrit A. Marx: So the roadmap is clearly laid out. We'll give you more color during investor day. And so, this makes me pretty confident that we are very well set up on this end as we also launch other innovations and automated functionalities around implements, and not only tractors, but also combines, and more to come. I mean, I can't reveal them here, but I'm pretty excited about what I've seen.

Speaker Change #156: Combat. So the roadmap is clearly late laid out will give you more color during the Investor day, we will proudly present, you. These technologies and features on sites.

Gerrit Marx: We'll proudly present you these technologies and features on-site. And so this makes me pretty confident that we are very well set up on this, and as we also launch other innovations and automated functionalities around implements and not only tractors, but also combines and more to come. I mean, I can't reveal them here, but I'm pretty excited about what I've seen, and the product pipeline is really strong and well invested. I got it.

Speaker Change #156: And so this is makes me pretty confident that we are very well set up on this and as we.

Speaker Change #156: As we also launched other innovations and automated.

Speaker Change #156: Functionality is around.

Speaker Change #156: Implements and not only <unk>, but also combines and more to come I mean, I can't reveal them here, but I'm pretty excited about what I've seen.

Michael Shlisky: And the product pipeline is really strong and well invested in. Got it. My other question was about your plan to make ag the core business and get construction a bit more autonomy, I suppose, but I've always thought I've always thought that farmers were a big customer base for the case and construction equipment. Do you need to tell us what percent of construction sales are actually on farms? And will there be any changes as to how— I know there are two separate distribution channels, but will there be any changes as to how the segment targets the farm sector going forward?

Speaker Change #156: And the pipeline the product pipeline is really strong.

Speaker Change #156: And well invested.

Speaker Change #174: Got it.

Michael Shlisky: Another question was about your plan to make adding the core business and get construction a bit more autonomous, I suppose. I've always thought that farmers were a big customer base for the case and my own construction equipment. Can you tell us what percent of construction sales are actually really on farms?

Speaker Change #188: And my other question was about your plan to take out of the core business give construction a bit more.

Speaker Change #175: Our economies.

Speaker Change #185: I suppose I've always thought I've always thought that farmers were a big customer base for the case and construction equipment.

Speaker Change #195: Can you tell us what percent of construction sales are actually really on farms and will there be any changes to how there are two separate distribution channels, but will there be any changes as to how.

Gerrit Marx: Will there be any changes to how there are two separate distribution channels? Will there be any changes to how the segment faces the farms sector going forward? Well, the farmers really like the Case construction equipment, whether branded Case or New Holland, in their farms, and that is a piece of equipment that is a smaller part of what Case construction does. So, yes, there is also that type of synergy clearly, yet the larger market for construction, when you look at, you know, crawlers and weed loaders and also even the backholes, they sell to a greater quality in other segments, in just typically construction, residential and the likes.

Speaker Change #175: How the segment faces the farm sector going forward.

Michael Shlisky: Well, farmers really like the case construction equipment, whether branded case or New Holland, on their farms, and that is... And that's a piece of equipment that is a smaller part of what case construction does. So yes, there is also that type of synergy, clearly.

Speaker Change #192: Are the farmers really like the case construction equipment, whether branded case, new Holland and they're in their farms and that is.

Speaker Change #196: That's a piece of equipment that is a smaller part of what case construction does so yes. There is also that type of synergy clearly.

Gerrit A. Marx: Yet, the larger market for construction, when you look at, you know, crawlers and wheel loaders, and also even backhoes. [inaudible] But the by far largest amount of those machines go to, let's say, more traditional construction sectors. And that has nothing to do with how we operate the businesses inside the group, with construction being an at arm's length operation that has gained its independence also through its pretty impressive turnaround. On the customer side, things come together, but on the operations, on the business side, they are clearly two distinct businesses. Okay, thank you. Our final question comes from Kyle Menges with Citigroup. Please go ahead.

Speaker Change #175: Yet the larger market for construction when you look at.

Speaker Change #175: And we loaders and also even the backhaul.

Speaker Change #175: To a greater quantity than in other segments and just typically construction residential and the likes. So there is a need for these types of equipments and farms, but the by far largest amount of those machines go too, but I'd say more traditional construction segments.

Gerrit Marx: So, there is a need for these types of equipment and farms, but by far the largest amount of those machines go to, let's say, more traditional construction segments.

Gerrit Marx: And that has nothing to do with how we operate the businesses inside the group, with construction being an arms-length operation that has gained its independence also through its, you know, pretty impressive turnaround. So, on the customer side, things come together, but on the operations on the business side, they are clearly two distinct businesses.

Gerrit A. Marx: And that has nothing to do with how we operate the businesses inside the group with construction being at arm's length.

Speaker Change #175: Operation that has gained its independence also through its.

Speaker Change #190: Pretty impressive turnaround so.

Speaker Change #190: On the customer side things come together.

Gerrit A. Marx: But on the on the operations on the business side. They are clearly two distinct businesses.

Gerrit Marx: Okay, thank you.

Speaker Change #191: Okay. Thank you.

Kyle Mengas: Our final question comes from Kyle Mengas with Citigroup.

Speaker Change #190: Our final question comes from Kyle <unk> with Citigroup. Please go ahead.

Kyle Mengas: Please go ahead. Thanks, and welcome back to C&H Garrett. Garrett, I was curious in your first 30 days as you've met with dealers and customers on the ag side.

Kyle David Menges: Thanks, and welcome back to CNH, Garrett. Garrett, I was curious, in your first 30 days as you've met with dealers and customers on the ag side specifically, I'd love to hear just any common threads of feedback that you've gotten from dealers and customers and how that's informing some of your strategic priorities over the next year. Well, look, this was a lot.

Kyle David Menges: Thanks, and welcome back to see an H Gareth Gareth I was curious in your first 30 days as you've met with dealers and customers on the AG side, specifically I'd love to hear just from any of the common threads that feedback that you've gotten from dealers and customers and how that's informing some of your strategic priority.

Gerrit Marx: Specifically, I'd love to hear just from any of the common threads of feedback that you've gotten from dealers and customers and how that's informing some of your strategic priorities over the next year or so. Well, look at the, oh, this was a lot, but if I, if I, I mean, as I alluded to, quality has always been in our top priority list. We have recently encountered some challenges there, and I think that echoed here and there that we need to get that back to the top levels where our customers and farmers are used to, and we own a good track to get that. As I said, receipt is already at a pretty good level.

Speaker Change #193: Over the next year or so.

Gerrit A. Marx: But if I, I mean, as I alluded to, quality has always been our top priority list. We have recently encountered some challenges there, and I think that is echoed here and there that we need to get that back to the top levels where our customers and farmers are used to, and we're on a good track. To get there, as I said, receipt is already at a pretty good level. So, I think that was just cutting across.

Speaker Change: Well look good.

Speaker Change: This was a lot better.

Gerrit A. Marx: I mean as I alluded to quality has always been our top priority list we.

Speaker Change: <unk> have recently encountered some challenges there and I think that echoes here and there that we need to get that back to the top levels, where our customers and farmers are used to and we are in a good track.

Speaker Change #193: To get there as I said receipt is already at a pretty good levels. So I think that was.

Gerrit Marx: So, I think that was cutting across.

Speaker Change #190: Cutting across I think another element that.

Gerrit A. Marx: I think another element that was more implicitly and explicitly stated is that we are going to further strengthen our dealer network to make it, when it comes to the different brands that we have, more prepared to take opportunities in the market and to compete more effectively in the territories where they are. So, I think on the dealer side, we want to strengthen them. We want to grow them.

Gerrit Marx: I think another element that was more implicitly than explicitly is we are going to further strengthen our dealer network to make it, when it comes to the different brands that we have, more prepared to take the opportunities in the market and to compete more effectively in the territories where they are. So, I think on the, on the dealers side, we want to strengthen them, we want to grow them, and we have also for that reason created a Chief Commercial Officer position, which is taken by Stefano Pampalona, the former CE head, and before that, Stefano has been for many, many years leading very successfully our Asia Pacific region, for both AC and CE, and I think all his knowledge and insights he will bring to bear in, you know, gearing up on creating a really strong brand aligned dealer network.

Speaker Change #190: Was more implicitly and explicitly as we are going to.

Oddone Anchiza: Further strengthen our dealer network.

Speaker Change #190: To make it.

Gerrit A. Marx: When it comes to the different brands that we have.

Speaker Change #190: More prepared to take the opportunities in the market and to compete more effectively in the territories, where they are so I think on the on the dealer side, we want to we want to strengthen them, we want to grow them and we have also for that reason created.

Gerrit A. Marx: And we have also, for that reason, created a chief commercial officer position, which is taken by Stefano Pampolone, the former CE head. And before that, he has been, for many, many years, leading very successfully our Asia-Pacific region for both ACK and CE. And I think all his knowledge and insights he will bring to bear in gearing up on creating a really strong brand-aligned dealer network. And I think that is clearly something that was not explicitly mentioned, I'd say, but it's more of an implicit takeaway that dealers are our partners.

Speaker Change #190: Chief commercial.

<unk>.

Speaker Change #187: <unk>, which is taken by Stefan or pump alone the former.

Speaker Change #187: He heads and before that Stefan has been for many many years leading.

Speaker Change: Very successfully our Asia Pacific region for both Atkins CE and I think all his knowledge and insights he will bring to bear in.

Gerrit A. Marx: Gearing up on creating a really strong <unk>.

Gerrit A. Marx: Brand aligned dealer network and I think that is clearly something that was not explicitly mentioned I'd say, but it's more like implicit.

Gerrit Marx: And I think that is clearly something that was not explicitly mentioned, I'd say, but it's more like an implicit takeaway that dealers are our partners, they are in parts of friends, but they're predominantly our business partners, and our revenues start with their commercial success with customers. Strengthening them means strengthening ourselves, and I think that is another pre-key priority and focus that I will bring to bear apart from obviously precision as we talked about. We're meeting even at the faster pace, having the precision and the iron come together.

Speaker Change #187: Takeaway that deal as our partners.

Gerrit A. Marx: They are, in part, our friends, but they are predominantly our business partners, and our revenues start with their commercial success with customers, and strengthening them means strengthening ourselves. And I think that is another key priority and focus that I will bring to bear, apart from, obviously, precision, as we talked about, meeting even at a faster pace, having the precision and the iron come together. And also some more minor points that are more local. When you talk to customers, for example, in the United States or in Germany, they have different views and different needs.

Gerrit A. Marx: And parts of friends, but they are predominantly our business partners and our revenues start with their commercial success with customers and strengthening them means strengthening ourselves and I think that is another pre key priority and focus that I would.

Gerrit A. Marx: Bring to bear apart from obviously precision as we talked about meeting even at a at a faster pace, having the precision of the iron come together.

Gerrit Marx: and also some more minor points that were more local when you talk to customers. For example, in the United States or in Germany, they have different views and different needs, and I think that is, that would, you know, I would overrun in this call to summarize those. But I'm listening quite attentively and I will continue to do so forever, actually, being in dealerships and listening to customers what they want. I'm pretty present and hands on. I would say so very strong momentum with customers and a couple of things to fix, a couple of things to reprioritize, but we are on a pretty good trajectory.

Speaker Change #187: And.

Speaker Change #187: Also some more minor points that were more local when you talk to.

Speaker Change: Customers for example, in the United States or in Germany, they have different views and different needs and I think that is that wood.

Gerrit A. Marx: And I think that would, you know, I would overrun this call to summarize those, but I'm listening quite attentively and I will continue to do so forever, actually, being in dealerships and listening to customers what they want. I'm pretty present and hands-on, I would say. So very strong momentum with customers and a couple of things to fix, a couple of things to reprioritize, but we're on a pretty good trajectory.

Speaker Change: I would overrun in this call to summarize those but I'm listening quite attentively and I will continue to do so.

Speaker Change: Forever actually being in dealerships and listening to customers, what they want I am pretty present that hands on and I would say, so very strong momentum with customers and a couple of things to fix a couple of things to.

Gerrit A. Marx: To re prioritize, but we own a pretty good trajectory.

Gerrit Marx: That's helpful. Thank you. That's all from me.

Kyle David Menges: That's helpful. Thank you. That's all for me. That does conclude today's conference call. Thank you, and you may now disconnect. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

Speaker Change: That's helpful. Thank you.

Kyle David Menges: It's all for me.

Kyle David Menges: Yes.

Operator: That does conclude today's conference call. Thank you, and you may now disconnect.

Speaker Change #194: That does conclude today's conference call. Thank you and you may now disconnect.

Kyle David Menges: Okay.

Kyle David Menges: [music].

Kyle David Menges: Yes.

Kyle David Menges: [music].