Plants and manufacturing processes

As of December 31, 2014, the Group owned 64 manufacturing facilities, of which 14 were located in Italy, 10 in the United States, 8 in France, 6 in Brazil. The Group also owns other significant properties including spare parts centers, research laboratories, test tracks, warehouses and office buildings.

A number of the Group’s manufacturing facilities (land and industrial buildings) are subject to mortgages and other security interests granted to secure indebtedness to certain financial institutions. These assets equaled approximately $93 million at December 31, 2014, as compared to $101 million at the end of 2013.

The Group makes capital expenditures in the regions in which it operates principally related to initiatives to introduce new products, enhance manufacturing efficiency, improve capacity, and for maintenance and engineering. In 2014, the Group’s total capital expenditures were $1,698 million of which 64% was spent in EMEA, 19% in NAFTA, 10% in LATAM and 7% in APAC. These capital expenditures were funded through a combination of cash generated from operating activities and borrowings under short-term facilities. In 2013, the Group’s total capital expenditures were $1,985 million. The Group continually analyzes the allocation of its industrial resources taking into account such things as relative currency values, existing and anticipated industry and product demand, the location of suppliers, the cost of goods and labor, and plant utilization levels.

The following table provides information about the Group’s significant manufacturing and engineering facilities as of December 31, 2014:

World Class Manufacturing

CNH Industrial, in striving to consolidate and maintain high standards of excellence in its manufacturing systems, applies principles of World Class Manufacturing (“WCM”), the innovative program for continuous improvement that encompasses the most effective manufacturing methodologies. These include: Total Quality Control (“TQC”), Total Productive Maintenance (“TPM”), Total Industrial Engineering (“TIE”), and Just In Time (“JIT”). Applying rigorous methods and procedures WCM aims to eliminate all types of waste and loss, including zero injuries, zero defects, zero breakdowns, zero waste, reduced inventories, and punctual delivery of parts by suppliers to plants, and thereafter to dealers and end users. Actions for continuous improvement are driven by the Cost Deployment pillar, which precisely identifies all plant wastes and losses, guides the activities of the corporate functions in charge of containing and eliminating the sources of waste, evaluates project feasibility, and assesses and certifies the results achieved by carefully monitoring specific performance indicators.

One of the main features of WCM is the way it incentivizes employees to engage and take responsibility, contributing directly to process optimization through a consistent system for collecting suggestions. This allows individuals to acquire and develop skills and good practices that are then shared across plants, forming a network of expertise and knowledge at the service of the Group. In 2014, about 395 thousand suggestions were collected across the plants where WCM principles are applied, with an average of eleven per employee. The projects implemented in 2014 within WCM generated savings of $196 million.

Each pillar involves a seven-step approach and auditing process, culminating in several awards (bronze, silver, gold, and world class). In December 2014, 53 plants were participating in the program, involving 83% of Group’s plants and 98% of revenues from sales of products manufactured in Group’s plants; 19 of them received bronze awards and six received silver awards (Bourbon-Lancy, Foggia, Madrid, Suzzara, Torino - transmissions and axles - and Valladolid). 

Environmental impacts of manufacturing processes

The Group’s manufacturing facilities are subject to a variety of laws designed to protect the environment, particularly with respect to solid and liquid wastes, air emissions, energy usage and water consumption. CNH Industrial is committed to continuously improving the environmental performance of its manufacturing processes, beyond the requirements of legislation, adopting the best technologies available and acting responsibly to preserve natural resources and to fight climate change. Environmental protection at CNH Industrial is focused on prevention, conservation, information and people engagement, thus facilitating long-term management. CNH Industrial principles are included in its Environmental Policy that describe the short, medium, and long-term commitments toward the responsible management of the environmental aspects, such as: energy, natural resources, raw materials, hazardous substances, polluting emissions, waste, natural habitats and biodiversity.

Most of the Group’s manufacturing operations voluntarily participate in the ISO 14001 and ISO 50001 certification process. Receipt of a certification for environmental or energy management confirms that an organization has a system capable of keeping the impacts of its operations under control, and that it systematically seeks to improve this system in a way that is coherent, effective and, above all, sustainable. As of December 31, 2014, 53 plants were ISO 14001 certified and 39 sites, accounting for 94% of total energy consumption, had been ISO 50001 certified.

CNH Industrial’s expenditure on environmental protection measures totaled approximately $56 million in 2014 (13% over 2013) and included: $35 million on waste disposal and emissions treatment and $21 million for prevention and environmental management. Investment to improve energy performance represented 7% of the total energy expenditure and led to a reduction of approximately 307 thousand GJ in energy consumed for the year and 19,467 tons of CO2.

All environmental aspects are monitored, measured and quantified to set improvement targets at both corporate and segment level. The principal environmental KPIs maintained the positive trend recorded in recent years, reconfirming CNH Industrial’s significant commitment to environmental protection. In 2014, the targets on the main environmental aspects were updated for the period 2015-2018, in line with the targets set in CNH Industrial’s Business Plan.

Numerous initiatives were rolled out in 2014 to optimize environmental and energy management. A major intervention to reduce environmental impact was undertaken at the plant in Bolzano (Italy). Works were completed to revamp and optimize the system for the treatment of industrial wastewater (from machining and washing) before authorized discharge into the public sewer system. The total amount of waste produced by the plant at standard use will be cut by over 40% compared to 2013 (approximately 1,000 tons), resulting in savings of over $133 thousand per year, thanks to the treatment of wastewater rather than its disposal. As regards energy management, in 2014, the Grand Island plant (USA) followed the example set by the Saskatoon plant (Canada) in 2013, by completely replacing its lighting system with the latest generation of LED ceiling lights. The project involved the replacement of 1,250 metal halide lamps (i.e., the substitution of 360 W lamps with 260 W lamps), saving 27% on electrical power consumption. The total investment was approximately $1,048 thousand. The replacement also doubled average brightness levels on the plant’s production area, with considerable benefits in terms of work area productivity and safety. Per year, this change saves 1,787,500 kWh, equal to approximately $140 thousand, and eliminates 1,135 tons of CO2 emissions. Furthermore, the expected savings in maintenance costs, as of 2015, amount to $60 thousand, which the plant will use to install additional LED lights in non-manufacturing areas and to enhance automated lighting control systems.