Industrial giant CNH is gearing up for life after diesel, and electric vehicles are not included (CNHI, DE)
Category : entrepreneur
- CNH Industrial, in the midst of an aggressive turnaround plan, is making big bets on liquefied natural gas and hydrogen fuel-cell electricity.
- CEO Hubertus Mülhäuser discussed the company’s approach to innovation in an interview with Business Insider, drawing a line in the sand against its larger competitor John Deere.
- It’s a fight not unlike the Android versus Apple wars, as technology moves from Silicon Valley to fields across Europe and the American heartland.
- But with agriculture hit hard by President Donald Trump’s trade war, neither company has tailwinds in its favor.
- Visit Business Insider’s homepage for more stories.
Hubertus Mülhäuser has a plan.
The former automotive executive was recruited by CNH Industrial, the conglomerate behind many well-known agriculture and heavy machinery brands, in August. When he arrived, his work was already cut out for him.
The Chicago-based, Netherlands-registered company behind names like Case and New Holland, is in the midst of a three-pronged turnaround. In 2018, it posted its first revenue and earnings growth in more than four years, as it targets aggressive growth from a depressed agricultural sector, weighed down by Presidential Donald Trump’s trade war.
“In all honesty, it can’t really get worse for ag,” Mühlhäuser said, referring to agriculture in an interview with Business Insider, and adding that the category’s slump has added a useful hedge against much more downside.
“We are already at a low point and moving sideways for the last years,” he said. “We don’t see the ag industry falling off a cliff because there is a solid end demand. The world’s population is growing. People want to have fresh food and you need to have a machine to harvest it.”
But with an increasingly tight labor market — and the necessity to wean a carbon-dependent industry off of fossil fuels — the agriculture of the future won’t look like past centuries.
“We’re moving away from diesel faster in the off-highway world,” Mülhäuser said, referring to the segment of vehicles for industrial uses in farms, mines, and more. “We’re already disrupting the market in Europe around liquefied natural gas engines and trucks, and we’re positioning ourselves for the hydrogen economy.”
Electric vehicles — while gaining steam for highways and families — aren’t part of the $13 billion CNH is earmarking for innovation.
“We are in a heavy duty environment,” Mülhäuser said. “Our thinking is that, will there be electrification with batteries? Yes. For applications where you don’t need a high degree of autonomy, in urban environments where you only have to go a couple hundred miles a day, and where you don’t have to carry 30 or 40 tons.”
For heavy vehicles, the battery technology just isn’t there yet.
“If we think heavy construction machinery,” he said, “we still believe that electrification is the right thing, but the power source is not going to be a battery, It’s going to be fuel cell.
In September, CNH invested $100 million for a 25% stake in the fuel-cell maker Nikola, with plans to use the company’s hydrogen technology in trucks throughout North America and Europe. The move highlights CNH’s strategy of investing in small stakes of many companies, in hopes that one is a breakout star. CNH, by way of its investment, then has exclusive rights to sell that product.
“We don’t have the arrogance to say we know best which startup is going to make it and then invest a lot of money,” Mülhäuser said. “There are companies that invest a quarter of a billion into one artificial-intelligence company and say ‘this is going to change the world.'”
Three key areas of focus for these investments fall into three basic categories: fleet, field, and farm. On fleets of tractors, for instance, the company hopes to have sensors flag parts that may be soon in need of replacement. While in the field, the autonomous advances that farming already has on highway driving still have room for improvement. Elsewhere on the farm, CNH wants to integrate soil moisture sensors with others that can monitor grain storage, market prices and more to help farmers increase average yields per acre.
Of course, CNH isn’t the only company betting on an agribusiness rebound. John Deere, the legendary brand with more than ten times CNH’s sales last year, is also rebounding from a 2016 revenue trough. Like CNH, Deere has teams working on data-intensive projects like artificial intelligence, automation, and other tech to increase output under increasingly fewer human workers.
Mülhäuser isn’t afraid to directly address the green elephant in the room.
His pitch comes down to a divide not uncommon in tech: walled-gardens versus open platforms. But we’re not dealing with Apple versus Android phones — it’s about a farmer’s ability to have products from any manufacturer talk to each other.
“We need to have an open platform, with an open-source approach,” he said. “If you go closed-circle, it will not be okay. John Deere has taken their decision to go with a closed system, a closed platform, like Apple. They decide with whom you can connect.
“We have chosen an Android approach.”