Closing Bell - Manifest Space: CNH Inks Intelsat Partnership with CNH CEO Scott Wine 5/23/24

Episode Date: May 23, 2024

As agriculture becomes increasingly connected and autonomous, space is helping to enable the surge in services. CNH Industrial is the latest to level up its satellite communications, partnering with Intelsat to bring satellite communications to precision farming in rural areas. CEO Scott Wine joins Morgan Brennan to dig into the collaboration, what space can bring to farming and the global agricultural downturn.

C&H Industrial is perhaps best known for its Case IH tractors and combines. But the agriculture and construction machines the company makes to move Earth will soon be connected by space. C&H Industrial recently announced a collaboration with Intelsat to provide customers a satellite option for more precise farming in the fields. The partnership will bring connectivity to rural areas where terrestrial mobile networks are just not available. And CNH's CEO, Scott Wine, says of the industry options, Intelsat was the best fit. A lot of those farmers needed access to our technology that they couldn't get with our cellular networks or just GPS. And what Intelsat gives us is this multispatial aspect of bringing almost anywhere in the world and especially anywhere in South America and Brazil, you know, that our farmers can have ready access to this technology that they need to provide the precision that ultimately guides their farming. The offering will roll out first in Brazil, where less than 20 percent of prospective farmland has high speed Internet access.

The U.S. and Australia will come online next year. The timeline means CNH will be first to market, ahead of rival Deere, which in January announced its own partnership with SpaceX's Starlink. Joining this podcast to discuss it. The space deals, though, speak to the future of farming. Constant connectivity is essential. As agriculture becomes increasingly tech-enabled, machines become more autonomous, and as manufacturers offer more data-based services. On this episode, CNH's Wine

discusses the partnership, as Intelsat is poised to be purchased by SES, how space offers more value to farmers on Earth, and what this offering does for sales as the industry navigates a global agricultural downturn. I'm Morgan Brennan, and this is Manifest Space. Joining me now, CEO of CNH Industrial, Scott Wine. It's so great to speak with you, particularly in this format. Let's start with the fact that you recently announced a deal with Intelsat to basically enable more connectivity for your machines in key parts of the world out in the farms. Yeah, well, you know, we're really excited about the partnership and that's how I see it. It really is a partnership. And, you know, what Intelsat brings to us is to

take our, you know, industry leading with Hemisphere. Remember, we acquired, you know, we've really built out our tech stack and started with Raven and we added Augmented. But Hemisphere recently, you know, being a leader in GNSS and then having that work with Intel Sat, we needed, you know, and this first operation, this first partnership will be in Brazil. And I don't know if you've ever been down to Mato Grosso, which is one of the largest and fastest growing agriculture cash crop in the world. And a lot of those farmers needed access to our technology that they couldn't get with our cellular networks or just GPS. And what Intelsat gives us is this multispatial aspect of bringing almost anywhere in the world,

and especially anywhere in South America and Brazil, you know, that our farmers can have ready access to this technology that they need to provide the precision that ultimately guides their farming. And, you know, it's not just where their satellites are, it's the ruggedness of their equipment. So their terminals have been proven in really rough environments. And you don't always think of agriculture and construction as rough environments, but I will tell you that it really does require, there's a constant beating of these things, the extra, you know, they still work in the rain and everything else. And we needed that rugged aspect of it. So it really, those two things were the

differentiating factors to us. The multi-orbital satellite construction that they offer and the ruggedness of their terminals just made them almost, I don't like to say plug and play because our software engineers and the people that have to integrate it always assure me, Scott, it's not quite that easy, but it almost is in this case for us to bring this best technology to our farmers. Okay. So maybe it's not plug and play, but it's pretty ready to go. So what does that mean in terms of your ability to equip tractors and combines and other types of machines, enable this connectivity and get it out to the marketplace? It'll be in operations this fall. I mean, it was really that type of, and again, it's the capability that we've built,

you know, with Raven. It started with Raven, but then we're adding it with Hemisphere. So we know how to bring these things together. And luckily, the IntelSat package was such that we could just integrate it very quickly. That was part of our decision-making process. And ultimately, we'll bring that value to the farmers in Brazil, but rapidly expand that around the world in the next several quarters and years. So what does that look like in terms of the business model around offering this? Does it become a service that farmers are paying for? How does that play out?

Well, we like to give our farmers the opportunity to use all of our equipment. And we have unlocked fees, if you will. And I think this would likely be another unlock that we have. You know, if they need to use, you know, have access to this, you know, obviously it's something we want them to have. But, you know, we're not we ultimately have to have a business model. So likely would be constructed in an unlocked fee like we use in other parts of the business. Okay.

You touched on this, but I'm going to circle back on it again. Why Intelsat? I mean, John Deere inked their deal with SpaceX and Starlink not that long ago. Why did you decide on Intelsat? How long have you been in talks to actually strike this partnership? You know, we had been evaluating, you know, what was the right way to provide more access to our customers, because ultimately, this was a customer-driven solution. And, you know, obviously, you know, as I mentioned earlier, I mean, I've got a good relationship with

Gwynne Shotwell. We know SpaceX have incredible respect for what they've built in their low Earth orbit tools. But we weren't as sure of two things. First of all, we weren't sure that just those low Earth orbit satellites were enough. So we wanted the geostationary equatorial orbits that IntelSat brings in addition to the low Earth orbit. But we also needed the rugged terminals. I mean, like I said, the operating environment, it was simply those two things. When we were searching about what's the best way to serve our farmers quickly and for the long term, we felt like that the IntelSat package was better for us. So it was a competitive review and our team just came. I was surprised, actually. I mean, if I were putting my weights on the scales, I would have said, you know, I understand

what has happened with Starlink. I know how good it is. And that's where I thought we would have gone. But at the end of the day, when we did the evaluation, we just felt like IntelSat was the right partner for us. Got it. IntelSat getting acquired by SES, that news coming out just a couple of days ago. We actually had the CEO of SES on this podcast to talk about it. Does that have any impact on how this rolls out? Positive impact. It just makes the network that we thought we were getting a lot better and bigger. So we were encouraged by that. And we think ultimately, it, it took a deal that we were going to do anyway and enhanced it. And if I just take a step back, because I think it's worth doing it. Why connectivity is so important for farm machinery and how it speaks to this precision agriculture revolution that is afoot right now when it comes to farming and the capabilities that technology and software are

bringing to the fields. Yeah, well, you know, if you step all the way back, I believe this game that we're playing, if you will, is productivity and yield. And that's what is going to allow us to feed more mouths as the earth, the arable land decreases and the mouths to feed increases. The only way you get there is through productivity and yield. And if you think about what we offer with our solutions, it's AFS Connect is the name we call it in Case IH and PLM Connect in New Holland, is the ability for a farmer and it

started with gps 60 some years ago um but now with with gnss and all the other tools that give us you know we're down to the centimeter now and so when a farmer plants in the spring um actually brazil they plant three times a year so it's not just the spring but when they plant we know exactly where that seed went. And so when we come back and we need to fertilize and we need to spray, you know, we are getting that precise with the solutions. And, you know, it only happens because we have this level of connectivity that sometimes, you know, we started with GPS and we increased it with cellular connectivity, but those weren't good enough. And so what Intelsat

just really expands the offering, but it's that precision. And we talk about sustainability, it's less fertilizer, we talk about productivity, it's less cost that the farmers are having to use because they have this precise ability to follow that same track over time. And really, you'd be surprised, we're not quite at level four and five autonomy, but many of our farmers are reading books or listening to your podcast when they're in the tractor. They're not actually driving the machine and getting to that level of specificity where that seed is and where they need to fertilize and plant and spray. Hmm. So where does this head now? I guess when you start to think about what connectivity enables,

and especially as we do see globally this agricultural downturn afoot right now, which I know the whole industry is navigating and dealing with, including CNH, any recent earnings trimmed for your guidance tied to that. What does that value proposition unlock? And does it actually make your customer base stickier and increase demand for new machines? Well, I think over time, it certainly increases demand. I mean, I think in the short term, you know, right now, soft commodity prices, you know, last year, there was a period where they were at 20-year lows. And soft commodity prices, you know, last year, there was a period where they were at 20 year lows and soft commodity prices. If you just look at history, they don't move in short term. They're longer cycles. And that's what we're in now is the beginning of that cycle.

I'm not on your podcast to talk about when the end of the ag cycle downturn is going to be. But, you know, we know it's not going to be next quarter. And, you know, what these investments that we're making are just recognizing through the cycle, whether it's an up cycle or a down cycle, the needs of our customers and farmers is going to be better productivity, better yield that they get through our enhanced precision and autonomy solutions. Over time, what happens is a farmer that might have wanted to postpone because his income is down because grain prices are down, he may still buy this equipment because he sees how much more productive his farm can be with these solutions. So I think it ultimately will tamp down how far down the cycle will go and ultimately give us more upside when it comes back. Makes sense. You also sell other types of equipment, construction equipment, for example. When we talk about something like autonomy, is there a possibility of taking a partnership like this and translating over to some of the other businesses? Oh, without a doubt, this solution

and our construction, Case Construction, has done really, really well over the last several years. And part of the reason is and differently than ag, ag on the agriculture side, we've decided to insource and really have our own tech stack capability on the construction side. You know, Trimble and Topcon and others offer really ready-to-fit solutions for our construction business, so we don't have to have that. But interestingly, when we made the Hemisphere acquisition, we bought it for our ag business, but really that solution goes directly to our construction business as well. So, you know, we're seeing that crossover benefit, and ultimately our construction business will need access to this geospatial network that Intelsat offers us. So absolutely, it'll be across the portfolio. How does all of this change the way you actually build equipment? You know, what we've found is, and I think you've seen it in the automotive sector, how Tesla had a huge advantage because the software was integrated with their

electric battery packs from the very, very beginning. And so we've had to rethink how we design our vehicles. It has to start, the software development has to start at the exact time we start, we call it the iron development. So it really is bringing that integration together so that we can have the optimized solutions for our customers. It can't be something that we just plug in at the after. We can't do that anymore. And that's what we're learning how to do.

OK, I would be remiss. I'm going to I'm going to veer a little bit here, but I would be remiss just because it's been in the headlines recently. Layoffs in Wisconsin seems to be stirring some controversy, political controversy as well. Just your response to it. You know, I think, you know, unfortunately, in this environment, you see everything trying to be turned to a political angle. There's nothing at all political about this. This is in reaction to the slowdown in the ag cycle. You know, we're taking actions in many of our plants to reduce headcount because we don't have the demand there anymore. You know, Racine was built, you know, a long, long, it was originally part of the original case business was Racine.

So we've got a long history there. We're committed to that workforce. We're committed to that town. But at the end of the day, we were producing things in racine that should have been somewhere else we were making axles for our plant in fargo so we moved those to the fargo plant so they would be built where they're being used um you know so we've just part of that and we've taken things that really don't make sense to be made in racing and move moved them other places. I think what happened in the news is part of that was a move to our joint venture partner in Mexico. And, you know, that's where it became political. But ultimately, you know, we're just doing what's right for our business and ultimately still committed to the ultimately having a very, very strong presence in the Racine community forever, really. So this isn't about taking jobs from Racine and transporting them to Mexico. This is about

right-sizing the labor force based on the locations and the demand of those locations. No, there will be some stuff moved to Mexico, but predominantly we're moving it to other plants here in the United States. Got it. All right. You're the outgoing CEO. You're getting ready to step down at CNH. Anything to keep in mind in terms of this legacy you've built? Because you've moved very quickly at CNH and you've made a lot of changes for the company, made it much more of a household and investor name as well. So anything to keep in mind? No, I mean, I'm really proud of the team and incredible three and a half years and the transformation really unlocking value ultimately for customers and hopefully investors in the future. Just really proud of what we've accomplished

and confident and the team will continue that going forward, especially with this latest announcement with IntelSAT and the overall progress we've made with our tech stack. Great. Scott Wine of CNH Industrial, thanks so much for joining me. Great to see you. Thank you, Morgan. Have a great day. That does it for this episode of Manifest Space. Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime.

I'm Morgan Brennan.