EDGAR 10-K Filing

Company CIK: 1567094
Filing Year: 2023
Filename: 1567094_10-K_2023_0001628280-23-005522.json

---

ITEM 1. BUSINESS
Item 1. Business
CNH Industrial N.V. qualifies as a Foreign Private Issuer, as determined by Rule 3b-4 under the Securities Exchange Act of 1934 (the "Exchange Act") and is exempt from filing annual reports on Form 10-K by virtue of Rules 13a-13 and 15d-13 under the Exchange Act. CNH Industrial N.V. has voluntarily elected to file this annual financial report using Form 10-K.
As a Foreign Private Issuer, CNH Industrial N.V. is also exempt from the proxy solicitation rules under Section 14 of the Exchange Act and Regulation FD, and its officers, directors, and principal shareholders are not subject to the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
History and Development of the Company
CNH Industrial N.V. is the company initially formed by the business combination transaction, completed on September 29, 2013, between Fiat Industrial S.p.A. and its subsidiary CNH Global N.V. CNH Industrial N.V. was incorporated on November 23, 2012, as a public limited liability company (naamloze vennootschap) under the laws of the Netherlands. The Company's principal office is located at 25 St. James’s Street, London, England, United Kingdom (telephone number: +44-207-7660-346). Unless otherwise indicated or the context otherwise requires, as used in this annual report, the term "CNH Industrial", "we", "us", "our" or "the Company" refer to CNH Industrial together with its consolidated subsidiaries. CNH Industrial’s agent for U.S. federal securities law purposes is Emily Sturges, c/o CNH Industrial America LLC, 6900 Veterans Boulevard, Burr Ridge, Illinois 60527 (telephone number +1-331-256-0594).
Certain financial information in this report has been presented by geographic region. Our geographic regions are: (1) North America; (2) Europe, Middle East and Africa; (3) South America and (4) Asia Pacific. The geographic designations have the following meanings:
•North America: United States, Canada and Mexico;
•Europe, Middle East, and Africa: member countries of the European Union, European Free Trade Association, the United Kingdom, Ukraine and Balkans, Russia, Turkey, Uzbekistan, Pakistan, the African continent and the Middle East;
•South America: Central and South America, and the Caribbean Islands; and
•Asia Pacific: Continental Asia (including the India subcontinent), Indonesia, and Oceania.
Certain industry and market share information in this Annual Report has been presented on a worldwide basis which includes all countries. In this Annual Report, management estimates of market share information are generally based on retail unit sales data in North America, on registrations of equipment in most of Europe, Brazil, and various other markets, and on retail and shipment unit data collected by a central information bureau appointed by equipment manufacturers associations, including the Association of Equipment Manufacturers in North America, the Committee for European Construction Equipment in Europe, the Associação Nacional dos Fabricantes de Veículos Automotores in Brazil, the Japan Construction Equipment Manufacturers Association, and the Korea Construction Equipment Manufacturers Association, as well as on other shipment data collected by independent service bureaus. Not all agricultural or construction equipment is registered, and registration data may thus underestimate, perhaps substantially, actual retail industry unit sales demand, particularly for local manufacturers in China, Southeast Asia, Eastern Europe, Russia, Turkey, Brazil, and any country where local shipments are not reported.
Iveco Group N.V. Demerger
Until December 31, 2021, CNH Industrial N.V. owned and controlled the Commercial and Specialty Vehicles business, the Powertrain business, and the related Financial Services business (together the “Iveco Group Business” or the “On-Highway Business”), as well as the Agriculture business, the Construction business, and the related Financial Services business (collectively, the “Off-Highway Business”). Effective January 1, 2022, the Iveco Group Business was separated from CNH Industrial N.V. by way of a demerger under Dutch law (the "Demerger") to Iveco Group N.V. (the "Iveco Group"), and the Iveco Group became a public listed company independent from CNH Industrial with its common shares trading on the Euronext Milan, a regulated market organized and managed by Borsa Italiana S.p.A. In connection with the Demerger, shares of Iveco Group N.V. were distributed to shareholders in CNH Industrial N.V. on a pro rata basis. The On-Highway Business' financial results for the periods prior to the Demerger have been reflected in our Condensed Consolidated Statement of Operations, retrospectively, as discontinued operations. Additionally, the related assets and liabilities associated with the On-Highway Business are classified as discontinued operations within Assets Held for Distribution and Liabilities Held for Distribution in the prior year of the Condensed Consolidated Balance Sheet. Pursuant to the terms of the deeds of demerger entered into between CNH Industrial N.V. and Iveco Group N.V. on January 1, 2022, assets related to the
On-Highway Business were transferred to, and liabilities related to the On-Highway Business were retained or assumed by, Iveco Group N.V.
Business Overview
General
CNH Industrial is a leading equipment and services company engaged in the design, production, marketing, sale, and financing of agricultural and construction equipment. We have industrial and financial services companies located in 32 countries and a commercial presence in approximately 170 countries.
Industrial Activities Segments:
Agriculture designs, manufactures and distributes a full line of farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors, combines, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements, and material handling equipment. Agricultural equipment is sold under the New Holland Agriculture and Case IH brands. Regionally focused brands include: STEYR, for agricultural tractors; Flexi-Coil specializing in tillage and seeding systems; Miller manufacturing application equipment; Kongskilde providing tillage, seeding and hay & forage implements. Further, starting in December 2021, Raven was included in the Agriculture segment bringing a leader in digital agriculture, precision technology and the development of autonomous systems to CNH Industrial.
Construction designs, manufactures and distributes a full line of construction equipment including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders, and compact track loaders. Construction equipment is sold under the CASE Construction Equipment, New Holland Construction and Eurocomach brands.
Financial Services:
Financial Services offers retail note and lease financing to end-use customers for the purchase of new and used agricultural and construction equipment and components sold through CNH Industrial brands' dealer network, as well as revolving charge account financing and other financial services. Financial Services also provides wholesale financing to CNH Industrial brand dealers and distributors. Further, Financial Services provides trade receivables factoring to CNH Industrial companies. The European operations of CNH Industrial Financial Services are supported by the Iveco Group's Financial Services segment. CNH Industrial Financial Services provides financial services to Iveco Group companies in the North America, South America and Asia Pacific regions.
Consolidated Results - 2022 Compared to 2021
Net sales for the fiscal year 2022 were $23,551 million, up 21% from FY 2021 mainly due to favorable price realization and higher sales volumes within the Agriculture and Construction segments. 2022 consolidated net income was $2,039 million, with diluted earnings per share of $1.49 (net income of $1,801 million in 2021, with diluted earnings per share from continuing operations of $1.32). Gross profit margin of Industrial Activities of 22.0%, (20.7% in 2021) with improvement in both Agriculture and Construction.
Industry Overview
Agriculture
The operators of dairy, livestock and row crop producing farms, as well as independent contractors that provide services to such farms, purchase most agricultural equipment. Row crop farmers typically purchase tractors at the mid-to-upper end of the horsepower ("hp") range, combines and harvesting equipment and crop production equipment. Dairy and livestock farmers typically utilize tractors in the mid-to-lower hp range and crop preparation and crop packaging implements. The key factors influencing sales of agricultural equipment are the level of net farm income and, to a lesser extent, general economic conditions, interest rates and the availability of financing and related subsidy programs, farmland prices and farm debt levels. Net farm income is primarily impacted by the volume of acreage planted, commodity and/or livestock prices and stock levels, crop yields, farm operating expenses (including fuel and fertilizer costs), fluctuations in currency exchange rates, government subsidies, tax incentives and trade policies. The availability, quality, and cost of used equipment for sale affects the level of new equipment sales. Weather conditions are a major determinant of crop yields and crop prices and therefore affect equipment-buying decisions. Global organization initiatives, such as those of the World Trade Organization, also can affect the market acceptance of genetically modified organisms such as seed, feed and animals and climate change and sustainability initiatives.
Demand for agricultural equipment also varies seasonally by region and product, primarily due to differing climates and farming calendars. Peak retail deliveries for tractors and planting, seeding, and application equipment typically occurs in March through June
in the Northern hemisphere and in September through December in the Southern hemisphere. Dealers order equipment year-round but harvesting equipment orders in the Northern hemisphere generally increase in the late fall and winter so that the dealers can receive inventory prior to the peak retail selling season, which generally extends from March through June. In the Southern hemisphere, dealers generally order between August and October so they can receive inventory prior to the peak retail-selling season, which extends from November through February. Agriculture's production levels are based upon estimated retail demand, which takes into account, among other things, the timing of dealer shipments, dealer and Company inventory levels, the need to retool manufacturing facilities to produce new or different models, and the efficient use of labor and facilities. However, because production and wholesale shipments adjust throughout the year to take into account the factors described above, sales of agricultural equipment in any given period may not reflect the timing of dealer orders and retail demand for that period. This situation has been emphasized during the recent pandemic and current post-pandemic environment where global supply chains have been disrupted for a series of reasons linked with production not able to match demand and transportation becoming congested with increases in lead times and expenses.
Customer preferences regarding farming practices, and thus product types and features, vary by region. In North America, Australia, Brazil, Argentina and other areas where soil conditions, climate, economic factors and population density allow for intensive mechanized agriculture, farmers generally demand high capacity, sophisticated machines equipped with the most advanced technology. In Europe, where farms are generally smaller in size than those in North America and Australia, there is greater demand for somewhat smaller, yet equally sophisticated, machines. In the developing regions of the world where labor is more abundant and infrastructure, soil conditions and/or climate are not conducive to intensive agriculture, customers generally prefer simpler and easy to use machines with relatively lower acquisition and operating costs. In many developing countries, tractors are the primary type of agricultural equipment used, and much of the agricultural work in such countries that cannot be performed by tractors is carried out by hand. A growing number of part-time farmers, hobby farmers and customers engaged in landscaping, municipality and park maintenance, golf course and roadside mowing in Western Europe and North America prefer relatively simple, low-cost agricultural equipment. Our position as a geographically diversified manufacturer of agricultural equipment and our broad geographic network of dealers allows us to provide customers in each significant market with equipment that meets their specific requirements.
One trend in North American and Western European agricultural industries include a reduction in number but growth in size of farms, supporting increased demand for higher capacity agricultural equipment. In addition, we believe that the use of technology and other precision farming solutions (including the development of autonomously operated equipment) to enhance productivity, profitability and environmental impact are becoming more important in the buyers’ purchasing decision. In South America, India and in other emerging markets, the number of farms is growing, and mechanization is replacing manual labor. In other markets, long-term demographic trends, increasing urbanization, and low level of farm mechanization represent the key drivers of demand for agricultural equipment.
Government farm programs, including the amount and timing of government payments, are a key income driver for farmers raising certain commodity crops in the United States (the "U.S.") and the European Union. The existence of comprehensive subsidies in these agricultural/farm markets reduces the effects of cyclicality in the agricultural equipment business. The existence and extent of subsidies depends largely on the U.S. Farm Bill and programs administered by the United States Department of Agriculture, the Common Agricultural Policy of the European Union and World Trade Organization negotiations. Additionally, the Brazilian government subsidizes the purchase of agricultural equipment through low-rate financing programs administered by the Banco Nacional de Desenvolvimento Economico e Social (“BNDES”). These programs have had over the years a significant influence on sales.
Global demand for renewable fuels increased considerably in recent years driven by consumer preference, government renewable fuel mandates, renewable fuel tax and production incentives. Biofuels, which include fuels such as ethanol and biodiesel, have become one of the most prevalent types of renewable fuels. The primary type of biofuel supported by government mandates and incentives varies by region. North America and Brazil are promoting ethanol first and then biodiesel, while Europe is primarily focused on biodiesel and biomethane.
The demand for biofuels has created an associated demand for agriculturally based feedstocks, which are used to produce biofuels. Currently, most of the ethanol in the U.S. and Europe is extracted from corn, while in Brazil it is extracted from sugar cane. Biodiesel is typically extracted from soybeans and rapeseed oil in the U.S. and Brazil, and from rapeseed and other oil seeds as well as food waste by-products in Europe. The use of corn and soybeans for biofuel has been one of the main factors affecting the supply and demand relationships, as well as the price for these crops. The economic feasibility of biofuels is significantly impacted by the price of oil. As the price of oil falls, biofuels become a less attractive alternative energy source. This relationship will, however, be impacted by government policy and mandates as governments around the world consider ways to combat global warming and avoid potential energy resource issues in the future.
Sustainability has been a focus of CNH Industrial since 2013. During the 2022 United Nations Climate Change Conference, COP27 event in Egypt, there was a continued emphasis on carbon reduction with significant attention on the establishment of a Loss and Damage Fund, which aims to provide financial assistance to nations most vulnerable and impacted by the effects of climate change. With the use of a bio-digester, animal waste and food waste can be processed to produce bio-methane. New Holland developed a Methane Powered Tractor that runs on methane produced on the farm from animal and food waste. Moreover, in 2021 CNH Industrial has invested with a minority equity share participation into the U.K. based technology start-up, Bennamann, which has developed an
on-site kit for small-medium size livestock farms to capture and repurpose fugitive methane from their waste and generate bio-methane which could potentially allow a successful implementation of the circular economy.
This approach also improves the sustainability of farmland management practices through minimizing artificial inputs such as manufactured fertilizer, lowering operational costs and reducing pollutants. This concept is intended to contribute to a dairy farm's decarbonization.
The developments in precision agriculture technology are designed to allow farmers to increase yield with reduced input costs in the areas of labor, fertilizer, chemicals and water. Further, with shorter planting and harvesting cycles experienced in recent years, we believe that precision agriculture technology will help drive replacement demand for new farm equipment as this technology is designed to improve farm efficiency.
Construction
The construction equipment market consists of two principal segments: heavy construction equipment (excluding the mining and the specialized forestry equipment markets in which we do not participate), with equipment generally weighing more than 12 metric tons, and light construction equipment, with equipment generally weighing less than 12 metric tons.
In developed markets, customers tend to prefer more sophisticated machines equipped with the latest technology and features to improve operator productivity. In developing markets, customers tend to prefer equipment that is relatively less costly and has greater perceived durability. In North America and Europe, where the hourly cost of machine operators is higher relative to fuel costs and machine depreciation, customers typically emphasize productivity, performance and reliability. In other markets, where the relative cost for machine operators is lower, customers often continue to use equipment after its relative performance and efficiency have begun to diminish.
Customer demand for power and operating capacity does not vary significantly from market to market. However, in many countries, restrictions on equipment weight or dimensions, as well as road regulations or job site constraints can limit demand for larger machines.
Although the demand for new construction equipment tends to decrease during periods of economic stagnation or recession, the aftersales market is historically less volatile than the new equipment market and, therefore, helps limit the impact of declines in new equipment sales on the operating results of full-line manufacturers, such as Construction.
Heavy Construction
Heavy construction equipment typically includes general construction equipment such as large wheel loaders and excavators, and road building and site preparation equipment such as graders, compactors and dozers. Purchasers of heavy construction equipment include construction companies, municipalities, local governments, rental fleet owners, quarrying and mining companies, waste management companies and forestry-related concerns.
Sales of heavy construction equipment depend on the expected volume of major infrastructure construction and repair projects such as highway, tunnel, dam and harbor projects, which depend on government spending and economic growth. Demand for aggregate mining and quarrying equipment is more closely linked to the general economy and commodity prices, while growing demand for environmental equipment is becoming less sensitive to the economic cycle. In North America, a portion of heavy equipment demand has historically been linked to the development of new housing subdivisions, where the entire infrastructure needs to be created, thus linking demand for both heavy and light construction equipment. The heavy equipment industry generally follows macroeconomic cyclicality, linked to growth in gross domestic product.
Light Construction
Light construction equipment is also known as compact and service equipment, and it includes skid-steer loaders, compact track loaders, tractor loaders, rough terrain forklifts, backhoe loaders, small wheel loaders and excavators. Purchasers of light construction equipment include contractors, residential builders, utilities, road construction companies, rental fleet owners, landscapers, logistics companies, and farmers. The principal factor influencing sales of light construction equipment is the level of residential and commercial construction, remodeling and renovation, which is influenced by interest rates and the availability of financing. Other major factors include the construction of light infrastructure, such as utilities, cabling and piping and maintenance expenditures. The principal use of light construction equipment is to replace relatively high-cost, slower manual work. Product demand in the United States and Europe has generally tended to mirror housing starts, with lags of six to twelve months. In areas where labor is abundant, and the cost of labor is inexpensive relative to other inputs, such as in India, Africa and South America, the light construction equipment market is generally smaller. These regions represent potential areas of growth for light construction equipment in the medium to long-term as labor costs rise relative to the cost of equipment or the supply of labor contracts leading to increased mechanization.
Equipment rental is a significant element of the construction equipment market. Compared to the U.K. and Japan, where there is an established market for long-term equipment rentals as a result of favorable tax treatment, the rental market in North America and
Western Europe (except for the U.K.) consists mainly of short-term rentals of light construction equipment to individuals or small contractors for which the purchase of equipment is not cost effective or that need specialized equipment for specific jobs. In North America, the main rental product has traditionally been the backhoe loader and, in Western Europe, it has been the mini-excavator. As the market has evolved, a greater variety of light and heavy equipment products have become available to rent. In addition, rental companies have allowed contractors to rent machines for longer periods instead of purchasing the equipment, enabling contractors to complete specific job requirements with greater flexibility and cost control. Large, national rental companies can significantly impact the construction equipment market, with purchase volumes being driven by their decisions to increase or decrease the size of their rental fleets based on rental utilization rates.
Seasonal demand for construction equipment fluctuates somewhat less than for agricultural equipment. Nevertheless, in North America and Western Europe, housing construction generally slows during the winter months. North American and European industry retail demand for construction equipment is generally strongest in the second and fourth quarters.
Agricultural and landscaping customers also contribute to a significant portion of the North America light equipment market. In this segment the main applications are related to material handling.
In markets outside of North America, Western Europe and Japan, equipment demand may also be partially satisfied by importing used equipment. Used heavy construction equipment from North America may fulfill demand in the South American market and equipment from Western Europe may be sold to Central and Eastern European, North African and Middle Eastern markets. Used heavy and light equipment from Japan is mostly sold to other Southeast Asian markets, while used excavators from Japan are sold to almost every other market in the world. This flow of used equipment is highly influenced by exchange rates, the weight and dimensions of the equipment and the different local regulations in terms of safety and/or engine emissions.
The construction equipment industry has seen an increase in the use of hydraulic excavators and wheel loaders in earth-moving and material handling applications. In addition, the light equipment sector has grown as more manual labor is being replaced on construction sites by machines with a variety of attachments for specialized applications, such as skid steer loaders, compact track loaders and mini-crawler excavators.
Competition
The Agriculture and Construction equipment industries are highly competitive. We believe that we have many competitive strengths that will enable us to improve our position in markets where we are already well established while we direct additional resources to markets and products with high growth potential.
We compete with: (i) large global full-line equipment manufacturers with a presence in every market and a broad range of products that cover most customer needs, (ii) manufacturers who are product specialists focused on particular industry segments on either a global or regional basis, (iii) regional full-line manufacturers, some of which are expanding worldwide to build a global presence, and (iv) local, low-cost manufacturers in individual markets, particularly in emerging markets such as Eastern Europe, India and China.
Our competitive strengths include well-recognized brands, a full range of competitive products and features, including software, a strong presence, distribution and customer service network. There are multiple factors that influence a buyer’s choice of industrial equipment. These factors include the strength and quality of the distribution network, brand loyalty, product features, quality and performance, availability of a full product range, pricing, technological innovations, product availability, financing terms, parts and warranty programs, resale value and customer service and satisfaction. The ability to meet or exceed applicable engine emissions standards as they take effect is also a key competitive factor, particularly in those markets where such standards are the subject of frequent legislative or regulatory scrutiny and change, such as Europe and North America. Emission regulations are becoming a significant competitive factor at global level with new legislation in India and China. We continually seek to improve in each of these areas but focus primarily on providing high-quality and high-value products and on supporting those products through our dealer networks. Customers’ perceptions of product value in terms of productivity, reliability, digital content, resale value and dealer support are formed over many years. Buyers tend to favor brands based on experience with the product and the dealer.
The efficiency of our manufacturing, logistics and scheduling systems are dependent on forecasts of industry volumes and our anticipated share of industry sales, which is predicated on our ability to compete successfully with others in the marketplace. We compete based on product performance, customer service, quality, innovation and price. The environment is by nature competitive from a pricing standpoint, but we have been able to counter inflationary cost increases with positive price realization. There is no guarantee that we can maintain positive price realization in the future. The ability of our supply chain and manufacturing system to timely deliver finished goods is also critical to meeting customer expectations. Failure to do so might imply losses of market share and competitiveness.
Our main competitors in the agricultural equipment market are Deere & Company, AGCO Corporation, Claas Group, Kubota Tractor Corporation, Argo Tractors S.p.A., and the Same Deutz Fahr Group.
Our principal competitors in the construction equipment market are Caterpillar Inc., Komatsu Ltd., J C Bamford Excavators Ltd., Hitachi Construction Machinery Co, Ltd., Volvo Group, Liebherr Group, Doosan Group, Kubota Tractor Corporation, and Deere & Company.
Products and Markets
Agriculture
To capitalize on customer loyalty to its dealers and its brands, Agriculture’s product lines are sold primarily under the Case IH and New Holland Agriculture brands as well as the STEYR and Kongskilde brands in Europe and the Miller and Flexi-Coil brands, primarily in North America and Australia. Raven primarily operates in North America, Australia, South America and Europe. Certain agricultural equipment products are also sold under Överum (a sub-brand of Kongskilde), K-Line and JF brands. We believe that these brands enjoy high levels of brand identification and loyalty among both customers and dealers.
Although newer generation tractors have a high percentage of common mechanical components, each brand and product remains differentiated by features, color, interior and exterior styling, warranty terms, technology offering, and model designation. Flagship products such as row crop tractors and large combine harvesters may have significantly greater differentiation.
Distinctive features that are specific to a particular brand such as the Supersteer® tractor axle or Twin Rotor combine threshing technology for New Holland, the Case IH tracked four-wheel drive tractor, Quadtrac®, and the front axle mounted hitch for STEYR tractors are examples of certain distinctive features that remain an important part of each brand’s unique identity.
Agriculture’s product lines include tractors, combine harvesters, hay and forage equipment, seeding and planting equipment, and self-propelled sprayers. Our agricultural equipment is sold with a limited warranty that typically runs from one to three years.
Case IH and New Holland Agriculture brands enable their customers to visualize and share in-depth real-time machine and farm operation data within the respective AFS-PLM Farm solution and offer data sharing to a vast number of third party providers at full control of the customer. Agriculture launched AGXTENDTM, focused exclusively on aftermarket precision farming technology solutions. AGXTENDTM is designed to provide our dealers and customers access to innovative and more sustainable productivity enhancing precision farming technologies.
CNH Industrial acquired AgDNA an industry leading Farm Management Information System (FMIS) that automatically collects and analyzes data from equipment manufactured by CNH Industrial and third-party manufacturers. The cloud-based platform analyzes equipment, agronomic and environmental data to deliver actionable insights directly to customers' smartphones and tablets to help them maximize the agronomic performance of their CNH Industrial and other equipment to increase farm profitability.
Raven Industries, Inc., ("Raven") formerly a long-term strategic supplier, was acquired in order to expand our portfolio of precision agriculture technology offerings and to accelerate the development of advanced machine automation and autonomous agriculture technology.
With Raven as part of the Agriculture product portfolio, we now design, manufacture, sell, and service innovative precision agriculture products, autonomous solutions, and information management tools, which are collectively referred to as precision agriculture equipment. Our Precision Agriculture suite of solutions encompass connected platforms, automation solutions and autonomous capabilities. Our technology stack includes satellite guided positioning, telemetric connectivity, automation software, ruggedized sensors and cross validation/machine learning aided by edge and cloud computing. Our connected platforms link farmers to their equipment, dealers, input providers, partners and other advisors enabling real time monitoring of their operations and logistics management capabilities. Our Raven brand offers retrofit solutions to upgrade farmer's existing equipment, resulting in increased productivity and reduced cost across the full fleet of equipment.
Construction
Construction’s product lines are sold primarily under the CASE Construction Equipment and New Holland Construction brands. CASE provides a wide range of products on a global scale, including crawler excavators and mini-excavators. The New Holland Construction brand family also markets a full product line of construction equipment in South America and focuses on light equipment distributed by the Agriculture network in the other regions. In 2021, we completed the acquisition of Sampierana S.p.A., which provides Construction direct control over technology and manufacturing of Mini and Midi Excavators.
Construction's products often share common components to achieve economies of scale in manufacturing, purchasing, and development. Construction differentiates these products based on the relative product value, technology, design concept, productivity, product serviceability, color, and styling to preserve the unique identity of each brand.
Heavy construction equipment product lines include general construction equipment such as large excavators and wheel loaders, and road building and site preparation equipment such as compactors, graders and dozers. Light construction equipment is also known as compact and service equipment, and its product lines include backhoe loaders, skid steer and tracked loaders, mini- and midi-
excavators, and compact wheel loaders. The brands each offer parts and support services for all of their product lines. Our construction equipment is generally sold with a limited warranty that typically runs from one to two years.
We continue to evaluate our Construction business with a view toward increasing efficiencies and profitability as well as evaluating its strategic alliances to improve its position in key markets.
Sales and Distribution
Agriculture and Construction
Agriculture sells and distributes products through dealers that sell either Case IH products, New Holland products or both brands. Case IH has 898 dealers worldwide with more than 2,500 point of sale locations and New Holland has more than 1,800 dealers worldwide and more than 3,700 point of sale locations. Construction sells and distributes products through approximately 420 full-line dealers and distributors with over 1,580 points of sale. Agriculture’s and Construction’s dealers are almost all independently owned and operated. Some Agriculture dealers also sell construction equipment. In the United States, Canada, Mexico, most of Western Europe, Brazil, Argentina, India, China, Thailand, Australia, and South Africa products are generally distributed directly through the independent dealer network. In the rest of the world, products are either sold to independent distributors who then resell to dealers, or to importers who have their own branches to sell product to retail customers.
Consistent with our brand promotion program, we generally seek to have dealers sell a full range of our products. Typically, a dealer is appointed to sell one brand in a specific territory, but depending on market potential, history, capabilities and commitment of the dealer operator, a multi-brand approach is also pursued in some territories. In each region, we seek to optimize our distribution strategy to maximize customer satisfaction and sales while reducing structural costs. This results in two far-reaching networks representing two strong brands with unique identities and strengths to compete against all non-CNH Industrial brands in any given territory.
In larger markets, a trade-in of used equipment typically accompanies the sale of new equipment to end-users. We often provide marketing assistance to our dealers to support the sale of used, trade-in equipment through subsidized financing incentives, inventory carrying cost defrayment, or other methods.
Exclusive, dedicated dealers generally provide a higher level of market penetration. Some dealers may sell complementary products manufactured by other suppliers to complete their product offerings or to satisfy local demand for a particular specialty application or segment.
A strong dealer network with wide geographic coverage is a critical element in the success of Agriculture and Construction. We work to enhance our dealer network through the expansion of our product lines and customer services, including enhanced financial services offerings, and an increased focus on dealer support. To assist dealers in building rewarding relationships with their customers, focused customer satisfaction programs have been introduced and they are expected to incorporate customer input into the relevant product development and service delivery processes.
As the equipment rental business becomes a more significant factor in both the agricultural and construction equipment markets, Agriculture and Construction are facilitating sales of equipment to the local, regional and national rental companies through their dealers as well as by encouraging dealers to develop their own rental activities. A strong dealer service network is required to maintain the rental equipment, and to help ensure that the equipment remains at peak performance levels both during its life as rental equipment and afterward when resold into the used equipment market. Agriculture and Construction have launched several programs to support their dealer service and rental operations, including training, improved dealer standards, financing, and advertising. As the rental market is a capital-intensive sector and sensitive to cyclical variations, we expand such activities gradually, with special attention to managing the resale of rental units into the used equipment market by our dealers, who can utilize this opportunity to improve their customer base and generate additional parts and service business.
We believe that it is generally more cost-effective to distribute our agricultural and construction equipment products through independent dealers, although as of December 31, 2022, we operated two Agriculture and Construction dealerships in North America and six company-owned Agriculture and Construction dealerships in Europe. We also operate with a network of owned dealers for Case IH and the Construction segment in South Africa. We promote a selective dealer development program, in territories with growth potential but underdeveloped representation by our agricultural and construction equipment brands, the program typically involves a transfer of ownership to a qualified operator through a buy-out or private investment after a few years.
Precision Agriculture technology is offered factory fit with our new equipment as well as offered as parts and service for retrofit solutions through our dealer network. The Raven brand is leveraging and expanding their sales through the CNH Industrial dealer network in all the regions but is also distributing through independent dealers and directly to other OEM as factory fit solutions or their parts and service offering.
Pricing and Promotion
The retail price of any piece of equipment is determined by the individual dealer or distributor and generally depends on market conditions, features, options and, potentially, regulatory requirements. Retail transaction prices may differ from the manufacturer-suggested list prices, as a result of different factors (markets' demand, customers' specific requirements, local market conditions, general economic conditions, access to financing, etc.). We sell most of our products and parts to our dealers and distributors at wholesale prices that reflect a discount from the manufacturer-suggested list prices. In the ordinary course of business, we engage in promotional campaigns that may include price incentives or preferential financing terms when a product is sold by a dealer to a final customer.
We regularly advertise our products to the community of farmers, builders, and agricultural and construction contractors, as well as to distributors and dealers in each of our major markets. To reach our target audience, we use a combination of general media, specialized design and trade magazines, the Internet and direct mail. We also regularly participate in major international and national trade shows and engage in co-operative advertising programs with distributors and dealers. The promotion strategy for each brand varies according to the target customers for that brand.
Parts and Services
The quality and timely availability of parts and services are important competitive factors for each of our businesses, as they are significant elements in overall customer satisfaction and important considerations in a customer’s original equipment purchase decision. We supply parts, many of which are proprietary, to support items in the current product line as well as for products we have sold in the past. We also offer personalized aftersales customer assistance programs that provide a wide range of modular and flexible maintenance and repair contracts, as well as warranty extension services, to meet a variety of customers’ needs and to support the equipment’s value over time. Many of our products can have economically productive lives of up to 20 years when properly maintained, and each unit has the potential to produce a long-term parts and services revenue stream for us and our dealers. The technology has allowed us to connect machines with our cloud-based Control Rooms and our dealer service shops get results of analytics blended with the professional knowledge of our products experts. We are increasing the number of connected units supported proactively by Dealer Control Room that leverage service alarms, operators’ insights, predictive repairs and maintenance that enrich a suite of machine and farm data’s.
As of December 31, 2022 we operated and administered 34 parts depots worldwide which support both Agriculture and Construction, either directly, through a joint venture, or through arrangements with warehouse service providers. This network includes 10 parts depots in North America, 7 in Europe, 3 in South America, and 14 in other regions. The network includes 33 parts depots that support Agriculture and 30 that support Construction. These depots supply parts to dealers and distributors, which are responsible for sales to retail customers. Our parts depots and parts delivery systems provide customers with access to substantially all the parts required to support our products.
Research and Development, Patents and Licenses, etc.
Our research, development and engineering personnel design, engineer, manufacture and test new products, components, and systems.
In a continuously and rapidly changing competitive environment, our research and development activities are a vital component in our strategic development. Our research and development activities are designed to accelerate time-to-market while taking advantage of specialization and experience in different markets.
We own a significant number of patents, trade secrets, licenses and trademarks related to our products and services, and that number is expected to grow as our R&D activities continue. We file patent applications in Europe, the U.S. and in other jurisdictions around the world to protect technology and improvements considered important to the business. Certain trademarks contribute to our identity and the recognition of our products and services and are an integral part of our business, and their loss could have a material adverse effect on us.
Agriculture-We are marketing the New Holland, Case IH, STEYR, Raven and Miller brands and logos as the primary brand names for our agriculture products.
Construction-For construction equipment under New Holland, we are marketing the New Holland Construction brand name and trademark. For construction equipment under CASE, we are promoting the CASE Construction brand name and trademark.
Joint Ventures
As part of a strategy to enter and expand in new markets, we are also involved in several commercial and/or manufacturing joint ventures. At December 31, 2022, they included the following:
◦in Japan, we own 50.0% of New Holland HFT Japan Inc. (“HFT”), which distributes our products in Japan. HFT imports and sells the full range of New Holland agricultural equipment;
◦in Pakistan, we own 43.2% of Al Ghazi Tractors Ltd., which manufactures and distributes New Holland tractors;
◦in Turkey, we own 37.5% of TürkTraktör ve Ziraat Makineleri A.S., which manufactures and distributes various models of both New Holland and Case IH tractors;
◦in Mexico, we own 50.0% of CNH de Mexico S.A. de C.V., which manufactures New Holland agricultural equipment and distributes our agricultural equipment through one or more of its wholly-owned subsidiaries.
Suppliers
We purchase materials, parts, components and services from third party suppliers. Our focus on quality improvement, cost reduction, product innovation and production flexibility requires us to rely upon suppliers with a focus on quality, reliability and the ability to provide cost reductions. We view our relationships with suppliers as critical to our operational effectiveness, and in recent years, we have established closer ties with a significantly reduced number of suppliers, selecting those that enjoy a leading position in the relevant markets.
Certain components and parts used in our products are available from a single supplier and cannot be sourced quickly otherwise. The sudden or unexpected interruption in the availability of certain of our suppliers’ raw materials, parts, and components could result in delays in, or increases in the costs of production.
CNH Industrial is committed to growing together with our suppliers to maintain a strong and resilient supply chain; therefore, the company is embarking on a multi-year supply chain transformation under our new strategic sourcing program. The strategic sourcing program is designed to leverage CNH Industrial's long-term relationships with its suppliers to reduce costs and improve overall performance of the supply chain.
Financial Services
Financial Services offers a range of financial products and services to dealers and customers in the various regions in which it operates. Retail financing products primarily include retail notes, finance leases and operating leases to end use customers and revolving charge account financing to purchase parts, service, rentals, implements and attachments from CNH Industrial brand dealers. Wholesale financing consists primarily of dealer floorplan financing as well as the management and purchase of trade receivables from CNH Industrial companies. Dealer floorplan financing gives dealers the ability to maintain a representative inventory of products. In addition, Financial Services provides financing to dealers for used equipment and machines taken in trade, equipment utilized in dealer-owned rental yards, parts inventory, working capital and other financing needs. As a captive finance business, Financial Services is reliant on and supports the operations of Agriculture, Construction, their dealers, and customers.
Financial Services supports the growth of Industrial Activities by developing and structuring financial products with the objective of supporting equipment and parts sales as well as customer loyalty. Financial Services’ strategy is to grow a core financing business to support the sale of our equipment and parts while at the same time maintaining its portfolio credit quality, service levels, operational effectiveness and customer satisfaction. Financial Services also offers products to finance third party equipment and machines sold through our dealer network or within our core businesses. Financed third party equipment include used equipment taken in trade by our dealers or equipment used in conjunction with or attached to our products.
In North America, retail customer and dealer financing activities, which support the sales of Agriculture and Construction, are managed through our wholly-owned financial services companies.
In Europe, the Middle East and Africa, CNH Industrial Capital Europe S.a.S., which is 24.95% owned by CNH Industrial N.V. and accounted for under the equity method, provides retail financing to customers of Agriculture and Construction. Additionally, there are vendor programs with banking partners that provide customer financing to our industrial segments in certain countries.
In Europe, IC Financial Services S.A., a French specialized credit institution, wholly-owned by Iveco Group, manages CNH Industrial dealer financing through a dedicated securitization. CNH Industrial Capital Solutions S.p.A. retains the securitization program's junior notes, and therefore retains substantially all the risks and the benefits of the underlying wholesale receivables.
For South America, retail customer and dealer financing activities are managed through our wholly-owned financial services company, which support the sales of Agriculture and Construction. For retail customer financing in Brazil, Banco CNH Industrial Capital S.A. serves as a lender for funding provided by BNDES, a federally-owned financial institution linked to the Brazilian
Ministry of Development, Industry and Foreign Trade. In Argentina, vendor programs with banking partners are also utilized. CNH Industrial Financial Services serves as a lender for Iveco Group and services the sales of Iveco Group.
In Asia Pacific, CNH Industrial Financial Services supports the sales of Agriculture and Construction by providing retail customer and dealer financing activities in Australia, New Zealand and India, managed through wholly-owned financial services companies. In China, Agriculture dealer financing activities are provided by and managed through a wholly-owned financial services company. CNH Industrial Financial Services serves as a lender for Iveco Group and services the sale of Iveco Group in Australia and New Zealand.
Customer Financing
Financial Services has certain retail underwriting and portfolio management policies and procedures that are specific to Agriculture or Construction. This distinction allows Financial Services to reduce risk by deploying industry-specific expertise in each of these businesses. We provide retail financial products primarily through our dealers, who are trained in the use of the various financial products. Dedicated credit analysis teams perform retail credit underwriting. The terms for financing equipment retail sales typically provide for retention of a security interest in the equipment financed.
Financial Services’ guidelines for minimum down payments for equipment generally range from 5% to 30% of the actual sales price, depending on equipment types, repayment terms, and customer credit quality. Finance charges are sometimes waived for specified periods or reduced on certain equipment sold or leased in advance of the season of use or in connection with other sales promotions. For periods during which finance charges are waived or reduced on the retail notes or leases, Financial Services generally receives compensation from the applicable Industrial Activities segment based on Financial Services’ estimated costs and a targeted return on equity. The cost is recognized as a reduction in net sales for the applicable Industrial Activities segment.
Dealer Financing
Financial Services provides dealer floorplan financing, and to a lesser extent, the financing of dealer operations. Under the standard terms of the wholesale receivable agreements, these receivables typically have a fixed period of “interest-free” financing to dealers. During the “interest-free” period, the applicable Industrial Activities segment compensates Financial Services based on Financial Services’ estimated costs and a targeted return on equity. The cost is recognized as a reduction in net sales for the applicable Industrial Activities segment. After the expiration of any “interest-free” period, interest is charged to dealers on outstanding balances until Financial Services receives payment in full.
A wholesale underwriting group reviews dealer financial information and payment performance to establish credit lines for each dealer. In setting these credit lines, Financial Services seeks to meet the reasonable requirements of each dealer while managing its exposure to any one dealer. All risk is underwritten and supported by Financial Services. The credit lines are secured by the equipment financed. Dealer credit agreements generally include a requirement to repay individual receivables at the time of the retail sale of the related unit. Financial Services leverages employees, third-party contractors, and digital technologies like “geo-fencing” to conduct periodic stock audits at individual dealerships to confirm that the financed equipment is maintained in inventory. These audits are unannounced, and their frequency varies by dealer and depends on the dealer’s financial strength, payment history, and prior performance.
Factoring
Financial Services also provides intragroup factoring of trade and other receivables. This activity involves the purchase, without recourse, of receivables of CNH Industrial companies, originating from the Industrial Activities segments, and due from third or related parties.
Sources of Funding
The long-term profitability of Financial Services’ activities largely depends on the cyclical nature of the industries in which we operate, interest rate volatility, and the ability to access funding on competitive terms. Financial Services funds its operations and lending activity through a combination of term receivable securitizations, committed secured and unsecured facilities, uncommitted lines of credit, unsecured bonds, unsecured commercial paper, affiliated financing, and retained earnings. Financial Services’ current funding strategy is to maintain sufficient liquidity and flexible access to a wide variety of financial instruments and funding options.
Financial Services has periodically accessed the asset-backed securities (“ABS”) markets in the United States, Canada, and Australia, as part of its retail note and wholesale financing programs when those markets offer funding opportunities on competitive terms. Financial Services has also accessed the unsecured bond market in the United States, Canada, Brazil, Argentina and Australia and commercial paper markets in the United States to diversify its funding sources. Financial Services’ ability to access these markets will depend, in part, upon general economic conditions and Financial Services’ financial condition and portfolio performance. These factors can be negatively affected by cyclical swings in the industries in which we operate.
Competition
The financial services industry is highly competitive. Financial Services competes primarily with banks, equipment finance and leasing companies and other financial institutions. Typically, this competition is based upon the financial products and services offered, customer service, financial terms, and interest rates charged. Financial Services’ ability to compete successfully depends upon, among other things, the availability and competitiveness of funding resources, the development of competitive financial products and services, and licensing or other governmental regulations.
Human Capital
All CNH Industrial employees contribute to company performance at different levels and are key to the achievement of business targets and results. The conviction that people are the company’s greatest asset is the baseline principle of the Human Capital Management Guidelines which aim to increase organizational effectiveness. The Company has identified 5 key cultural behaviors which have been cascaded to the entire organization through specific trainings during 2022: Customer First, One Team, Grow Together, Make it Simple, Be the Best. Specific tools have been developed to implement the cultural behaviors which include focus recognitions, story telling and focus feedback. We strongly believe that sharing a common culture will help to retain and attract talent and ultimately allow the Company to be more competitive.
Employees
The ability to attract, retain, and further develop qualified employees is crucial to the success of CNH Industrial’s businesses and its ability to create value over the long-term. CNH Industrial’s business is, by its nature, labor intensive and this is reflected in the high number of Group hourly employees. As of December 31, 2022, CNH Industrial had 40,070 employees including 11,769 employees in the U.S. and Canada. CNH Industrial also retains consultants, independent contractors, and temporary and part-time workers. Approximately 1,000 hourly production employees in the United States were covered by a collective bargaining agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America with an expiration date of May 2, 2026. Additionally, approximately 750 U.S. production employees are covered by a collective bargaining agreement with International Association of Machinists with an expiration date of April 28, 2024. In Canada, a small number of employees are covered by a collective bargaining agreement with the United Steelworkers Local Union No. 5917 that expires on April 15, 2023. In Europe, most employees are covered by collective labor agreements (“CLAs”) stipulated either by a CNH Industrial subsidiary or by the employer association for the specific industry to which the CNH Industrial subsidiary belongs. Outside North America and Europe, the Company enters into employment contracts and agreements in those countries in which such relationships are mandatory or customary.
Diversity and Inclusion
Our Company is committed to creating a diverse and inclusive environment where all employees feel empowered, engaged, and valued. To progress towards our company’s diversity and inclusion ("D&I") goals, we are carrying out dedicated initiatives around the globe, such as D&I training employee resource groups (ERGs), online forum panel series "Let's Talk"; and partnerships with the Society of Women ENgineers and others.
Code of Conduct
CNH Industrial’s Code of Conduct is one of the pillars of the CNH Industrial corporate governance system, which regulates the decision-making processes and the approach used by the Company and its employees in interacting with all stakeholders. The Code of Conduct summarizes the values the Company recognizes, adheres to, and fosters, in the belief that integrity and fairness are important drivers of long-term value creation and social and economic development.
Employee Health and Safety
CNH Industrial’s approach to occupational health and safety is based on effective preventive and protective measures, implemented both collectively and individually, aimed at minimizing the risk of injury in the workplace. The Company endeavors to ensure optimal working conditions, applying principles of industrial hygiene and ergonomics to processes at organizational and operational level. Its safety management system directly involves employees in identifying and reporting work related hazards and potentially unsafe situations. This approach is intended to promote common, ethical occupational health and safety principles, and enables the achievement of improvement targets using various tools, including training and awareness campaigns. Key areas of focus are pursuit of a zero-accident and zero-injury rate, extension of ISO 45001 certification, and implementation of initiatives to increase employee health and safety awareness via multiple tools (e.g., training courses, corporate Intranet, video tutorials).
Employee Compensation and Benefits
The Company is committed to providing a base pay that, in compliance with local regulations, is competitive with the local market, affordable from a business perspective, and in line with the Company’s achieve and earn philosophy. CNH Industrial has defined a compensation approach that comprises a number of different components. This comprehensive package rewards employees for their contribution to the Company’s results and allows them to share in the business success they help to create. Base salary, benefits, and short and long-term incentives are determined by market-driven benchmarks. Variable compensation is influenced by individual employee contribution, which is evaluated through a performance evaluation program that is deployed throughout the entire organization. The same metrics and methodology are applied in the annual performance assessment of all eligible employees worldwide. Additionally, the Company employs a formal process to monitor the application of its core equity and fairness principles to compensation levels, annual salary reviews, and promotions.
Employee Welfare and Well-being
Employee welfare and well-being initiatives are an important part of the Company’s employee engagement. CNH Industrial offers well-being initiatives in addition to traditional benefits (such as health care), going beyond its legal obligations in the countries where it operates. The aim is to help employees balance their personal commitments through time and money saving initiatives and flexible working arrangements, while cultivating motivation, pride, and a sense of belonging at work through family activities, engagement with the community, and involvement in Company life.
Training and Development
CNH Industrial believes that employee training is key to skill management and development. Training allows sharing operational and business know-how, as well as the Company’s strategy and values.
The Company manages training through a 4-step process: training needs identification, content development, program delivery, and reporting. Ownership of each lies with different corporate functions, depending on which areas of content or expertise need to be improved.
The Training Management Model is business-oriented and therefore closely involves business functions on content areas such as:
•business and job-specific skills
•new business methodologies
•shared tools, languages, soft skills, legal aspects and compliance, ethics, etc.
CNH Industrial manages the overall training process through an Internet-based global learning management system. The Company builds upon segment-specific training programs, believing that the most effective solutions are specifically tailored to individual needs.
Employees are given the opportunity to indicate development and training needs as part of a Performance Management Process, and to propose actions to support their personal development during the year.
Training effectiveness and efficiency are monitored and measured based on the participants’ satisfaction with the initiatives delivered and improvements in their knowledge/skills; in some cases, depending on the learning path, structured followups are provided.
Environmental and Other Regulatory Matters
We engineer, manufacture and sell our products and offer our services around the world, subject to requirements applicable to our products that relate to equipment emissions, product safety and fuel efficiency as well as those applicable to our manufacturing facilities that relate to stack emissions, treatment of waste, water and hazardous materials, prohibitions on soil contamination and worker health and safety. These extensive regional, national and local laws and regulations often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to engines. We have made, and expect that we may additionally make, significant capital and research and development expenditures to comply with these standards now and in the future.
We are conducting environmental investigatory or remedial activities at certain properties that are currently or were formerly, owned and/or operated by us, or which are being decommissioned. We believe that the outcome of these activities will not have a material adverse effect on our business, financial position or results of operations while they will restore environmental conditions.
Our operations and the activities of our employees, contractors and agents around the world are also subject to the laws and regulations of numerous countries, including the United States. These laws and regulations include data privacy requirements, labor relations laws, tax laws, antitrust regulations, prohibitions on payments to governmental officials and others, federal and state
environmental regulations, import and trade restrictions and export requirements. Any violations of such law or regulation could also result in prohibitions on our ability to offer our products and services in one or more countries and could have a material adverse effect on our business, results of operations and financial condition.
Our operations globally are also subject to risks of violations of laws prohibiting improper payments and bribery, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act as well as a range of national anti-corruption and antitrust or competition laws that apply to conduct in a particular jurisdiction. We have implemented a program to promote compliance with these laws and to reduce the likelihood of potential violations. Our compliance program, however, may not in every instance protect us from acts committed by our employees, agents, contractors, or collaborators that may violate the applicable laws or regulations of the jurisdictions in which we operate. Such improper actions could subject us to civil or criminal investigations and monetary, injunctive and other penalties as well as damage claims.
Available Information
Our internet address is www.cnhindustrial.com. Beginning with its October 31, 2022 financial statements, the Company elected to voluntarily file its US GAAP financial statements on Form 10-Q and Form 10-K. We make the following reports filed by us available, free of charge, on our website under the heading “Investor Relation; Regulatory Filings; SEC Filings".
•annual reports on Form 10-K;
•quarterly reports on Form 10-Q;
•current reports on Form 8-K and Form 6-K; and
•agenda and meeting notes for the annual meetings of stockholders.
These reports are made available on our website as soon as practicable after they are filed with the Securities and Exchange Commission (“SEC”). The SEC also maintains a website (www.sec.gov) that contains our reports and other information filed with the SEC. We also provide governance and other company information on our website.
None of these materials, including the other materials available on our website, are incorporated by reference into this Annual Report on Form 10-K unless expressly provided.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
This Annual Report on Form 10-K contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements provide our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements as they do not relate to historical or current facts and by words such as “believe,” “expect,” “estimate,” “anticipate,” “will,” “should,” “plan,” “forecast,” “target,” “guide,” “project,” “intend,” “could,” and similar words or expressions.
All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, and other important information about forward-looking statements are disclosed under Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)-Cautionary Note on Forward-Looking Statements,” in this Annual Report on Form 10-K.
The following risks should be considered in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, including the risks and uncertainties described in the Forward-Looking Statements and notes to the consolidated financial statements beginning on page 133. The following is a cautionary discussion of risks, uncertainties and assumptions that we believe are material to our business. These risks may affect our operating results and, individually or in the aggregate, could cause our actual results to differ materially from past and projected future results. Some of these risks and uncertainties could affect particular lines of business, while others could affect all of our businesses. Although risks are organized by headings, and each risk is discussed separately, many are interrelated. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. You should, however, consult any subsequent disclosures we make from time to time in materials filed with the SEC.
STRATEGIC RISKS
Global economic conditions impact our businesses. Our results of operations and financial position are and will continue to be influenced by macroeconomic factors - including changes in gross domestic product, the level of consumer and business confidence, changes in interest rates, the availability of credit, inflation and deflation, energy prices, and the cost of commodities or other raw materials - which exist in the countries and regions in which we operate. Such macroeconomic factors vary from time to time and their effect on our results of operations and financial position cannot be specifically and singularly assessed and/or isolated.
Economic conditions vary across regions and countries, and demand for our products and services generally increases in those regions and countries experiencing economic growth and investment. Slower economic growth or a change in global mix of regions and countries experiencing economic growth and investment could have an adverse impact on our business, results of operations and financial condition. In a weaker economic environment, dealers and customers may delay or cancel plans to purchase our products and services and may not be able to fulfill their obligations to us in a timely fashion. Our suppliers may also be impacted by economic pressures, which may adversely affect their ability to fulfill their obligations to us or the price or availability of supplies we require. These factors could result in product delays, increased accounts receivable, defaults and inventory challenges. The persistent disparity with respect to the widely varying economic conditions amongst the individual countries of the European Union, and their implications for the Euro, as well as market perceptions concerning these and related issues, have led to further pressure on economic growth and may lead to new periods of economic volatility and recession in the European Union. Similarly, in Brazil and Argentina, macroeconomic conditions remain volatile.
The COVID pandemic, geopolitical instability, including the conflict between Russia and Ukraine, and other global events have significantly increased economic and demand uncertainty. Some of the results of these events include supply chain challenges, inflation, high interest rates, foreign currency exchange volatility, and volatility in global capital markets. Supply chain challenges, including delays caused by shortages of raw materials, shipping containers and labor availability, have increased production costs and impacted our profit margins. Additionally, the cost of raw materials used in our products and the cost of freight have increased due to heightened inflation. These adverse economic events have and may continue to adversely affect the Company’s operations.
We are exposed to political, economic, trade and other risks beyond our control as a result of operating a global business. We manufacture and sell products and offer services in several continents and numerous countries around the world including those experiencing varying degrees of political and economic instability. Given the global nature of our activities, we are exposed to risks associated with international business activities that may increase our costs, impact our ability to manufacture and sell our products and require significant management attention. These risks include:
•changes in laws, regulations and policies that affect, among other things:
-import and export duties and quotas;
-currency restrictions;
-the design, manufacture and sale of our products;
-interest rates and the availability of credit to our dealers and customers;
-where, to whom, and what type of products may be sold, including new or additional trade or economic sanctions imposed by the United States, European Union, the United Kingdom or other governmental authorities and supranational organizations (e.g., the United Nations); and
-taxes;
•regulations from changing world organization initiatives and agreements;
•changes in the dynamics of the industries and markets in which we operate;
•labor disruptions;
•disruption in the supply of raw materials and components (e.g. as a result of pandemics or sanctions), including rare materials (they might be easily subjected to sudden cost increases due to a variety of factors, including speculative measures or unforeseen political changes);
•changes in governmental debt relief and subsidy program policies in certain significant markets, including the Brazilian government discontinuing programs subsidizing interest rates on equipment loans;
•withdrawal from or changes to trade agreements or trade terms, negotiation of new trade agreements and the imposition of new (and retaliatory) tariffs on certain countries or covering certain products and raw materials or embargoes, including developments in U.S.-China trade relations; and
•war, civil unrest and acts of terrorism.
In recent years, acts of terrorism have occurred around the world, leading to personal safety anxieties and political instability in many countries and, ultimately, an impact on consumers’ confidence. More recently, growing populist and nationalist political movements in several major developed countries, changes in or uncertainty surrounding global trade policies and other unanticipated changes to the previous geopolitical order may have negative effects on the global economy.
Further, the war in Ukraine has given rise to regional instability and resulted in heightened sanctions and counter-sanctions. Our business in Ukraine and Russia has been impacted by the war and the Company has suspended all shipments to Russia. We have experienced, and may continue to experience, risks related to the impact of the war in Ukraine, including restrictions on our ability or willingness to do business with certain vendors or suppliers, the ability to repatriate funds from the region, increases in the cost of raw materials and commodities, supply chain and logistics challenges, access to natural gas, higher energy prices and foreign currency volatility. The extent of the impact of the war in Ukraine on the global economy cannot be predicted, including the extent to which the conflict may heighten other risks disclosed herein, any of which could have an adverse impact on our business, results of operation, cash flows or financial condition.
There can be no guarantee that we will be able to quickly and completely adapt our business model to changes that could result from the foregoing, and any such changes may have an adverse effect on our business, results of operations and financial condition.
Reduced demand for equipment would reduce our sales and profitability. The agricultural equipment market is influenced by factors such as:
•the general economic conditions and outlook, such as market volatility and rising interest rates;
•the price of agricultural commodities and the ability to competitively export agricultural commodities;
•the cost of farm inputs including the value of land, fertilizers, fuel, labor and other inputs
•the profitability of agricultural enterprises, farmers’ income and their capitalization;
•the demand for food products;
•the availability of stocks from previous harvests; and
•agricultural policies, including aid and subsidies to agricultural enterprises provided by governments and/or supranational organizations, policies impacting commodity prices or limiting the export or import of commodities, and alternative fuel mandates.
In addition, droughts, floods and other unfavorable climatic conditions, especially during the spring, a particularly important period for generating sales orders, could have a negative impact on decisions to buy agricultural equipment and, consequently, on our revenues.
The construction equipment market is influenced by factors such as:
•public infrastructure spending;
•new residential and non-residential construction; and
•capital spending in oil and gas and, to a lesser extent, in mining.
The above factors can significantly influence the demand for agricultural and construction equipment and consequently, our financial results. If demand for our products is less than we expect, we may experience excess inventories and be forced to incur additional charges and our profitability will suffer, including lower fixed costs absorption associated with lower production levels at our plants. Our business may be negatively impacted if we experience excess inventories or if we are unable to adjust on a timely basis our production schedules or our purchases from suppliers to reflect changes in customer demand and market fluctuations.
Competitive activity, or failure by us to respond to actions by our competitors, could adversely affect our results of operations. We operate in highly competitive global and regional markets. Depending on the particular country and product, we compete with other international, regional and local manufacturers and distributors of agricultural and construction equipment. Certain of our global competitors have substantial resources and may be able to provide products and services at little or no profit, or even at a loss, to compete with certain of our product and service offerings. We compete primarily on the basis of product performance, innovation, quality, distribution, customer service, and price. Aggressive pricing or other strategies pursued by competitors, unanticipated product or manufacturing delays, quality issues, or our failure to price our products competitively could adversely affect our business, results of operations and financial position. Additionally, there has been a trend toward consolidation in the construction equipment industries that has resulted in larger and potentially stronger competitors in those industries. The markets in which we compete are highly competitive in terms of product quality, innovation, pricing, fuel economy, reliability, safety, customer service and financial services offered. Competition, particularly on pricing, has increased significantly in the markets in which we compete. Should we be unable to adapt effectively to market conditions, this could have an adverse effect on our business, results of operations and financial condition.
Changes in government monetary or fiscal policies may negatively impact our results. Most countries where our products and services are sold have established central banks to regulate monetary systems and influence economic activities, generally by adjusting
interest rates. Some governments have implemented measures designed to slow inflationary pressure in their countries (e.g. higher interest rates, reduced financial assets purchases). Rising interest rates could have a dampening effect on the overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect demand for our products and our customers’ ability to repay obligations to us. Central banks and other policy arms of many countries may take further actions to vary the amount of liquidity and credit available in an economy. The impact from a change in liquidity and credit policies could negatively affect the customers and markets we serve or our suppliers, which could adversely impact our business, results of operations and financial condition. Government initiatives that are intended to stimulate demand for products sold by us, such as changes in tax treatment or purchase incentives for new equipment, can significantly influence the timing and level of our revenues. The terms, size and duration of such government actions are unpredictable and outside of our control. Any adverse change in government policy relating to those initiatives could have a material adverse effect on our business, results of operations and financial condition.
Our future performance depends on our ability to innovate and on market acceptance of new or existing products. Our success depends on our ability to maintain or increase our market share in existing markets and to expand into new markets through the development of innovative, high-quality products that provide adequate profitability. We have a strategic plan covering investments in innovation designed to further develop existing, and create new, product and service offerings responsive to customer needs, including developing and delivering connected and digital solutions, automation, electrification and autonomy. Achievement of these objectives is dependent on a number of factors, including our ability to maintain key dealer relationships, our ability to design and produce products that meet our customers’ quality, performance and price expectations, our ability to develop connected and digital solutions that improve the profitability and sustainability of customers through their production systems, our ability to develop effective sales, dealer training and marketing programs, and the ability of our dealers to support and service connected and digital solutions and emerging power solutions. Failure to develop and offer innovative products that compare favorably to those of our principal competitors in terms of price, quality, functionality, features, mobility and connected services, equipment electrification, fuel cell technology and autonomy, or delays in bringing strategic new products to market, or the inability to adequately protect our intellectual property rights or supply products that meet regulatory requirements, including engine emissions requirements, could result in reduced revenue and market share, which could have a material adverse effect on our business, results of operations and financial condition.
We may face challenges to our intellectual property rights which could adversely affect our reputation, business and competitive position. We own important intellectual property, including patents, trademarks, copyrights and trade secrets. Our intellectual property plays an important role in maintaining our competitive position in the markets that we serve. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design around the intellectual property that we own or license. Despite our controls and safeguards, our technology may be misappropriated by employees, competitors or third parties. The pursuit of remedies for any misappropriation of intellectual property is expensive and the ultimate remedies may be insufficient. Further, in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of misappropriation of our intellectual property is higher notwithstanding the efforts we undertake to protect it. Developments or assertions by or against us relating to intellectual property rights, and any inability to protect or enforce our rights sufficiently, could adversely affect our business, competitive position and results of operations.
We may not realize all of the anticipated benefits from our business initiatives and cost management initiatives. As part of our strategic plan, we are actively engaged in a number of initiatives to strengthen our business and increase our productivity, market positioning, efficiency and cash flow, all of which we expect will have a positive long-term effect on our business, results of operations and financial condition. These initiatives include our enhanced focus on digital, precision farming and alternative propulsion, as well as other initiatives aimed at improving our product portfolio and customer focus. There can be no assurance that these initiatives or others will be beneficial to the extent anticipated, or that the estimated efficiency or cash flow improvements will be realized as anticipated or at all. If these initiatives are not implemented successfully, they could have an adverse effect on our operations. We also expect to take targeted restructuring actions as we continue to optimize our cost structure and improve the efficiency of our operations. In order to complete these actions, we will incur charges. Failure to realize anticipated savings or benefits from our cost reduction actions could have a material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash flows.
We may not be able to realize anticipated benefits from any acquisitions and, further, challenges associated with strategic alliances may have an adverse impact on our results of operations. We have engaged in the past, and may engage in the future, in investments or mergers and acquisitions or enter into, expand or exit from strategic alliances and joint ventures that could involve risks that could prevent us from realizing the expected benefits of the transactions or the achievement of strategic objectives or could divert management’s time and attention. Such risks, many of which are outside our control, include:
▪technological and product synergies, economies of scale and cost reductions not occurring as expected;
▪unexpected liabilities;
▪incompatibility of operating, information or other systems;
▪inability to retain key employees;
▪significant costs associated with terminating or modifying alliances; and
▪problems in retaining customers and integrating operations, services, personnel, and customer bases.
If issues were to arise with respect to an acquisition or the parties to one or more of our joint venture or strategic alliances or other relationships for managerial, financial, or other reasons, or if such strategic alliances or other relationships were terminated, our product lines, businesses, results of operations and financial condition could be adversely affected.
Our business may be affected by climate change, unfavorable weather conditions or other calamities. Poor, severe or unusual weather conditions caused by climate change or other factors, particularly during the planting and early growing season, can significantly affect the purchasing decisions of our agricultural equipment customers. The timing and quantity of rainfall are two of the most important factors in agricultural production. Insufficient levels of rain prevent farmers from planting crops or may cause growing crops to die, resulting in lower yields. Excessive rain or flooding can also prevent planting or harvesting from occurring at optimal times and may cause crop loss through increased disease or mold growth. Temperature affects the rate of growth, crop maturity, crop quality and yield.
Temperatures outside normal ranges can cause crop failure or decreased yields and may also affect disease incidence. Natural disasters such as floods, hurricanes, storms, droughts, diseases and pests can have a negative impact on agricultural production. The resulting negative impact on farm income can strongly affect demand for our agricultural equipment in any given period.
In addition, natural disasters, pandemic illness, acts of terrorism or violence, acts of war, equipment failures, power outages, disruptions to our information technology systems and networks or other unexpected events could result in physical damage to, and complete or partial closure of, one or more of our manufacturing facilities or distribution centers, temporary or long-term disruption in the supply of parts or component products and disruption and delay in the transport of our products to dealers and customers. If such events occur, our financial results might be negatively impacted. Our existing insurance and risk management arrangements may not protect against all costs that may arise from such events.
Furthermore, the potentially long-term physical impacts of climate change on our facilities, suppliers and customers and therefore on our operations are highly uncertain and will be driven by the circumstances developing in various geographical regions. These may include long-term changes in temperature and water availability. These potential physical effects may adversely impact the demand for our products and the cost, production, sales and financial performance of our operations.
Regulators in Europe and the U.S. have also focused efforts on increased disclosure related to climate change and mitigation efforts.
Changes in demand for food and alternative energy sources could impact our revenues. Changing worldwide demand for farm outputs to meet the world’s growing food and alternative energy demands, driven by a growing world population and government policies, including those related to climate change, are likely to result in fluctuating agricultural commodity prices, which affect sales of agricultural equipment. While higher commodity prices will benefit our crop producing agricultural equipment customers, higher commodity prices also result in greater feed costs for livestock and poultry producers, which in turn may result in lower levels of equipment purchased by these customers. Lower commodity prices directly affect farm income, which could negatively affect sales of agricultural equipment. Moreover, changing alternative energy demands may cause farmers to change the types or quantities of the crops they grow, with corresponding changes in equipment demands. Finally, changes in governmental policies regulating bio-fuel utilization could affect demand for our equipment and result in higher research and development costs related to equipment fuel standards.
International trade policies may impact demand for our products and our competitive position. Government policies on international trade and investment such as sanctions, import quotas, capital controls or tariffs, whether adopted by non-governmental bodies, individual governments or addressed by regional trade blocks, may affect the demand for our products, technology and services, impact the competitive position of our products or prevent us from being able to sell products to certain customers or in certain countries. The implementation of more protectionist trade policies, such as more detailed inspections, higher tariffs, or new barriers to entry, in countries where we sell products and provide services could negatively impact our business, results of operations and financial position. For example, a government’s adoption of trade sanctions or “buy national” policies or retaliation by another government against such policies could have a negative impact on our results of operations.
OPERATIONAL RISKS
We depend on suppliers for raw materials, parts and components. We rely upon many suppliers for raw materials, parts and components that we require to manufacture our products. We cannot guarantee that we will be able to maintain access to raw materials, parts and components, and in some cases, this access may be affected by factors outside of our control and the control of our suppliers. Certain components and parts used in our products are available from a single supplier and cannot be quickly sourced from other suppliers. Significant disruptions to the supply chain resulting from shortages of raw materials, components, and whole-goods can adversely affect our ability to meet customer demand. For example, during 2022, increases in demand have exacerbated significant disruptions to the global supply chain stemming from the COVID-19 pandemic, which have affected our ability to receive
certain materials and components on a timely basis and at anticipated costs. These supply chain disruptions have been caused and compounded by many factors, including changes in supply and demand, industry capacity constraints and labor shortages. Global logistics network challenges include ocean freight capacity constraints, international port delays, trucking and chassis shortages, railway and air freight capacity, and labor availability constraints, which have resulted in delays, shortages of key manufacturing components, increased order backlogs, and increased transportation costs. While we diligently monitor our supply chain risk and seek to respond promptly to address supply chain and logistics bottlenecks, there can be no assurance that our mitigation plans will be effective to prevent disruptions that may arise from shortages of materials that we use in the production of our products. Uncertainties related to the magnitude and duration of global supply chain disruptions have adversely affected, and may continue to adversely affect, our business and outlook.
We use a variety of raw materials in our businesses, including steel, aluminum, lead, resin and copper, and precious metals such as platinum, palladium and rhodium. The availability and price of these raw materials fluctuate, particularly during times of economic volatility or regulatory and geopolitical instability or in response to changes in tariffs, and while we seek to manage this exposure, we may not be successful in mitigating these risks. Further, increases in the prices for raw materials have resulted in and could continue to result in significant increases to our costs of production, which could have a material adverse effect on our business, results of operations and financial condition, particularly if we are unable to offset the increased costs through an increase in product pricing.
Our existing operations and expansion plans in emerging markets could entail significant risks. Our ability to grow our businesses depends to an increasing degree on our ability to increase market share and operate profitably worldwide and, in particular, in emerging market countries, such as Brazil, India, China, Argentina and Turkey. In addition, we could increase our use of suppliers located in such countries. Our implementation of these strategies will involve a significant investment of capital and other resources and exposes us to multiple and potentially conflicting cultural practices, business practices and legal requirements that are subject to change, including those related to tariffs, trade barriers, investments, property ownership rights, taxation, and sanction and export control requirements. For example, we may encounter difficulties in obtaining necessary governmental approvals in a timely manner. In addition, we may experience delays and incur significant costs in constructing facilities, establishing supply channels, and commencing manufacturing operations. Further, customers in these markets may not readily accept our products as compared with products manufactured and commercialized by our competitors. The emerging market countries may also be subject to a greater degree of economic and political volatility that could adversely affect our financial position, results of operations and cash flows. Many emerging market economies have experienced slower growth, volatility, and other economic challenges in recent periods and may be subject to a further slowdown in gross domestic product expansion and/or be impacted by domestic political or currency volatility, potential hyperinflationary conditions, and/or increase of public debt.
Dealer equipment sourcing and inventory management decisions could adversely affect our sales. We sell our products primarily through independent dealers and are subject to risks relating to their inventory management decisions and operating and sourcing practices. Our dealers carry inventories of finished products and parts as part of ongoing operations and adjust those inventories based on their assessment of future sales opportunities and market conditions, including the level of used equipment inventory. If our dealers’ inventory levels are higher than they desire, they may postpone product purchases from us, which could cause our sales to be lower than the end-user demand for our products and negatively impact our results. Similarly, our sales could be negatively impacted through the loss of time-sensitive sales if our dealers do not maintain inventory sufficient to meet customer demand. Further, dealers who carry other products that compete with our products may focus their inventory purchases and sales efforts on goods provided by other suppliers due to industry demand or profitability. Such inventory adjustments and sourcing decisions can adversely impact our sales, results of operations and financial condition.
Our results of operations may be adversely impacted by various types of claims, lawsuits, and other contingent obligations. In the ordinary course of business, we are involved in litigation and investigations on a wide range of topics, including securities law in the Netherlands and U.S., dealer and supplier litigation, intellectual property rights disputes, product warranty and defective product claims, product performance, asbestos, personal injury, regulatory and contract issues, indirect tax issues, and environmental claims. The industries in which we operate are also periodically reviewed or investigated by regulators, which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims. We are subject to regulation and oversight by securities regulatory authorities in a number of jurisdictions including the Netherlands, Italy and the United States. In the United States, we recently adopted on a voluntary basis the financial reporting standards and practices applicable to U.S. domestic issuers, which include certain incremental filing and reporting requirements. These additional obligations may increase the cost for ensuring compliance with the applicable reporting requirements and may subject us to an enhanced risk of regulatory investigations and private litigation. The ultimate outcome of these legal matters pending against us is uncertain, and although such legal matters are not expected individually to have a material adverse effect on our financial position or profitability, such legal matters could, in the aggregate, in the event of unfavorable resolutions thereof, have a material adverse effect on our results of operations and financial condition. Furthermore, we could in the future be subject to judgments or enter into settlements of lawsuits and claims that could have a material adverse effect on our results of operations in any particular period. In addition, while we maintain insurance coverage with respect to certain risks, we may not be able to obtain such insurance on acceptable terms in the future, if at all, and any such insurance may not provide adequate coverage against claims under such policies. We establish reserves based on our assessment of contingencies, including contingencies
related to legal claims asserted against us. Subsequent developments in legal proceedings may affect our assessment and estimates of the loss contingency recorded as a reserve and require us to make payments that exceed our reserves, which could have a material adverse effect on our results of operations and/or financial position. For further information see “Note 14: Commitments and Contingencies” to the consolidated financial statements for the year ended December 31, 2022 for additional information.
A cybersecurity breach could interfere with our operations, compromise confidential information, negatively impact our corporate reputation and expose us to liability. We rely upon information technology systems and networks, some of which are managed by third parties, in connection with a variety of our business activities. These systems include supply chain, manufacturing, distribution, invoicing and collection of payments from dealers or other purchasers of our products and from customers of our financial services business, and connectivity services with and among equipment. We use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. Additionally, we collect and store sensitive data, including intellectual property, proprietary business information and the proprietary information of our customers, suppliers and dealers, as well as personally identifiable information of our dealers, customers and employees, in data centers and on information technology networks. Operating these information technology systems and networks, and processing and maintaining this data, in a secure manner, are critical to our business operations and strategy. Increased information technology security threats (e.g. worms, viruses, malware, phishing attacks, ransomware, and other malicious threats) and more sophisticated computer crime pose a significant risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Cybersecurity attacks could also include attacks targeting customer data or the security, integrity and/or reliability of the hardware and software installed in our products.
While we actively manage information technology security risks within our control through security measures, business continuity plans and employee training around phishing and other cyber risks, our information technology networks and infrastructure have been and may be vulnerable to intrusion, attacks or disruptions or shutdowns due to attacks by cyber criminals, employee, supplier or dealer error or malfeasance or supply chain compromise.
A failure or breach in security, whether of our systems and networks or those of third parties on which we rely, could expose us and our customers, dealers and suppliers to risks of misuse of information or systems, the compromising of confidential information, loss of financial resources, manipulation and destruction of data, defective products, production downtimes and operations disruptions, which in turn could adversely affect our reputation, competitive position, businesses and results of operations. Security breaches could also result in litigation, regulatory action, unauthorized release of confidential or otherwise protected information and corruption of data, as well as remediation costs and higher operational and other costs of implementing further data protection measures. In addition, as security threats continue to evolve, we may need to invest additional resources to protect the security of our systems and data. The amount or scope of insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack.
Security breaches with respect to our products could interfere with our business and our dealers, and/or customers, exposing us to liability that would cause our business and reputation to suffer. Some of our products include connectivity hardware typically used for telematics services and remote system updates. While we have implemented security measures intended to prevent unauthorized access to these products, malicious actors have reportedly attempted, and may attempt in the future, to gain unauthorized access to such products including through such connectivity hardware in order to gain control of the products, change the products’ functionality, user interface, or performance characteristics, or gain access to data stored in or generated by the products. Any unauthorized access to or control of our products or systems or any loss of data could result in legal claims against us or government investigations. In addition, reports of unauthorized access to our products, systems, and data, regardless of their veracity, may result in the perception that the products, systems, or data are capable of being hacked, which could harm our brands, prospects, and operating results.
We face risks associated with our employment relationships. In many countries where we operate, our employees are protected by laws and/or collective labor agreements that guarantee them, through local and national representatives, the right of consultation on specific matters, including repurposing, downsizing or closure of production facilities and reductions in personnel. Laws and/or collective labor agreements applicable to us could impair our flexibility in reshaping and/or strategically repositioning our business activities. Therefore, our ability to efficiently deploy personnel or implement permanent or temporary redundancy measures is subject to government approvals and/or the agreement of labor unions where such laws and agreements are applicable. Furthermore, the failure of the Company to successfully renegotiate labor agreements as they expire from time to time led, and could in the future lead, to work interruption or stoppage. Any strike, work stoppage, or other dispute with labor unions distracts management from operating the business, may affect the Company's reputation, could significantly impact the volume of products we manufacture and sell, which could have a material adverse effect on our business, results of operations and financial condition. In addition, the COVID-19 pandemic has resulted in material changes in how and where employees work.
Our ability to execute our strategy is dependent upon our ability to attract, develop and retain qualified personnel. Our ability to compete successfully, to manage our business effectively, to expand our business and to execute our strategic direction, depends, in part, on our ability to attract, motivate and retain qualified personnel in key functions and markets. In particular, we are dependent on our ability to attract, motivate and retain qualified personnel with the requisite education, skills, background, talents and industry
experience. Failure to attract and retain qualified personnel, whether as a result of an insufficient number of qualified applicants, difficulty in recruiting new personnel, or the inability to integrate and retain qualified personnel, could impair our ability to execute our business strategy and meet our business objectives. These may be affected by the loss of employees, particularly when departures involve larger numbers of employees. Higher rates of employee separations may adversely affect us through decreased employee morale, the loss of knowledge of departing employees, and the devotion of resources to recruiting and onboarding new employees.
COMPLIANCE RISKS
We are subject to increasingly stringent and evolving laws that impose significant compliance costs. We are subject to comprehensive and constantly evolving laws, regulations and policies in numerous jurisdictions around the world. We expect the extent of legal requirements affecting our businesses and our costs of compliance to continue to increase in the future. Such laws govern, among other things, products - with requirements on emissions of polluting gases and particulate matter, increased fuel efficiency and safety becoming increasingly strict - and industrial plants - with requirements for reduced air emissions, treatment of waste and water, and prohibitions on soil contamination also becoming increasingly strict. To comply with such laws, we make significant investments in research and development and capital expenditures and expect to continue to incur substantial costs in the future. Failure to comply with such laws could limit or prohibit our ability to sell our products in a particular jurisdiction, expose us to penalties or clean-up costs, civil or criminal liability and sanctions on certain of our activities, as well as damage to property or natural resources. Liabilities, sanctions, damages and remediation efforts related to any non-compliance with such laws, including those that may be adopted or imposed in the future, could negatively impact our ability to conduct our operations and our results of operations and financial condition. In addition, there can be no assurance that we will not be adversely affected by costs, liabilities or claims with respect to any subsequently acquired operations.
Further, environmental, health and safety regulations change from time to time, as may related interpretations and other guidance. For example, changes in environmental and climate change laws, including laws relating to engine and equipment emissions, safety regulations, fuel requirements, restricted substances, or greenhouse gas emissions, could lead to new or additional investments in product designs to comply with these regulations. Our internal combustion engines are mainly supplied by FPT S.p.A., a company controlled by Iveco N.V., and compliance with emissions regulations is contractually allocated to our suppliers. Failure of our suppliers to ensure compliance with the applicable regulations may result in our Company be subject to administrative and legal proceedings and other material consequences. Further, we may experience production delays if our suppliers are unable design and manufacture components for our products that comply with environmental standards. For instance, as we are required to meet more stringent engine emission reduction standards that are applicable to engines we incorporate into our products, we expect to meet these requirements through the introduction of new technology to our products, engines and exhaust after-treatment systems, as necessary. Failure to meet applicable requirements could materially affect our performance.
Changes to existing laws and regulations or changes to how they are interpreted or the implementation of new, more stringent laws or regulations could adversely affect our business by increasing compliance costs, limiting our ability to offer a product or service, requiring changes to our business practices, or otherwise making our products and services less attractive to customers. For example, so-called “right to repair” legislation proposals in certain states and at the federal level in the U.S. could require us to provide access to the software code embedded in our products, which, among other harmful consequences, could create product safety issues, compromise engine emissions and performance controls, adversely affect the protection of our intellectual property, and limit our ability to recoup necessary investments in innovation and research and development.
We are subject to extensive laws and regulations, the violation of which could expose CNH Industrial to potential liabilities, increased costs and other adverse effects. Due to the global scope of our operations, we are subject to many laws and regulations that apply to our operations around the world, including the U.S. Foreign Corrupt Practices Act, and the U.K. Bribery Act, as well as a range of national anti-corruption and antitrust or competition laws that apply to conduct in a particular jurisdiction. These anti-corruption laws prohibit improper payments in cash or anything of value to improperly influence third parties to obtain or retain business or gain a business advantage. These laws tend to apply regardless of whether those practices are legal or culturally acceptable in a particular jurisdiction. Over the past several years there has been an increase in the enforcement of anti-corruption and antitrust or competition laws both globally and in particular jurisdictions and we have from time to time been subject to investigations and charges claiming violations of anti-corruption or antitrust or competition laws. We are committed to operating in compliance with all applicable laws, in particular, anti-corruption and antitrust or competition laws. We have implemented a program to promote compliance with these laws and to reduce the likelihood of potential violations. Our compliance program, however, may not in every instance protect us from acts committed by our employees, agents, contractors, or collaborators that may violate the applicable laws or regulations of the jurisdictions in which we operate. Such improper actions could subject us to civil or criminal investigations and monetary, injunctive and other penalties as well as damage claims. Investigations of alleged violations of these laws tend to be expensive and require significant management time and attention, and these investigations of purported violations, as well as any publicity regarding potential violations, could harm our reputation and have a material adverse effect on our business, results of operations and financial position. For further information see "Note 14: Commitments and Contingencies” to the consolidated financial statements at December 31, 2022.
Changes in privacy laws could disrupt our business. The regulatory framework for privacy and data security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. We collect personal information and other data as part of our business operations. This data is subject to a variety of U.S. and foreign laws and regulations. For example, the European Union's General Data Protection Regulation imposes more stringent data protection requirements and provides for significant penalties for noncompliance. New privacy laws will continue to come into effect around the world. We may be required to incur significant costs to comply with these and other privacy and data security laws, rules and regulations. Any inability to adequately address privacy and security concerns or comply with applicable privacy and data security laws, rules and regulations could have an adverse effect on our business prospects, results of operations and/or financial position.
New regulations or changes in financial services regulations could adversely impact us. Our Financial Services’ operations are highly regulated by governmental and banking authorities in the locations where we operate, which can impose significant additional costs and/or restrictions on our business. In the U.S., for example, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), including its regulations, as well as other efforts at regulatory reform in financial services may substantially affect the origination, servicing, and securitization programs of our Financial Services segment as well as limit the ability of our customers to enter into hedging transaction or finance purchases of our equipment. The Dodd-Frank Act also strengthens the regulatory oversight of these securities and related capital market activities by the SEC and increases the regulation of the ABS markets through, among other things, a mandated risk retention requirement for securitizers and a direction to regulate credit rating agencies. Future regulations may affect our ability to engage in these capital market activities or increase the effective cost of such transactions, which could adversely affect our financial position, results of operations and cash flows.
FINANCIAL AND TAXATION RISKS
Difficulty in obtaining financing or refinancing existing debt could impact our financial performance. Our performance will depend on, among other things, our ability to finance debt repayment obligations and planned investments from operating cash flow, available liquidity, the renewal or refinancing of existing bank loans and/or facilities and access to capital markets or other sources of financing. A decline in revenues could have a negative impact on the cash-generating capacity of our operations. Consequently, we could find ourselves in the position of having to seek additional financing and/or having to refinance existing debt, including in unfavorable market conditions with limited availability of funding and a general increase in funding costs. Instability in global capital markets, including market disruptions, limited liquidity and interest rate and exchange rate volatility, could reduce our access to capital markets or increase the cost of our short and long-term financing. Any difficulty in obtaining financing could have a material adverse effect on our business, results of operations and financial position.
Our ability to access the capital markets or other forms of financing and related costs are highly dependent on, among other things, the credit ratings of CNH Industrial N.V., its subsidiaries, ABS and other debt instruments. Rating agencies may review and revise their ratings from time to time, and any downgrade or other negative action with respect to our credit ratings by one or more rating agencies may increase our cost of capital, potentially limit our access to sources of financing, and have a material adverse effect on our business, results of operations and financial condition.
We are subject to exchange rate fluctuations, interest rate changes and other market risks. We operate in numerous markets worldwide and are exposed to market risks stemming from fluctuations in currency and interest rates, including as a result of changes in monetary or fiscal policies of governmental authorities from time to time. We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which we earn revenues. In addition, the reporting currency for our Consolidated Financial Statements is the U.S. dollar. Certain of our assets, liabilities, expenses and revenues are denominated in other currencies. Those assets, liabilities, expenses and revenues are translated into the U.S. dollar at the applicable exchange rates to prepare our Consolidated Financial Statements. Therefore, increases or decreases in exchange rates between the U.S. dollar and those other currencies affect the value of those items reflected in our Consolidated Financial Statements, even if their value remains unchanged in their original currency. Changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations and financial condition.
We use various forms of financing to cover the funding requirements of our Industrial Activities and for financing offered to customers and dealers by Financial Services. Financial Services normally implements a matching policy to offset the impact of differences in interest rates on the financed portfolio and related liabilities. Nevertheless, any future changes in interest rates can result in increases or decreases in revenues, finance costs and margins.
Although we seek to manage our currency risk and interest rate risk, including through hedging activities, there can be no assurance that we will be able to do so successfully, and our business, results of operations and financial position could be adversely affected. In addition, by utilizing these instruments, we potentially forego the benefits that may result from favorable fluctuations in currency exchange and interest rates. For additional information, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.” to the consolidated financial statements at December 31, 2022.
We also face risks from currency devaluations. Currency devaluations result in a diminished value of funds denominated in the currency of the country suffering the devaluation.
Because Financial Services provides financing for a significant portion of our sales worldwide, our operations and financial results could be impacted materially should negative economic conditions affect the financial services industry. Negative economic conditions can have an adverse effect on the financial services industry in which Financial Services operates. Financial Services, through wholly-owned financial services companies and joint ventures, provides financing for a significant portion of our sales worldwide. Financial Services may experience credit losses that exceed its expectations and adversely affect its financial condition and results of operations. Financial Services’ inability to access funds at cost-effective rates to support its financing activities could have a material adverse effect on our business. Financial Services’ liquidity and ongoing profitability depend largely on timely access to capital in order to meet future cash flow requirements and to fund operations and costs associated with engaging in diversified funding activities. Additionally, negative market conditions could reduce customer confidence levels, resulting in declines in credit applications and increases in delinquencies and default rates, which could materially impact Financial Services’ write-offs and provision for credit losses. Financial Services may also experience residual value losses that exceed its expectations caused by lower pricing for used equipment and higher than expected equipment returns at lease maturity.
We are subject to interest rate risks and changes in interest rates can reduce demand for equipment, adversely affect the interest margins in our Financial Services segment, and limit access to capital markets while increasing borrowing costs. Rising interest rates could have a dampening effect on overall economic activity as well as on the financial health of our customers, either of which could negatively affect customer demand for our products and services as well as customers’ ability to service any financing provided by our Financial Services segment. In addition, credit market dislocations could have an impact on funding costs, which in turn may make it more difficult for our Financial Services Segment to offer customers competitive financing rates. While we aim to limit the exposure of our net financial assets to changes in prevailing interest rates, interest rates volatility could have an adverse effect on our net interest rate margin -i.e., the difference between the yield we earn on assets and the interest rates we pay. Actions by credit rating agencies, such as downgrades or negative changes to ratings outlooks, can affect the availability and cost of funding for the Company and can increase the Company’s cost of capital and hurt its competitive position.
An increase in delinquencies or repossessions could adversely affect the results of Financial Services. Fundamental in the operation of Financial Services is the credit risk associated with its customers/borrowers. The creditworthiness of each customer, rates of delinquency and default, repossessions and net losses on loans to customers are impacted by many factors, including: relevant industry and general economic conditions; the availability of capital; the terms and conditions applicable to extensions of credit; the experience and skills of the customer’s management team; commodity prices; political events, including government mandated moratoria on payments; weather; and the value of the collateral securing the extension of credit. An increase in delinquencies or defaults, or a reduction in repossessions could have an adverse impact on the performance of Financial Services and our earnings and cash flows. In addition, although Financial Services evaluates and adjusts its allowance for credit losses related to past due or non-performing receivables on a regular basis, adverse economic conditions or other factors that might cause deterioration of the customers' financial health could change the timing and level of payments received and thus necessitate an increase in Financial Services’ reserves for estimated losses, which could have a material adverse effect on Financial Services’ and our results of operations and cash flows.
We may be exposed to shortfalls in our pension plans. At December 31, 2022, the funded status for our defined benefit pension, healthcare and other post-employment benefit plans was a deficit of $408 million. The funded status is subject to many factors, as discussed in “Management's Discussion and Analysis of Financial Conditions and Results of Operation-Critical Accounting Estimates-Pension and Other Post-employment Benefits,” as well as “Note 12: Employee Benefit Plans and Postretirement Benefits” to the consolidated financial statements for the year ended December 31, 2022.
To the extent that our obligations under a plan are unfunded or underfunded, we will have to use cash flows from operations and other sources to pay our obligations as they become due. In addition, since the assets that currently fund these obligations are primarily invested in debt instruments and equity securities, the value of these assets is subject to changes due to market fluctuations.
We have significant outstanding indebtedness, which may limit our ability to obtain additional funding and may limit our financial and operating flexibility. As of December 31, 2022, we had an aggregate of $22,962 million (including $18,941 million relating to Financial Services’ activities) of consolidated gross indebtedness, and our equity was $6,927 million, including non-controlling interests. The extent of our indebtedness could have important consequences on our operations and financial results, including:
▪we may not be able to secure additional funds for working capital, capital expenditures, debt service requirements or general corporate purposes;
▪we may need to use a portion of our projected future cash flow from operations to pay principal and interest on our indebtedness, which may reduce the amount of funds available to us for other purposes;
▪we may be more financially leveraged than some of our competitors, which could put us at a competitive disadvantage;
▪we may not be able to invest in the development or introduction of new products or new business opportunities;
▪our future cash flow may be exposed to the risk of interest rate volatility (see above);
▪we may not be able to adjust rapidly to changing market conditions, which may make us more vulnerable to a downturn in general economic conditions; and
▪we may not be able to access the capital markets on favorable terms, which may adversely affect our ability to provide competitive retail and wholesale financing programs.
These risks are exacerbated by the ongoing volatility in the financial markets, in part resulting from perceived strains on the finances and creditworthiness of several governments and financial institutions, particularly in the European Union and South America, and from continued concerns about global economic growth, particularly in emerging markets.
Further, due to the cessation of the London Interbank Offered Rate (“LIBOR”), the Company has entered into financial transactions such as credit agreements and certain derivative transactions that use the relevant new benchmark rates. These new benchmark rates are calculated differently from LIBOR and have inherent differences, which could give rise to uncertainties, including the limited historical data and volatility in the benchmark rates. The full effects of the transition to these new benchmark rates remain uncertain.
Restrictive covenants in our debt agreements could limit our financial and operating flexibility. The agreements governing our outstanding debt securities and other credit agreements to which we are a party from time to time contain, or may contain, covenants that restrict our ability to, among other things:
▪incur additional indebtedness by certain subsidiaries;
▪make certain investments;
▪enter into certain types of transactions with affiliates;
▪sell or acquire certain assets or merge with or into other companies; and/or
▪use assets as security in other transactions.
Although we do not believe any of these covenants materially restrict our operations currently, a breach of one or more of the covenants could result in adverse consequences that could negatively impact our businesses, results of operations, and financial position. These consequences may include the acceleration of amounts outstanding under certain of our credit facilities, triggering an obligation to redeem certain debt securities, termination of existing unused commitments by our lenders, refusal by our lenders to extend further credit under one or more of the facilities or to enter into new facilities or the lowering or modification of CNH Industrial’s credit ratings or those of one or more of its subsidiaries. For further information, see “Note 10: Debt” to the consolidated financial statements for the year ended December 31, 2022 for additional information.
CNH Industrial N.V. operates and will continue to operate, as a company that is resident in the U.K. for tax purposes; other tax authorities may treat CNH Industrial N.V. as being tax resident elsewhere. CNH Industrial N.V. is not incorporated in the U.K.; therefore, in order to be resident in the U.K. for tax purposes, CNH Industrial N.V.’s central management and control must be located (in whole or in part) in the U.K. The test of central management and control is largely a question of fact based on all the circumstances. The decisions of the U.K. courts and the published practice of His Majesty’s Revenue & Customs, or HMRC, suggest that CNH Industrial N.V. should be regarded as being U.K.-resident on this basis. The competent authority ruling referred to below supports this analysis. Although CNH Industrial N.V.’s “central management and control” is in the U.K., it would not be treated as U.K.-resident if (a) CNH Industrial N.V. were concurrently resident in another jurisdiction (applying the tax residence rules of that jurisdiction) which has a double tax treaty with the U.K.; and (b) that tax treaty allocates exclusive residence to that other jurisdiction.
Although CNH Industrial N.V.’s central management and control is in the U.K., CNH Industrial N.V. is considered to be resident in the Netherlands for Dutch corporate income tax and Dutch dividend withholding tax purposes because CNH Industrial N.V. is incorporated in the Netherlands. The U.K. and Dutch competent authorities have agreed, following a mutual agreement procedure (as contemplated by the Netherlands-U.K. tax treaty), that CNH Industrial will be regarded as solely resident in the U.K. for purposes of the application of the Netherlands-U.K. tax treaty provided that CNH Industrial operates as planned and provides appropriate required evidence to the U.K. and Dutch competent tax authorities. If the facts upon which the competent authorities issued this ruling change over time, this ruling may be withdrawn or cease to apply and in that case the Netherlands may levy corporate income tax on CNH Industrial N.V. and impose withholding taxes on dividends distributed by CNH Industrial N.V.,which could have a material adverse effect on our results of operations and financial condition.
CNH Industrial N.V.’s residence for Italian tax purposes is also largely a question of fact based on all the circumstances. CNH Industrial N.V. has a management and organizational structure such that CNH Industrial N.V. should not be deemed resident in Italy under Italian domestic law except to the extent of CNH Industrial N.V.'s Italian branch, and should be deemed resident exclusively in the U.K. from the date of its incorporation for purposes of the Italy-U.K. tax treaty. Because this analysis is highly factual and may depend on future changes in CNH Industrial’s management and organizational structure, there can be no assurance regarding the final determination of its tax residence. Should CNH Industrial N.V. be treated as an Italian tax resident, CNH Industrial would be subject to corporate income tax in Italy on its worldwide income and may be required to comply with withholding tax on dividends and other
distributions and/or reporting obligations under Italian law, which could result in additional costs and expenses, which may have a material adverse effect on our results of operations and financial condition.
Tax may be required to be withheld from dividend payments. The U.K. does not require U.K. tax-resident companies to withhold tax from dividend payments (except in circumstances that are not relevant to CNH Industrial). Although the U.K. and Dutch competent authorities have ruled that we should be treated as solely resident in the U.K. for the purposes of the Netherlands-U.K. double tax treaty, dividend payments made by us to Dutch residents are still subject to Dutch dividend withholding tax under Dutch domestic law and we have no obligation to gross-up or pay additional amounts in respect of such dividend payments. This position with respect to dividend withholding is contingent upon CNH Industrial’s maintenance of its exclusive U.K. tax residency and is subject to any future change of law.
In the case that withholding taxes are imposed on future dividends or distributions with respect to our common shares due to a change in law or for any other reason, whether such withholding taxes are creditable against a tax liability to which a shareholder is otherwise subject depends on the laws of such shareholder’s jurisdiction and such shareholder’s particular circumstances. Shareholders are urged to consult their tax advisors in respect of the consequences of the potential imposition of withholding taxes.
The Company could be characterized as a passive foreign investment company (PFIC) for U.S. federal income tax purposes The U.S. federal income tax rules provide specific tax rules applicable to shareholders in companies that meet the definition of a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. We believe that the Company is not a passive foreign investment company, but this conclusion is a factual determination made annually and may be subject to change. U.S. Holders of our ordinary shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company.
We may incur additional tax expense or become subject to additional tax exposure. We are subject to income taxes, as well as non-income-based taxes, in various jurisdictions in which we operate around the world. Our tax liabilities are dependent upon the mix of earnings among these different jurisdictions. Our future results of operations could be adversely affected by changes in the consolidated effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in our overall profitability, changes to our transfer pricing approach, changes in tax legislation and rates, changes in generally accepted accounting principles and changes in the valuation of deferred tax assets and liabilities. If our effective tax rates were to increase, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued or paid, our operating results, cash flows, and financial position could be adversely affected. We are also subject to ongoing tax audits in the various jurisdictions in which we operate. Tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on our business, results of operations, financial condition, and cash flows, see Management's Discussion and Analysis of Financial Condition and Results of Operations - Taxation.
RISKS RELATED TO OUR COMMON SHARES
Our maintenance of two exchange listings may adversely affect liquidity in the market for our common shares and could result in pricing differentials of our common shares between the two exchanges. The dual listing of our common shares on the New York Stock Exchange (NYSE) and the Euronext Milan (previously named MTA) may split trading between the two markets and adversely affect the liquidity of the shares in one or both markets and the development of an active trading market for our common shares on the NYSE and may result in price differentials between the exchanges. Differences in the trading schedules, trading volume and investor bases, as well as volatility in the exchange rate between the two trading currencies, among other factors, may result in different trading prices for our common shares on the two exchanges or otherwise adversely affect liquidity and trading prices of our shares. On February 1, 2023, the Company announced that it believes that its shareholders will be best served by a single stock listing on the NYSE and that we are monitoring the ongoing initiatives of harmonization and simplification of the legal and regulatory framework of the Italian financial system that could allow for a smooth transition to a single listing on the NYSE. There can be no assurance that these initiatives will be completed or as beneficial as anticipated, in which case the company will have to pursue other avenues to achieve the single listing on the NYSE. There can be also no assurance or that the estimated efficiency will be realized as anticipated or at all. As a result, our stock price might be more volatile than it would be if it was listed on a single stock exchange.
The loyalty voting program may affect the liquidity of our common shares and reduce our share price. CNH Industrial’s loyalty voting program was established to reward shareholders for maintaining long-term share ownership by granting at inception initial shareholders and subsequently any other person holding shares continuously for at least three years, the option to elect to receive special voting shares. Issuance of special voting shares is subject to various conditions set forth in the Company's constituting documents, including the registration of the common shares held by each shareholder requesting the issuance of special voting shares in the CNH Industrial Loyalty Register. Special voting shares have minimal economic entitlements and cannot be traded. In the event any shareholder holding such special voting shares intends to transfer its common shares from the CNH Industrial Loyalty Register, immediately prior to such transfer, any corresponding special voting shares shall be transferred to CNH Industrial for no consideration (om niet). This loyalty voting program is designed to encourage a stable shareholder base and, conversely, it may deter trading by
those shareholders who are interested in gaining or retaining special voting shares. Therefore, the loyalty voting structure may reduce liquidity in our common shares and adversely affect their trading price.
The loyalty voting program may prevent or frustrate attempts by our shareholders to change our management and hinder efforts to acquire a controlling interest in us, and the market price of our common shares may be lower as a result. The provisions of our Articles of Association establishing the loyalty voting program may make it more difficult for a third party to acquire, or attempt to acquire, control of us, even if a change of control is considered favorably by shareholders holding a majority of our common shares. As a result of the loyalty voting program, a relatively large proportion of the voting power of our common shares could be concentrated in a relatively small number of shareholders who would have significant influence over us. As of January 31, 2023, EXOR N.V. had a voting interest in CNH Industrial of approximately 42.8%. For further information, see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” to the consolidated financial statements at December 31, 2022. Such shareholders participating in the loyalty voting program could effectively prevent change of control transactions that may otherwise benefit our shareholders.
The loyalty voting program may also prevent or discourage shareholders’ initiatives aimed at changes in our management.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

---

ITEM 2. PROPERTIES
Item 2. Properties
As of December 31, 2022, we owned 43 manufacturing facilities. We also own other significant properties including spare parts depots, research laboratories, test tracks, warehouses, and office buildings. We consider each of our facilities to be in good condition and adequate for its present use. We believe that we have sufficient capacity to meet our current and anticipated manufacturing requirements.
The following table provides information about our manufacturing and engineering facilities as of December 31, 2022:
Location Primary Functions Approximate Covered
Area (Sqm/ 000)
Italy
San Piero in Bagno Earthmoving machines 14
Jesi Tractors 77
Lecce Wheel loaders, compact track loaders, telehandlers; graders; R&D center 130
Modena Components 102
S. Matteo R&D center 51
Cesena Earthmoving machines 8
United States
Benson Sprayers, cotton harvesting; R&D center 41
Burlington Backhoe loaders, forklift trucks; R&D center 91
Burr Ridge R&D center 44
Fargo Tractors, wheeled loaders; R&D center 88
Goodfield Soil management equipment; R&D center 39
Grand Island Tractors and combines 128
Mt. Joy R&D center 11
Mt. Vernon Tracks; R&D center 7
New Holland Hay & Forage; R&D center 104
Racine Tractors, transmissions 105
Sioux Falls Ag Assembly Mfg, Repair Shop, Training and R&D center 23
St. Nazianz Self-propelled sprayers 24
Wichita Skid steer loaders; R&D center 46
Wautoma Components 2
Sioux Falls Precision Agriculture 16
Scottsdale (Phoenix) R&D Digital 1
Ames R&D 1
Wakarusa R&D Service 1
Rapid City R&D 1
Brookings R&D 1
France
Coex Grape Harvesters; R&D center 26
Croix Cabins 12
Brazil
Belo Horizonte (Contagem) Crawler excavators, crawler dozers, wheel loaders, graders, backhoe loaders; R&D center 58
Curitiba Combines and tractors; R&D center 117
Piracicaba Sugar cane harvesters, coffee harvesters, sprayers; R&D center 23
Sorocaba Combines and other Agriculture; R&D center 188
China
Harbin Combines, tractors, balers; R&D center 121
Urumqi Cotton pickers 10
Kunshan Manufacturing 8
Belgium
Antwerp Components 77
Zedelgem Combines, forage harvesters and balers; R&D center 154
India
Noida Tractors; R&D center 95
Pithampur Backhoe loaders, earth compactors, crawler excavator; R&D center 45
Pune Sugar cane harvesters and combines; R&D center 80
Poland
Kutno Row crop, cultivators, harvesters; R&D center 33
Plock Combines, balers and headers; R&D center 129
Others
Cordoba (Argentina) Tractors and combines 35
St. Valentin (Austria) Tractors; R&D center 53
Cowra (Australia) Tillage; R&D center 6
Mannum (Australia) Seeding & Tillage 17
Saskatoon (Canada) Sprayers, seeders; R&D center 61
Queretaro (Mexico) Components 15
Wieringerwerf (Netherlands) Ag Assembly Mfg 2
Överum (Sweden) Ploughs; R&D center 49
Basildon (United Kingdom) Tractors; R&D center 129

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
As a global company with a diverse business portfolio, CNH Industrial in the ordinary course of business is exposed to numerous legal risks, including, without limitation, dealer and supplier litigation, intellectual property right disputes, product warranty and defective product claims, product performance, asbestos, personal injury, emissions and/or fuel economy regulatory and contractual issues, competition law and other investigations and environmental claims. The most significant of these matters are described in “Note 14: Commitments and Contingencies” to our Consolidated Financial Statements for the year ended December 31, 2022.
The outcome of any current or future proceedings, claims, or investigations cannot be predicted with certainty. Adverse decisions in one or more of these proceedings, claims or investigations could require CNH Industrial to pay substantial damages or fines or undertake service actions, recall campaigns or other costly actions. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers’ compensation payments and could affect CNH Industrial’s financial position and results.
Although the ultimate outcome of legal matters pending against CNH Industrial and its subsidiaries cannot be predicted, management believes the reasonable possible range of losses for these unresolved legal matters in addition to the amounts accrued would not have a material effect on our Consolidated Financial Statements.
We maintain insurance with third party insurers to cover various risks arising from our business activities including, but not limited to, risk of loss or damage to our assets or facilities, business interruption losses, general liability, automobile liability, product liability and directors' and officers' liability insurance. We believe that we maintain insurance coverage that is customary in our industry. Until 2022, we used a broker that is a subsidiary of Stellantis N.V. ("Stellantis", formerly Fiat Chrysler Automobiles N.V. which, effective January 16, 2021, merged with Peugeot S.A. by means of a cross-border legal merger) to place a portion of our insurance coverage. Starting with the placement of the 2023 insurance coverage, we have moved to a third-party broker.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosure
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Listing Information
CNH Industrial N.V. common stock is listed on the New York Stock Exchange in the United States and on Euronext Milan, in Italy under the symbol "CNHI".
Number of Shareholders
At January 31, 2023, there were 408 registered holders of our common stock in the U.S., including 124 shareholders that hold special voting shares associated with their common shares. This number does not include stockholders who hold their stock through brokers, banks and other nominees or hold their shares outside of the United States.
Stock Performance Graph
The following graph compares the cumulative total shareholder return on our Common Stock with the total return on the S&P 500 Index and the S&P 500 Industrials Index for the five year period ended December 31, 2022. It shows the growth of a $100 investment on December 31, 2017, including the reinvestment of all dividends.
Base Period Years Ending
Company/Index 2017 2018 2019 2020 2021 2022
CNH Industrial $ 100 $ 70 $ 85 $ 99 $ 151 $ 146
S&P 500 $ 100 $ 96 $ 126 $ 149 $ 192 $ 157
S&P 500 Industrials $ 100 $ 87 $ 112 $ 125 $ 151 $ 143
Dividends
CNH Industrial’s dividend policy permits annual dividends of between 25-35% of its consolidated net income in any one year. In line with its dividend policy, on February 2, 2023, CNH Industrial announced that its Board of Directors intends to recommend and propose to the Company’s shareholders a dividend of €0.36 per common share, totaling approximately €483 million (equivalent to approximately $511 million) subject to the approval of the Company's shareholders. While the Company currently expects a cash dividend to be paid in the future, future dividend payments will depend on the Company's earnings, capital requirements, financial condition, and other factors considered relevant by the Company's Board of Directors.
Issuer Purchases of Equity Securities
On September 19, 2022, CNH Industrial N.V. announced the launch of the first tranche of $50 million share buyback in the framework of its $300 million share buyback program, previously approved on July 28, 2022. The Company’s purchases of its common shares under the buy-back program during the three months ended December 31, 2022 were as follows:
Period Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Average Price Paid per Share (€) Average Price Paid per Share ($)(1) Approximate USD Value of Shares that May Yet Be Purchased under the Plans or Programs
($)
10/1/2022 - 10/31/2022 2,548,970 12.26 12.01 8,608,488
11/1/2022 -11/30/2022 398,262 14.48 15.02 2,626,593
12/1/2022 - 12/31/2022 - - - 2,626,593
Total 2,947,232 2,626,593
1) Share repurchases are made on Euronext Milan and have been translated from Euros at the exchange rate reported by the European Central Bank on the respective transaction dates.
Other Shareholder Matters
Taxation
Nothing within this section should be considered or relied upon as tax advice. Rather, all prospective purchasers and holders of CNH Industrial stock, regardless of their country of residency, should consult their own tax advisors regarding the U.S. federal, state, local and foreign tax consequences of owning and disposing of CNH Industrial stock based upon their particular circumstances.
Taxation of Loyalty Voting Program
The Company maintains a Loyalty Register which provides for special voting shares to reward long-term ownership of the Company’s common shares and to promote stability of its shareholder base, as further defined in Note 16 to the Financial Statements.
The tax consequences to Shareholders of owning special voting shares are uncertain because no statutory, judicial or administrative authority directly discusses how the receipt, ownership or disposition of special voting shares should be treated for tax purposes.
U.S. Passive Foreign Investment Company (PFIC)
The U.S. federal income tax rules provide specific tax rules applicable to shareholders in companies that meet the definition of a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. CNH Industrial believes that shares of its stock are not stock of a PFIC, but this conclusion is a factual determination made annually and thus may be subject to change. U.S. Holders of our ordinary shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company.
Material U.K. Tax Consequences
This section summarizes the material U.K. tax consequences of the ownership of CNH Industrial common shares for U.S. Shareholders. It is intended only as a general guide and does not purport to be a complete analysis of all potential U.K. tax consequences of holding CNH Industrial common shares. This section is based on current U.K. tax law and what is understood to be the current practice of H.M. Revenue and Customs, as well as applicable tax treaties, as of the date of this form. This law and practice and these treaties are subject to change, possibly on a retroactive basis.
This section applies only to shareholders of CNH Industrial that are U.S. Shareholders, that are not resident or domiciled in the U.K., that hold their shares as an investment, and that are the absolute beneficial owner of both the shares and any dividends paid on the shares. This section does not apply to members of any special class of shareholders subject to special rules, such as:
•a pension fund;
•a charity;
•persons acquiring their shares in connection with an office or employment;
•a dealer in securities;
•an insurance company; or
•a collective investment scheme.
In addition, this section may not apply to:
•any shareholders that, either alone or together, with one or more associated persons, such as personal trusts and connected persons, control directly or indirectly at least 10% of the voting rights or of any class of share capital of CNH Industrial; or
•any person holding shares as a borrower under a stock loan or an interim holder under a repurchase agreement.
Taxation of Dividends
Withholding from dividend payments
Under U.K. domestic law, dividend payments on CNH Industrial common shares may be made without withholding or deduction for or on account of U.K. income tax.
Non-U.K. - Resident Shareholders
A shareholder of CNH Industrial common shares that is not resident in the U.K. for U.K. tax purposes will not be liable to account for income or corporation tax in the U.K. on dividends paid on the shares unless the shareholder carries on a trade (or profession or vocation) in the U.K. and the dividends are either a receipt of that trade (or profession or vocation) or, in the case of U.K. corporation tax, the shares are held by or for a U.K. permanent establishment through which the trade is carried on.
Taxation of Capital Gains
Non-U.K. - Resident Shareholders
As long as CNH Industrial does not maintain any share register in the U.K., the disposal of CNH Industrial common shares by a shareholder that is not resident in the U.K. for tax purposes (other than individuals temporarily non-resident in the U.K. for a period of less than five complete tax years) will not give rise to a chargeable gain or allowable loss.
Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)
As long as CNH Industrial does not maintain any share register in the U.K., (i) U.K. stamp duty will not normally be payable in connection with a transfer of common shares, provided that the instrument of transfer is executed and retained outside the U.K. and no other action is taken in the U.K. by the transferor or transferee, and (ii) no U.K. SDRT will be payable in respect of any agreement to transfer CNH Industrial common shares.
Tax Consequences of Participating in the Loyalty Voting Program
A non-U.K.-resident shareholder that would not be subject to tax on dividends or capital gains in respect of CNH Industrial common shares will not be subject to U.K. tax in respect of the special voting shares.
As long as CNH Industrial does not maintain any share register in the U.K., no liability to U.K. stamp duty or SDRT will arise to shareholders on the issue or repurchase of special voting shares.
Netherlands Taxation
This section summarizes solely the principal Dutch tax consequences of the acquisition, the ownership and the disposal of CNH Industrial common shares and / or special voting shares, by Non-Resident holders of such shares (as defined below). It does not purport to describe every aspect of Dutch taxation that may be relevant to a particular holder of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares. Tax matters are complex, and the tax consequences to a particular holder of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares, will depend in part on such holder’s circumstances. Shareholders and any potential inventor should consult their own tax advisors regarding the Dutch tax consequences of acquiring, owning and disposing of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares in their particular circumstances.
Where in this summary English terms and expressions are used to refer to Dutch concepts, the meaning to be attributed to such terms and expressions shall be the meaning to be attributed to the equivalent Dutch concepts under Dutch tax law. Where in this section the terms “the Netherlands” and “Dutch” are used, these refer solely to the European part of the Kingdom of the Netherlands
This summary also assumes that the board shall control the conduct of the affairs of CNH Industrial and shall procure that CNH Industrial is organized in accordance with the facts, based upon which the competent authorities of the U.K. and the Netherlands have ruled that CNH Industrial should be treated as solely resident of the U.K. for the application of the tax treaty as concluded between the U.K. and the Netherlands. A change in facts and circumstances based upon which the ruling was issued may invalidate the contents of this section, which will not be updated to reflect any such change.
This summary is based on the tax law of the Netherlands (unpublished case law not included) as it stands at the date of this form. The law upon which this summary is based is subject to change, perhaps with retroactive effect. Any such change may invalidate the contents of this summary, which will not be updated to reflect such changes.
Scope of the Summary
The summary of Dutch taxes set out in this section “Material Dutch tax consequences” only applies to a holder of shares who is a Non-Resident holder of shares. For the purpose of this summary, a holder of shares is a Non-Resident holder of shares if such holder is neither a resident nor deemed to be resident in the Netherlands for purposes of Dutch income tax or corporation tax as the case may be.
This Dutch taxation discussion does not address the Dutch tax consequences for a holder of CNH Industrial common shares and, if applicable, special voting shares who:
1.Is a person who may be deemed an owner of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares for Dutch tax purposes pursuant to specific statutory attribution rules in Dutch tax law;
2.Owns CNH Industrial common shares and, if applicable, CNH Industrial special voting shares in connection with a membership of a management board or a supervisory board, an employment relationship, a deemed employment relationship or management role; or
3.Is for Dutch tax purposes taxable as a corporate entity and resident of Aruba, Curaçao, or Sint Maarten.
Dividend Withholding Tax
CNH Industrial is generally required to withhold Dutch dividend withholding tax at a rate of 15 percent from dividends distributed by it. The competent authorities of the U.K. and the Netherlands have ruled that CNH Industrial is resident of the U.K. for the application of the tax treaty as concluded between the Netherlands and the U.K. Consequently, payments made by CNH Industrial on the common shares and / or the special voting shares to Non-Resident shareholders may be made free from Dutch dividend withholding tax.
Taxes on income and capital gains from the ownership and disposition of CNH Industrial common shares and / or special voting shares
Individuals
If a Non-Resident holder of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares is an individual, the holder will not be subject to Dutch income tax in respect of any benefits derived or deemed to be derived from or in connection with CNH Industrial common shares and, if applicable, CNH Industrial special voting shares, except if:
(i)the holder derives profits from an enterprise, whether as an entrepreneur or pursuant to a co-entitlement to the net value of such enterprise, other than as a shareholder, and such enterprise is carried on, in whole or in part, through a permanent establishment or a permanent representative in the Netherlands, and such holder’s CNH Industrial common shares and, if applicable, CNH Industrial special voting shares are attributable to such permanent establishment or permanent representative; or
(ii)the holder benefits or is deemed to derive benefits from or in connection with CNH Industrial common shares and, if applicable, CNH Industrial special voting shares that are taxable as benefits from miscellaneous activities performed in the Netherlands; or
(iii)the holder derives profits pursuant to the entitlement to a share in the profits of an enterprise, other than as a holder of securities, which is effectively managed in the Netherlands and to which enterprise CNH Industrial common shares and, if applicable, CNH Industrial special voting shares are attributable.
Corporate entities
If a Non-Resident holder of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares is a corporate entity, or an entity including an association, a partnership and a mutual fund, taxable as a corporate entity, it will not be subject to Dutch corporation tax in respect of any benefits derived or deemed to be derived from or in connection with CNH Industrial common shares and, if applicable, CNH Industrial special voting shares, except if:
(i)it derives profits from an enterprise directly which is carried on, in whole or in part, through a permanent establishment or a permanent representative in the Netherlands, and to which permanent establishment or permanent representative its CNH Industrial common shares and, if applicable, CNH Industrial special voting shares are attributable; or
(ii)it derives profits pursuant to a co-entitlement to the net value of an enterprise which is managed in the Netherlands, other than as a holder of securities, and to which enterprise its CNH Industrial common shares and, if applicable, CNH Industrial special voting shares are attributable.
Gift and Inheritance Taxes
No Dutch gift or inheritance taxes will arise with respect to an acquisition or deemed acquisition of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares by way of a gift by, or upon the death of, a holder of CNH Industrial common shares, and, if applicable, special voting shares, who is neither resident nor deemed to be resident in the Netherlands for purposes of Dutch gift tax or Dutch inheritance tax except if, in the event of a gift whilst not being a resident nor being a deemed resident in the Netherlands for purposes of Dutch gift tax or Dutch inheritance tax, a holder of CNH Industrial common shares and, if applicable, a holder of CNH Industrial special voting shares becomes a resident or a deemed resident in the Netherlands and dies within 180 days after the date of the gift.
For purposes of Dutch gift and inheritance taxes, a gift of CNH Industrial common shares and, if applicable, CNH Industrial special voting shares made under a condition precedent is deemed to be made at the time the condition precedent is satisfied.
Registration Taxes and Duties
No Dutch registration tax, transfer tax, stamp duty or any other similar documentary tax or duty, other than court fees, is payable in the Netherlands in respect of or in connection with the execution and/or enforcement (including by legal proceedings and including the enforcement of any foreign judgment in the courts of the Netherlands) of the documents relating to the issue of CNH Industrial common shares and / or special voting shares or the performance by CNH Industrial of its obligations under such documents, or the transfer of CNH Industrial common shares and / or special voting shares.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
See the information under the caption “Management’s Discussion and Analysis.”

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to the following financial risks connected with our operations:
•credit risk related to our financing activities;
•currency risk; and
•interest rate risk.
We attempt to actively manage these risks.
The quantitative data reported in the following sections does not have any predictive value. In particular, the sensitivity analysis on market risks does not reflect the complexity of the market or the reaction, which may result from any changes that are assumed to take place.
Credit Risk
Our credit concentration risk differs in relation to the activities carried out by the segments and end markets in which we operate; in all cases, the risk is mitigated by the large number of counterparties and customers. Considered from a global point of view, however, there is a concentration of credit risk in trade receivables and receivables from financing activities, in particular dealer financing in the European Union market and in North America, as well as in South America for Agriculture and Construction.
Financial assets are recognized in the statement of financial position net of write-downs for the risk that counterparties may be unable to fulfill their contractual obligations, determined on the basis of the available information as to the creditworthiness of the customer and historical data.
The maximum credit risk to which we were theoretically exposed at December 31, 2022 is represented by the carrying amounts stated for financial assets in the statement of financial position and the nominal value of the guarantees provided on debt or commitments of third parties.
Dealers and final customers are generally subject to specific assessments of their creditworthiness under a detailed scoring system. In addition to carrying out this evaluation process, we may also obtain financial and non-financial guarantees for risks arising from credit granted for the sale of agricultural equipment, construction equipment and related parts. These guarantees are further secured, where possible, by retention of title clauses or specific guarantees on financed equipment sales to the distribution network and on equipment under finance or leasing agreements.
Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis if they are individually significant. The amount of the write-down takes into account an estimate of the recoverable cash flows and the date of receipt, the costs of recovery, and the fair value of any guarantees received. Impairment losses are recognized for receivables that are not written down on a specific basis, but rather determined based on historical experience and statistical information.
Receivables for financing activities amounted to $19,260 million at December 31, 2022 ($15,376 million at December 31, 2021) containing balances totaling $334 million ($285 million at December 31, 2021) that have been written down. In addition, balances totaling $117 million ($75 million at December 31, 2021) were either past due or in nonaccrual status. In the event of installment payments, even if only one installment is overdue, the whole amount of the receivable is classified as such.
Trade receivables totaling $172 million at December 31, 2022 ($192 million at December 31, 2021) contain balances totaling $23 million ($24 million at December 31, 2021) that have been written down.
Currency Risk
We are exposed to risk resulting from changes in exchange rates, which can affect our earnings and equity.
Where one of our subsidiaries incurs costs in a currency different from that of its revenues, any change in exchange rates can affect the net income/(loss) of that company. In 2022, the total net trade flows exposed to currency risk amounted to the equivalent of 19% of our revenue (19% in 2021). The principal exchange rates to which we are exposed are the following:
•EUR/USD, in relation to the production/purchases of Agriculture and Construction in the Euro area
•USD/BRL and EUR/BRL, in relation to production in Brazil and the respective import/export flows;
•AUD/USD, mainly in relation to sales made by Agriculture and Construction in Australia;
•EUR/GBP, predominately in relation to sales on the U.K. market.
Trade flows exposed to changes in these exchange rates in 2022 made up approximately 73% of the exposure to currency risk from trade transactions.
It is our policy to use derivative financial instruments to hedge a certain percentage, on average between 55% and 85%, of the forecasted trading transaction exchange risk exposure for the coming 12 months with additional flexibility to reach 0% or 100% (including forecasted risk exposure beyond that timeframe where it is believed to be appropriate) and to hedge completely the exposure resulting from firm commitments.
Certain subsidiaries may hold trade receivables or payables denominated in a currency different from the subsidiary’s functional currency. In addition, in a limited number of cases, subsidiaries may obtain financing or use funds in a currency different from their functional currency. Changes in exchange rates may result in exchange gains or losses arising from these situations. It is our policy to hedge fully, whenever possible, the exposure resulting from receivables, payables, and securities denominated in currencies different from the subsidiary’s functional currency.
Certain of our subsidiaries’ functional currency is different than the U.S. dollar, which is the Company’s reporting currency. The income statements of those subsidiaries are converted into U.S. dollars using the average exchange rate for the period, and while revenues and margins are unchanged in local currency, changes in exchange rates may lead to effects on the converted balances of revenues, costs, and the results reported in U.S. dollars.
The assets and liabilities of consolidated companies whose functional currency is different from the U.S. dollar may acquire converted values in U.S. dollars which differ as a function of the fluctuation in exchange rates.
We monitor our principal exposure to conversion exchange risk, although there was no specific hedging in place at December 31, 2022. There were no substantial changes in 2022 in the nature or structure of exposure to currency risk or in our hedging policies.
Sensitivity Analysis
The potential loss in fair value of derivative financial instruments held for currency risk management (currency swaps/forwards, currency options, interest rate and currency swaps) at December 31, 2022 resulting from a hypothetical change of 10% in the exchange
rates amounted to approximately $276 million ($344 million at December 31, 2021). The valuation model for currency options assumes that market volatility at year-end remains unchanged.
Receivables, payables, and future trade flows whose hedging transactions have been analyzed were not considered in this analysis. It is reasonable to assume that changes in exchange rates will produce the opposite effect, of an equal or greater amount, on the underlying transactions that have been hedged.
Interest Rate Risk
Our Industrial Activities make use of external funds obtained in the form of financing and invest in monetary and financial market instruments. In addition, we sell receivables. Changes in market interest rates can affect the cost of financing, including the sale of receivables, or the return on investments of funds, causing an impact on the level of net financial expenses incurred by us.
In addition, Financial Services provides loans (mainly to customers and dealers), financed primarily using various forms of external borrowings or asset-backed financing (e.g., securitization of receivables). Where the characteristics of the variability of the interest rate applied to loans granted differ from those of the variability of the cost of the financing/funding obtained, changes in the current level of interest rates can affect our net income/(loss).
In order to mitigate these risks, we use interest rate derivative financial instruments, mainly interest rate swaps and forward rate agreements.
Sensitivity Analysis
In assessing the potential impact of changes in interest rates, we separate fixed rate financial instruments (for which the impact is assessed in terms of fair value) from floating rate financial instruments (for which the impact is assessed in terms of cash flows).
The fixed rate financial instruments used by us consist of retail receivables, debt, ABS, and other instruments.
The potential loss in fair value of fixed rate financial instruments (including the effect of interest rate derivative financial instruments) held at December 31, 2022, resulting from a hypothetical, unfavorable and instantaneous change of 10% in market interest rates, would have been approximately $29 million (approximately $20 million at December 31, 2021).
Floating rate financial instruments consist principally of cash and cash equivalents, wholesale receivables, debt, and ABS securities. The effect of the sale of receivables is also considered in the sensitivity analysis as well as the effect of hedging derivative instruments.
A hypothetical change of 10% in short-term interest rates at December 31, 2022, applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivative financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately $15 million (approximately $3 million at December 31, 2021).
This analysis is based on the assumption that there is a hypothetical change of 10% in interest rates across homogeneous categories. A homogeneous category is defined on the basis of the currency in which the financial assets and liabilities are denominated.
Other Risks in Connection with Derivative Financial Instruments
We have entered derivative contracts linked to commodity prices to hedge specific exposures on supply contracts.
Sensitivity Analysis
In the event of a hypothetical change of 10% in the underlying raw materials prices, the potential loss in fair value of outstanding derivative financial instruments at December 31, 2022 linked to commodity prices would not have been significant (not significant at December 31, 2021).

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
See the Consolidated Financial Statements and notes thereto and supplementary data.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of December 31, 2022 our internal control over financial reporting is effective.
Ernst & Young LLP, the independent registered public accounting firm that audited our 2022 consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on our internal control over financial reporting. The report appears on page 39.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of CNH Industrial N.V.
Opinion on Internal Control Over Financial Reporting
We have audited CNH Industrial N.V.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CNH Industrial N.V. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of CNH Industrial N.V. as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, cash flows and changes in equity for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 28, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Chicago, Illinois
February 28, 2023

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers, and Corporate Governance
The names of our directors, executive officers and their ages, positions and biographies as of February 28, 2023 are as set forth below. Our executive officers are appointed by and serve at the discretion of our Board of Directors.
Name Age Current Position with CNH Industrial
Catia Bastioli 65 Director, Member of the Environmental, Social and Governance Committee, Member of the Human Capital and Compensation Committee
Howard W. Buffett 39 Director, Member of the Environmental, Social and Governance Committee, Member of the Human Capital and Compensation Committee
Suzanne Heywood 53 Executive Director, Chair
Léo W. Houle 75 Senior Non-Executive Director, Chairperson of the Human Capital and Compensation Committee, Member of the Environmental, Social and Governance Committee
Karen Linehan 64 Director, Chairperson of Audit Committee
Alessandro Nasi 48 Director, Chairperson of the Environmental, Social and Governance Committee, Member of the Human Capital and Compensation Committee
Vagn Sørensen 63 Director, Member of the Audit Committee
Åsa Tamsons 41 Director, Member of the Audit Committee
Scott W. Wine 55 Executive Director, Chief Executive Officer
Kevin Barr 63 Chief Human Resources Officer
Oddone Incisa 50 Chief Financial Officer; President, Financial Services
Marc Kermisch 49 Chief Digital and Information Officer; ad interim Chief Technology and Quality Officer
Derek Neilson 52 President, Agriculture
Stefano Pampalone 55 President, Construction
Roberto Russo 63 Chief Legal and Compliance Officer
Catia Bastioli, Director (Non-Executive Director-independent), Member of the Environmental, Social, and Governance Committee, Member of the Human Capital and Compensation Committee
Catia Bastioli is the CEO of Novamont, an international leader in the bioplastics sector and in the development of biochemicals. Ms. Bastioli joined Novamont in 1991, initially as its technical director, before being appointed general manager and subsequently CEO. During her tenure as CEO she has transformed Novamont from a research center into a reference company in the field of Circular Bioeconomy. Ms. Bastioli started her career at Montedison, Italy's largest chemical group, helping found the Fertec Research Center for renewable raw materials, with Fertec merging with Novamont in 1991. Ms. Bastioli has been a member of European Union High Level Groups on climate change, the environment and renewable raw materials - such as the High-Level Panel on Decarbonization Pathways Initiative and the Mission Board on Soil Health and Food. She is the first inventor of about 80 patent families in the sector of biopolymers and transformation processes of renewable raw materials, and was named European Inventor of the Year in 2007 for her inventions related to starch-based bioplastics between 1991-2001. Ms. Bastioli served as the President of Terna S.p.A., the first grid operator for electricity transmission in Europe, from 2014 - 2020, is a former Board Member of the charitable Fondazione Cariplo, is the CEO of the Italian Cluster of Circular Bioeconomy SPRING and is the President of the Kyoto Club Association - a non-profit organization which raises awareness about the importance of the green and circular economy in order to reach the goals of the Paris Agreement. Ms. Bastioli attended the University of Perugia in Italy and obtained a Master's degree in Chemistry and a Master from the Business Management School Luigi Bocconi University in Milan, Italy. She was also granted an Honorary Doctoral Degree in Civil, Chemical, Environmental and Materials Engineering by “Alma Mater Studiorum” University of Bologna, Italy (2019), a Honoris Causa Degree in Business Economics by University of Foggia, Italy (2018), a Honoris Causa Degree in Materials Engineering by University of Palermo, Italy (2016) and a Honoris Causa Degree in Industrial Chemistry by the University of Genoa, Italy (2008). In 2017 she was given the honorary title of Knighthood “Cavaliere del Lavoro” by the President of the Italian Republic Sergio Mattarella. Born in 1957, Italian citizenship. Date of first appointment: December 23, 2021.
Howard W. Buffett, Director (Non-Executive Director-independent), Member of the Environmental, Social, and Governance Committee, Member of the Human Capital and Compensation Committee
Howard W. Buffett was appointed Director of CNH Industrial in April 2020. He is a Professor at Columbia University's School of International and Public Affairs in New York, U.S.A., with research focused on ESG, sustainability, and impact measurement and management. He also serves on the Advisory Committee on Socially Responsible Investing, which advises the University's $15 billion
endowment on social and environmental investment policies. Earlier in his career, Howard W. Buffett was the Executive Director of the Howard G. Buffett Foundation. He also held a variety of roles in the U.S. government, including in the U.S. Department of Defense, where he oversaw economic stabilization and redevelopment programs in Iraq and Afghanistan. For his work in Afghanistan, he received the Joint Civilian Service Commendation Award. Howard W. Buffett also served as Policy Advisor for the White House Domestic Policy Council and in the Office of the Secretary at the U.S. Department of Agriculture. Howard W. Buffett serves on several Corporate Boards and Advisory Boards including Toyota Motor North America, Inari Agriculture, REEF Technology, and StateBook International. He chairs the Advisory Council for Harvard University's International Negotiation Program and serves on several nonprofit Advisory Boards, including the Daugherty Water for Food Global Institute, the Learning by Giving Foundation, and the Chicago Council on Global Affair's Center on Global Food and Agriculture Panel of Advisors. Howard W. Buffett is also a former Term Member of the Council on Foreign Relations. A New York Times bestselling author, Howard W. Buffett holds a Bachelor of Science in Communications Science and Political Science from Northwestern University, U.S.A., a Master's in Public Policy and Administration in Advanced Management and Finance from Columbia University, U.S.A., and executive education certificates from Harvard Business School, U.S.A. Born in 1983, U.S. citizenship. Date of first appointment: April 16, 2020.
Suzanne Heywood, Chair (Executive-Director)
Suzanne Heywood is the Chief Operating Officer of Exor. She first joined Exor as a Managing Director in 2016. Prior to that she worked at McKinsey & Company which she joined as an associate in 1997 and left as a Senior Partner (Director) in 2016. Suzanne co-led McKinsey's global service line on organization design for several years and also worked extensively on strategic issues with clients across different sectors. She has published a book, “Reorg,” and multiple articles on these topics. Suzanne started her career in the U.K. Government as a Civil Servant in the U.K. Treasury. At the Treasury she worked as Private Secretary to the Financial Secretary (who is responsible for all direct taxation issues) as well as leading thinking on the Government's privatization policy and supporting the Chancellor in his negotiations at ECOFIN (the meeting of European Finance Ministers) in Brussels. Prior to that she studied science at Oxford University (BA) and then at Cambridge University (PhD). Lady Heywood is Chair of Iveco Group N.V., and of Shang Xia. She is also a non-executive director of Louboutin and The Economist. She grew up sailing around the world with her family recreating Captain James Cook's third voyage. Born in 1969, British citizenship.
Léo W. Houle, Director (Senior Non-Executive Director-independent), Chairperson of the Human Capital and Compensation Committee, Member of the Environmental, Social, and Governance Committee
Mr. Houle was a Director of CNH Global N.V. from April 7, 2006, until the merger of the company into CNH Industrial. On September 6, 2011, Mr. Houle was appointed to the Board of Directors of Chrysler Group LLC now known as FCA US LLC until June 2016 when all public debt of the company was repaid, and its public listing ceased. Mr. Houle was Chief Talent Officer of BCE Inc. and Bell Canada, Canada’s largest communications company, from June 2001 until his retirement in July 2008. Prior to joining BCE and Bell Canada, Mr. Houle was Senior Vice-President, Corporate Human Resources of Algroup Ltd., a Swiss-based diversified industrial company. From 1966 to 1987, Mr. Houle held various managerial positions with the Bank of Montreal, the last of which was Senior Manager, Human Resources, Administration Centers. In 1987, Mr. Houle joined the Lawson Mardon Group Limited and served as Group Vice-President, Human Resources until 1994 when Algroup Ltd. acquired Lawson Mardon Group at which time he was appointed Head of Human Resources for the packaging division of Algroup and in 1997 Head of Corporate Human Resources of Algroup, Ltd. Mr. Houle completed his studies at the College Saint Jean in Edmonton, attended the Executive Development Program in Human Resources at the University of Western Ontario in 1987 and holds the designation of Certified Human Resources Professional (CHRP) from the Province of Ontario. Born in 1947, Canadian citizenship. Date of first appointment: September 29, 2013.
Karen Linehan, Director (Non-Executive Director-independent), Chairperson of the Audit Committee
Karen Linehan is a former Executive Vice President and General Counsel of Sanofi, a French global healthcare company, a role she held from 2007 - 2021. During this time Ms. Linehan supported multiple acquisitions and divestitures, complex litigations and government investigations as well as being a founding member of Sanofi’s Gender Balance Board. She joined Sanofi in 1991 and held roles of increasing importance including Assistant General Counsel from 1991 - 1996, International Counsel from 1996 - 2000 and Deputy Head of Legal Operations from 2000 - 2007. Prior to joining Sanofi, Karen Linehan was a Corporate Attorney at the New York-based legal firm Townley & Updike. She started her career in the Congressional Office of the Speaker of the US House of Representatives, the Honorable Thomas P. O’Neill, Jr. Ms. Linehan is currently a board member of Aelis Farma (France), a company which specializes in developing drugs targeting diseases of the brain, where she chairs the Audit Committee and serves as a member of the Remuneration Committee. She also sits on the board of Veon Ltd. (The Netherlands), a multinational telecommunication services company, where she serves as a member of the Audit Committee and the Nomination and Governance Committee. Ms. Linehan is a Non-Executive Director of The Global Antibiotic Research and Development Partnership (GARDP) (North America), a Non-Profit Organization which is focused on pursuing the development of treatments for drug resistant infections.
Ms. Linehan holds a Bachelor of American Studies and a Juris Doctor (J.D.) degree in Law, both from Georgetown University in the U.S.A. Born in 1959, American and Irish citizenship. Date of first appointment: April 13, 2022.
Alessandro Nasi, Director (Non-Executive Director), Chairperson of the Environmental, Social, and Governance Committee, Member of the Human Capital and Compensation Committee
Alessandro Nasi started his career as a financial analyst in several banks, gaining experience at a division of UniCredit in Dublin, PricewaterhouseCoopers in Turin, Merrill Lynch and JP Morgan in New York, U.S. He also worked as an Associate in the Private Equity Division of JP Morgan Partners in New York, U.S. Mr. Nasi joined the Fiat Group in 2005 as manager of Corporate and Business Development, heading the APAC division and supporting Fiat Group sectors in Asia Pacific. In 2007, Mr. Nasi was appointed Vice President of Business Development and a member of the Steering Committee of Fiat Powertrain Technologies. In 2008, he joined CNH in the role of Senior Vice President of Business Development and from 2009 to 2011 he also served as Senior Vice President of Network Development. In January 2011, he was also appointed Secretary of the Industrial Executive Council of Fiat Industrial, continuing in the role of Executive Coordinator to the successor Group Executive Council of CNH Industrial until January 2019. In 2013 he was appointed President Specialty Vehicles, a role he held until January 2019. Mr. Nasi is a Director of Giovanni Agnelli B.V., a Director of EXOR N.V., Chairman of Comau, Director of Iveco Group and Chair of its Environmental, Social, and Governance Committee and member of its Human Capital & Compensations Committee. He is Chairman of Iveco Defence (an affiliate of Iveco Group) and Chairman of Astra Veicoli Industriali (an affiliate of Iveco Group). Since 2019, he is a member of the Advisory Board of the Lego Brand Group and since 2020 he is a Non-Executive, Independent Director of GVS S.p.A. and member of its Compensation & Nominating Committee. In October 2022, he was appointed member of the Board of Istituto Italiano di Tecnologia and member of the Strategic Advisory Board of 3 Boomerang Capital LLC. Mr. Nasi obtained a degree in Economics from the University of Turin. Born in 1974, Italian citizenship. Date of first appointment: April 12, 2019.
Vagn Sørensen, Director (Non-Executive Director-independent), Member of the Audit Committee
Vagn Sørensen was appointed Director of CNH Industrial in April 2020. He has spent the majority of his executive career in the aviation industry. After a 17-year career with Scandinavian Airlines, where he held the position of deputy CEO, from 2001 to 2006 he served as the CEO of Austrian Airlines. Following this, he has pursued a career as an Independent Director, primarily in the leisure, hotel and aviation sectors. His appointments, however, also encompass additional sectors including software development, telecommunications and heavy machinery. Mr. Sørensen can draw on over 20 years’ experience in private equity, primarily gained with EQT. Mr. Sørensen is currently Chairman of Vakantie Discounter, Big Bus Tours, Air Canada and Scandlines. He serves as an Independent Director on the Board of Royal Caribbean Cruises. He also sits on the Boards of Parques Reunidos and is a member of the Board of Trustees of the Rock’n Roll Forever Foundation. Mr. Sørensen has previously been the Chairman of F L Smidth A/S, SSP Group Plc, British Midland Airways, Scandic Hotels Group, Automic Software, Bureau van Dijk, KMD and Flying Tiger Copenhagen. He was a Member of the Supervisory Board of Lufthansa Cargo, Deputy Chairman of DFDS, Chairman of the Association of European Airlines, a Member of the Board of the International Air Transport Association (IATA) and was Chairman of TDC A/S, the Danish incumbent telecommunications operator. Mr. Sørensen attended the Aarhus Business School in Denmark, and obtained a Master of Science degree in Economics and Business Administration. Born in 1959, Danish citizenship. Date of first appointment: April 16, 2020.
Åsa Tamsons, Director (Non-Executive Director-independent), Member of the Audit Committee
Åsa Tamsons is a Senior Vice President and Head of Business Area Technologies and New Businesses at Ericsson, where she is also a member of the Company's Executive Team. Ms. Tamsons primary focus is on driving growth in new business areas targeting the enterprise market and creating new revenue streams for Ericsson, with emphasis on SaaS and software centric connectivity offerings. The objective is to help the Company's customers, and the broader enterprise market, realize the full potential of 5G, IoT and future technologies. Ms. Tamsons drives a business portfolio encompassing commercialization and licensing of Ericsson's 60,000+ patents, Cradlepoint - the US-based market leader in Wireless WAN Edge solutions for the enterprise market, Ericsson's global IoT platform business, its Private Network business with products used by industry companies and the public safety sector, its fintech platform serving 80+ million customers in Middle East and Africa, as well as, Security Solutions for Telecom Customers worldwide, and a number of other emerging businesses in incubation stage through the innovation hub Ericsson ONE. The business portfolio also includes the global number portability leader, iconectiv, as well as the fully owned subsidiary RedBee Media, where Ms. Tamsons serves as Chairperson. Previously, between 2018-2020, Ms. Tamsons was also responsible for Ericsson's Group Strategy, M&A and Corporate Venture Capital investments. Ms. Tamsons joined Ericsson as a Partner from McKinsey where between 2006-2017 she served tech, telecom and industrial companies around the world. She has worked across the world and during her career has been based in Stockholm, Paris, Singapore, San Francisco and Sao Paulo. Ms. Tamsons holds a Master of Science in Business Administration from the Stockholm School of Economics in Sweden. Born in 1981, Swedish citizenship. Date of first appointment: December 23, 2021.
Scott W. Wine, Chief Executive Officer (Executive-Director)
Scott W. Wine is the Chief Executive Officer of CNH Industrial and an executive director on the Company's Board of Directors. Leading a workforce of over 38,000 across the globe, Mr. Wine assumes complete accountability for the Company's results, whilst ensuring it delivers them in accordance with the highest ethical standards. His focus is on best supporting CNH Industrial's dealers and customers through a diverse and inclusive workforce, industry leading technology, exceptional safety and quality, and unmatched innovation. Mr. Wine has an exceptional track record as a proven leader, with both considerable international experience across a variety of industries, and extensive mergers and acquisitions expertise in the U.S., Europe and Asia. Prior to joining CNH Industrial in 2021, he was Chairman and CEO of Polaris Inc., a manufacturer of off-road vehicles, electric cars, motorcycles, snowmobiles and boats. He joined Polaris in 2008 as Chief Executive Officer and was named Chairman in 2013. In 2007, Mr. Wine joined UTC Fire and Security, a subsidiary of United Technologies Corporation, as President of Fire Safety America. From 2003 to 2007 he held positions of increasing importance across a range of Danaher Corporation companies, serving as President of Jacobs Vehicle Systems, a commercial truck braking systems manufacturer, from 2003 until 2006, when he became President of The VeederRoot Co., a manufacturer of fuel-tank measuring equipment. In 1996 Mr. Wine joined Allied Signal Corp, a US aerospace, automotive and engineering company. Following its 1999 acquisition of Honeywell, in 2001 Wine assumed the role of Managing Director of Honeywell Aerospace GmBh, based in Germany, before being appointed Vice President of the European Engine Services Division. From 1989 to 1996 he served as a supply officer in the United States Navy. Mr. Wine holds an MBA from the University of Maryland and a bachelor's degree from the United States Naval Academy. He serves on the Boards of US Bancorp and the U.S. Naval Academy Foundation. Born in 1967, he holds American citizenship. Date of first appointment: April 15, 2021.
Kevin Barr, Chief Human Resources Officer
Kevin Barr is the Chief Human Resources Officer at CNH Industrial. He is responsible for leading the global HR organization to support the Company's strategic direction, overseeing HR operations across the Global Business Units, Corporate Regions, Business & Corporate Staff Functions, Talent Management, Organization Development, Industrial Relations and Compensation & Benefits. Mr. Barr has some four decades of experience in human resources, in roles of increasing importance across a range of industries and geographies, including financial services, information services, consumer products and manufacturing, with extensive experience in mergers and acquisition. Prior to joining CNH Industrial, Kevin Barr was a practicing executive and leadership career coach. From 2000 - 2019, Mr. Barr was the Chief Human Resources Officer and Senior Vice President of Terex Corporation, managing a workforce that expanded four-fold during this time. In 1998 he was appointed Chief Human Resources Officer and Vice President at Database Technologies (DBT), the then fastest-growing Internet-based US company providing online investigative information services to businesses, law enforcement agencies and consumers. In 1995 he joined Nabisco Inc., an American manufacturer of consumer snacks, as Vice President Human Resources for the Asia Pacific region, based in Singapore. During his tenure he oversaw the construction of three greenfield factories in China and Indonesia, as well as being involved in global brand launches. In 1990 he joined Dun & Bradstreet Corporation, a US provider of commercial data, analytics, and insights for businesses, and in 1992 was appointed Vice President Human Resources for its Asia-Pacific, Latin American and Canadian operations. Kevin Barr started his career with The Chase Manhattan Bank, now J.P. Morgan Chase, in 1981, assuming roles of increasing importance, and in 1988 was named Vice President, Human Resources for the Automotive Finance Division. Kevin Barr holds a Bachelor of Science degree in Industrial and Labor Relations from Cornell University, in the United States.
Oddone Incisa, Chief Financial Officer and President, Financial Services
Oddone Incisa della Rocchetta is the Chief Financial Officer and President of Financial Services at CNH Industrial. In this dual-role Mr. Incisa is responsible for all of the Company's financial activities, both corporate and commercial, and the global finance organization, which includes accounting, financial planning & analysis, tax, investor relations, treasury and enterprise risk management. Mr. Incisa's career with CNH Industrial and its sister-company, the former Fiat Group (now Stellantis), spans over twenty-five years working across Europe, North America and South America. He has assumed roles of increasing seniority connected to Finance and Commercial Lending. He was first appointed Chief Financial Officer of CNH Industrial in March 2020. This was in addition to his existing role as President Financial Services, a position he has held since January 2013. From January 2013 to present, Mr. Incisa has also been a member of the Company's Senior Leadership Team. Prior to this, Mr. Incisa held the position of Chief Executive Officer and General Manager at FGA Capital (now FCA Bank) from 2011 to 2013. In 2008, he was nominated Chief Financial Officer of CNH Capital, the Company's global financing arm based in the United States. Prior to that appointment he served as Head of Financial Planning & Analysis of Fidis Retail and FGA Capital for five years. From 2001 - 2003, he was Chief Financial Officer of Banco Fiat, the automaker's consumer lending unit in Brazil. Mr. Incisa started his career with Fiat Group in auto financing for the German market in 1997. Oddone Incisa holds a bachelor's degree in Economics, cum laude, from the University of Turin, Italy and a master's degree in Management from the ESCP Business School, earned across its Paris, France; Oxford, United Kingdom; and Berlin, Germany campuses.
Marc Kermisch, Chief Digital and Information Officer, ad interim Chief Technology & Quality Officer
Marc Kermisch is Chief Digital and Information Officer at CNH Industrial. Under his leadership, the Company's Digital and Information Technology (IT) organization is focused on securely transforming, developing and running digital solutions that enhance value for its customers and dealers. Mr. Kermisch has over 20 years of experience in technology organizations, in roles of increasing importance across a range of industries, including retail, financial services, software, start-ups, manufacturing, healthcare and professional services. He has extensive experience in building technology organizations and driving operational efficiencies. Marc Kermisch first joined CNH Industrial in 2021 in his current role, also becoming a member of the Company's Senior Leadership Team. Prior to this, Mr. Kermisch held a one-year tenure as Senior Vice President and Chief Technology Officer at OptumRx, a $90B pharmacy benefits management division of United Health Group. From 2019 - 2020, he served as Executive Vice President and Chief Information Officer at Bluestem Brands Inc., a direct to consumer and financial services company, where he led the transformation of its core eCommerce and mobile platforms. For five years, Mr. Kermisch was Vice President and Chief Information & Innovation Officer for Red Wing Shoe Company where he led the shift to consumer and dealer centricity through technology. Previously, Mr. Kermisch has assumed roles of increasing seniority in the field of IT with Xcel Energy, Target Corporation and The Hartford. Marc Kermisch started his career with Imaginet, a web development services company in 1997 as a programmer. Marc Kermisch holds a Bachelor of Arts degree in English from the University of Wisconsin-Madison, in the United States. He serves on the Board of Directors of Salo LLC, a US-based talent firm, and Crew Car Wash, Inc, a US-based full-service car wash company.
Derek Neilson, President, Agriculture
Derek Neilson is President Agriculture at CNH Industrial. He leads the Agriculture Global Business Unit, overseeing all operations, to ensure this segment best serves its customers while sustainably and profitably improving and growing this business. Mr. Neilson has over two decades of experience in CNH Industrial where he has served in roles of increasing responsibility across its Agriculture business, corporate region and manufacturing. He has been a sitting member of the Senior Leadership Team for over 10 years. Derek Neilson assumed his current role in 2019. Prior to this, he served as the Company's ad interim Chief Executive Officer for three quarters of 2018. Alongside this designation, Mr. Neilson continued in his role as Chief Operating Officer for the EMEA region (appointed in 2015) and President of the Commercial Vehicles Products Segment. From 2012 to 2015 he served as Chief Manufacturing Officer, building upon his existing role as Global Head of Agricultural Manufacturing (appointed in 2010). Prior to assuming global responsibility, Mr. Neilson was Vice President of Agricultural Manufacturing in Europe for three years. He began his career with CNH Industrial (then CNH Global) in 1999 at the Company's tractor plant in Basildon, United Kingdom, last serving as Plant Manager before moving to international assignments. Derek Neilson holds a BTEC Diploma in Mechanical and Production Engineering.
Stefano Pampalone, President, Construction
Stefano Pampalone is President Construction at CNH Industrial. He leads this segment's Global Business Unit to attain its strategic and operational targets, all in the service of delivering value to end customers. In this role, Mr. Pampalone has full oversight of product portfolio and development, manufacturing, parts & service and regional operations, in coordination with the corporate regions. Mr. Pampalone's career with CNH Industrial spans over two decades, where he counts significant experience in directing international high growth and emerging markets. He assumed his current role in 2019, in which he continues to sit on the Company's Senior Leadership Team, which he has been a part of from the establishment of CNH Industrial N.V. in 2013. Mr. Pampalone was Chief Operating Officer for the Asia Pacific region from 2013, gaining additional remit responsibility for the Middle East and Africa as General Manager until his current appointment. In order of appointment, he has served as General Manager for the then CNH Global in India, South East Asia and Japan; General Manager of the Agricultural and Construction Equipment Business in India and Pakistan; Business Director for the Agricultural Business in Africa and the Middle East; Marketing Director for Agricultural Equipment in Asia, Africa and the Middle East; and Business Manager Southern Africa and Iran for the Company's agricultural brands. Upon joining New Holland in 1998, Mr. Pampalone's career focused on overseas assignments, first gaining commercial experience in parts and whole goods in Poland, India, Africa and the Middle East. Stefano Pampalone holds an MBA from Profingest Management School (now Bologna Business School) and a bachelor's degree in Engineering from the University of Trieste, both in Italy.
Roberto Russo, Chief Legal and Compliance Officer
Roberto Russo is the Chief Legal and Compliance Officer at CNH Industrial. He advises the governing bodies on the main legal issues and risks concerning the Company. Mr. Russo also serves as Board Secretary to the CNH Industrial Board of Directors. Before being promoted to Senior Vice President and joining the Company's Senior Leadership Team, Mr. Russo served as General Counsel of CNH Industrial from its establishment in 2013, resulting from the merger of CNH Global and Fiat Industrial. He was previously General Counsel and Board Secretary of Fiat Industrial and General Counsel of Fiat Group from 2004 to 2011, where he also served as Board Secretary until 2014. Prior to being named to these roles, he covered roles of increasing seniority within Fiat Group from his joining in 1986. Roberto Russo was admitted to the Italian Bar in 1985 and began his career as an attorney at law in a private firm in Turin, Italy. Roberto Russo holds a Master of Laws (LLM) with Distinction in Corporate and Commercial Law from the London School of
Economics and Political Science, United Kingdom; graduated summa cum laude with a Juris Doctor degree in Law from the University of Turin, Italy; and holds diplomas in Business Law, Finance, and ESG from the University of California, Berkeley School of Law, USA. Mr. Russo has served on several national Italian committees relating to European Union directives and regulations on environmental law, corporate law, antitrust, and financial markets transparency as well as on the Italian legislation committee for quasi-criminal corporate liability.
Code of Ethics
Our Board of Directors has adopted a Code of Conduct which is applicable to all employees, officers and directors, including our principal executive officer, principal financial officer and the principal accounting officer and controller. Our Code of Conduct is intended to meet the definition of “code of ethics” under the SEC rules and regulations. We intend to disclose future amendments to certain provisions of our code of conduct, or waivers of these provisions, on our website or in public filings. Our Code of Conduct is posted on our website, www.cnhindustrial.com, and may be found as follows: from our main page, first click on "Our Company", then on “Governance” and then on “Code of Conduct.”
Board Practices
CNH Industrial is a company, organized under the laws of the Netherlands, initially formed from a business combination of Fiat Industrial S.p.A. and CNH Global N.V. consummated on September 29, 2013. CNH Industrial qualifies as a foreign private issuer under the applicable rules of the SEC and its common shares are listed on the NYSE and on Euronext Milan.
We are subject to, among other things, the laws of the Netherlands and the laws and regulations applicable to foreign private issuers in the U.S., the Dutch Corporate Governance Code (the “Dutch Code”), the Sarbanes Oxley Act of 2002, the Dodd-Frank Act and the NYSE listing standards, which are of particular significance to our corporate governance. In accordance with the NYSE Listed Company Manual, we are permitted to follow home country practice with regard to certain corporate governance standards. We describe the significant differences between our corporate governance practices and those required (i) under the Dutch Code and (ii) for domestic U.S. listed companies by the NYSE listing standards on our website.
The Board has collective responsibility for the strategy of the Company. During 2022, the Board reviewed and discussed with management, among other things, the Company’s strategy, and the long-term value creation strategies of all of the Company’s individual business segments and their deployment in the regions.
All Board members are expected to attend not less than 75% of all Board and Committee meetings. In addition, Non-Executive Directors are limited to being on not more than four (4) boards of other public companies.
The Board met five times during 2022. The following chart shows the current Board members and their attendance at Board meetings.
Board Member
Heywood
Houle
Buffett
Bastioli
Linehan
Nasi
Tamsons
Sørensen
Wine
Attendance %
100%
100%
100%
100%
100%
100%
100%
100%
100%
Board Composition and Leadership Structure
The positions of Chief Executive Officer and Chair of the Board of Directors are held by two different individuals (Scott W. Wine and Suzanne Heywood, respectively). This structure allows our Chief Executive Officer to focus on our day-to-day business while our Chair provides advice to and oversight of management. The Board of Directors appointed Mr. Léo Houle Senior Non-Executive Director for purposes of best practice provision 5.1.3, and in compliance with best practice provision 2.1.9, of the Dutch Code. The Senior Non-Executive Director is responsible for the proper functioning of the Board of Directors and its Committees.
The non-executive directors believe that in consideration of the size of the Company, the complexity and specific characteristics of the segments in which it operates and the worldwide presence of its business, an adequate and diversified mix of skills, experience and cultures, both general and specific, acquired in an international environment, in relation to the capital goods industry and with respect to general macroeconomics and market globalization issues, as well as the industrial and financial sectors, and other diversity factors (such as gender, race, ethnicity, and country of origin or nationality) are necessary prerequisites to achieve a Board having the appropriate diversification and collegial capabilities, also assured by an appropriate balance between the number of Executive Directors and Non-Executive Directors. Independent Directors - identified as such both pursuant to NYSE and DGCG provisions - have an essential role in protecting the interests of all stakeholders and in the proper composition and functioning of the Board Committees, further described below. It is generally recognized that more diverse boards are more effective in performing their monitoring and advisory activities, due to the variety of professional experience, perspectives, insights, skills and connections to the outside world that diversity can add. Accordingly, the Board will continue to actively seek diverse candidates for possible appointment to the Board; though no formal diversity policy was adopted, the Board has in the past and expects to continue to utilize the services of executive search firms to assist in the identification of qualified and diverse candidates for nomination for appointment to the Board.
The Environmental, Social, and Governance Committee periodically assesses the skills, experience and other attributes of the individual Directors with a view toward ensuring an appropriate level of diversity and ensuring the Directors have the necessary
expertise to fulfill their respective duties. In 2022, the Environmental, Social, and Governance Committee conducted such an assessment in connection with its evaluation of candidates to be recommended to the Board for nomination of (re)appointment as a Director.
Committees of Our Board of Directors
Our Board of Directors has established an Audit Committee, a Human Capital and Compensation Committee and an Environmental, Social and Governance Committee. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors.
Audit Committee
Our Audit Committee currently consists of Ms. Linehan (Chairperson), Mr. Sørensen and Ms. Tamsons, all of whom are independent, non-executive directors. Under the Audit Committee Charter, the Audit Committee is elected by the Board of Directors and is comprised of at least three members who may be appointed for terms of up to two years, each of whom must be a non-executive director. Member of the Audit committee may be reappointed. Audit Committee members are also required (i) not to have any material relationship with the Company or to serve as auditors or accountants for the Company, (ii) to be “independent”, under the NYSE rules, Rule 10A-3 under the Exchange Act and the DCGC, and (iii) to be “financially literate” and have “accounting or selected financial management expertise” (as determined by the Board of Directors). At least one member of the Audit Committee shall be a “financial expert” as defined in the rules of the SEC and best practice provisions of the DCGC. Our Board of Directors has determined that Vagn Sørensen and Åsa Tamsons are audit committee financial experts. No Audit Committee member may serve on more than four audit committees for other public companies, absent a waiver from the Board of Directors. Unless decided otherwise by the Audit Committee, the independent auditors of the Company, as well as the Chief Financial Officer of the Company, attend its meetings.
The Audit Committee is responsible for, among other things, assisting the Board of Directors’ oversight of: (i) the integrity of the Company’s financial statements, (ii) the Company’s policy on tax planning, (iii) the Company’s financing, (iv) the Company’s application of information and communication technology, (v) the systems of internal controls that management and the Board of Directors have established, (vi) the Company’s compliance with legal and regulatory requirements, (vii) the Company’s compliance with recommendations and observations of internal and external auditors, (viii) the Company’s policies and procedures for addressing certain actual or perceived conflicts of interest, (ix) the independent auditors’ qualifications, independence, remuneration and any non-audit services for the Company, (x) the performance of the Company’s internal audit function and of the independent auditors, (xi) risk management guidelines and policies, and (xii) the implementation and effectiveness of the Company’s ethics and compliance program. The Company has established a separate department for the internal audit function and the head of the internal audit function reports to the Audit Committee, which reviews and approves the annual internal audit plan.
During 2022, the Audit Committee, inter alia, reviewed and discussed the annual and quarterly financial statements (and the independent auditors’ review or audit thereof), the key risks and controls relating to the Company’s information systems, the appropriateness and completeness of the Company's system of internal control, the performance of the Company’s internal audit function, the performance of the Company’s independent public auditors, legal matters facing the Company, and the implementation and effectiveness of the Company's ethics and compliance program.
The Audit Committee met ten times during 2022. The following chart shows the current Audit Committee members and their attendance at Committee meetings.
Audit Committee Member
Linehan
Tamsons
Sørensen
Attendance %:
100%
100%
100%
The Charter for the Audit Committee is available on our web site (www.cnhindustrial.com). The information contained on our web site is not included in, or incorporated by reference into, this annual report on Form 10-K.
Human Capital and Compensation Committee
Our Human Capital and Compensation Committee currently consists of Mr. Houle (Chairperson), Mr. Buffett, Mr. Nasi and Ms. Bastioli. All the members of the Human Capital and Compensation Committee are non-executive directors and all, other than Mr. Nasi, meet the requirements of independence in the current NYSE and SEC rules and regulations and the DCGC.
The Human Capital and Compensation Committee is responsible for, among other things, assisting the Board of Directors in: (i) determining executive compensation consistent with the Company’s Remuneration Policy, (ii) reviewing and recommending for approval the compensation of Executive Directors, (iii) administering equity incentive plans and deferred compensation benefit plans, (iv) discussing with management the Company’s policies and practices related to compensation and issuing recommendations thereon, (v) talent development/talent management and succession plans for the Senior Leadership Team, (vi) the Company's policies and
initiatives related to equal employment opportunity, as well as diversity, equity and inclusion, and (vii) the Company's programs designed to measure and improve overall employee engagement.
The Human Capital and Compensation Committee met six times during 2022. The following chart shows the current Human Capital and Compensation Committee members and their attendance at Committee meetings.
Human Capital and Compensation Committee Member
Houle
Buffett
Bastioli
Nasi
Attendance %:
100%
100%
100%
100%
The Charter for the Human Capital and Compensation Committee is available on our web site (www.cnhindustrial.com). The information contained on our web site is not included in, or incorporated by reference into, this annual report on Form 10-K.
Environmental, Social and Governance Committee
Our Environmental, Social, and Governance Committee currently consists of Mr. Nasi (Chairperson), Mr. Buffett, Mr. Houle, and Ms. Bastioli. All members of the Environmental, Social, and Governance are non-executive directors and all, other than Mr. Nasi, meet the independence in the current NYSE and SEC rules and regulations and the Dutch Code.
The Environmental, Social and Governance Committee is responsible for, among other things, assisting the Board of Directors with: (i) the identification of the criteria, professional and personal qualifications for candidates to serve as directors of the Company, (ii) periodic assessment of the size and composition of the Board of Directors, (iii) periodic assessment of the functioning of individual Board members and reporting on this to the Board of Directors, (iv) proposals for appointment of executive and non-executive directors, (v) supervision of the selection criteria and appointment procedure for senior management, (vi) overseeing and evaluating the policies, procedures, and practices related to the environment health and safety of Company employees, (vii) monitoring and evaluating reports on the Company’s sustainable development policies and practices, management standards, strategy, performance and governance globally, and (viii) reviewing, assessing and making recommendations as to strategic guidelines for sustainability-related issues, and reviewing the Company’s annual Sustainability Report.
The Environmental, Social, and Governance Committee met five times during 2022. The following chart shows the current Environmental, Social, and Governance Committee members and their attendance at Committee meetings.
Environmental, Social, and Governance Committee Member
Nasi
Buffett
Bastioli
Houle
Attendance %:
100% 100%
100%
100%
The Charter for the Environmental, Social and Governance Committee is available on our web site (www.cnhindustrial.com). The information contained on our web site is not included in, or incorporated by reference into, this annual report on Form 10-K.
Family Relationships
There are no family relationships between the officers and directors of the company.
Legal Proceedings Involving Officers and Directors
None.
Shareholder Recommendation of Board Nominees
As a foreign private issuer, the Company is permitted to follow home country practice. Further, the Company's common shares and special voting shares are exempt from the proxy rules under the United States Securities Exchange Act of 1934, as amended.
Compliance with Section 16(a) of the Exchange Act
As a foreign private issuer, CNH Industrial, is not subject to Section 16(a) of the Exchange Act.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Compensation Discussion & Analysis
This Compensation Discussion & Analysis (“CD&A”) provides our shareholders and other stakeholders with information about CNH Industrial’s performance, compensation framework, compensation decisions and associated governance for our Named Executive Officers (“NEOs”) in 2022. Notwithstanding its status as a foreign private issuer, CNH Industrial, as part of a commitment to transparency and shareholder engagements, has voluntarily chosen to include a CD&A that combines the disclosures required under Dutch law and the Dutch Corporate Governance Code (“DCGC”) in the remuneration section of our annual report, with the disclosure of information required to U.S. domestic filers (for example, the compensation of certain executive officers who are not members of our Board).
2022 Named Executive Officers (NEOs)
Scott W. Wine Oddone Incisa Derek Neilson Stefano Pampalone Kevin Barr
Chief Executive Officer (“CEO”) (Executive Director on the Board of CNH Industrial) Chief Financial Officer (“CFO”) & President, Financial Services President, Agriculture President, Construction Chief Human Resources Officer (“CHRO”)
Year In Review | Performance Highlights | Aligning Pay and Performance | CEO Compensation | Key Human Capital & Compensation (“HCC”) Committee Activities
Compensation Design | Compensation Philosophy | Strategic Alignment | Compensation Framework | Compensation Policies and Practices
Compensation Governance | Role of the HCC Committee | Shareholder Engagement | Use of Market Data | Compensation Risk
2022 Compensation Decisions and Outcomes | Base Salary | Annual Cash Incentives | Equity Incentives | New Hire Awards | Benefits
Additional Information | HCC Committee Report
Annual Bonus 2022 Equity Awards
• For the CEO, based 100% on corporate performance; for other NEOs a combination of corporate and individual performance • CEO equity awards delivered 75% in Performance Share Units (“PSUs”) and 25% in Restricted Share Units (“RSUs”); other NEOs equity awards are delivered 67% in PSUs and 33% in RSUs
• Corporate performance assessed based on Consolidated Adjusted EBIT Margin, Consolidated Revenue, Cash Conversion Ratio, CO2 Emission Reduction and Accident Frequency Rate
• Awards vest following a three year performance and/or service period
• PSUs vest based on Adjusted EPS, Industrial ROIC and relative TSR
(1) ”Other NEOs” row reflects the average for the non-CEO NEOs calculated in local currency.
Year in Review
Performance Highlights
In 2022, CNH Industrial delivered record results, while overcoming supply chain pressures and increased product costs. In its first year as a pure player in Agriculture and Construction, CNH Industrial achieved full year consolidated revenue of $23,551 million (up 20.8% year over year), net income of $2,039 million (up 13.2% year over year), and combined gross profit margins of 22.0% for our Agriculture and Construction businesses.
As importantly, the Company’s focused execution on key strategic priorities under the leadership of Mr. Wine has reaped considerable value for its shareholders, such as:
•The simplification of the Company’s portfolio transformed CNH Industrial in a pure player in the Agriculture and Construction businesses.
•The absolute total shareholder return (“TSR”) for CNH Industrial kept pace with the S&P 500 Industrial index in 2022 and outpaced it over the past three and five years.
•The acquisitions of Raven and Sampierana have broadened our product and services offering, enhancing capabilities in precision agriculture technology for the Agriculture segment and key excavator products for the Construction Equipment segment, respectively.
•CNH Industrial returned nearly $600 million to shareholders in the form of dividends and share repurchases.
Since Mr. Wine joined the company as its CEO in early January 2021, and through December 31, 2022, cumulative TSR reached 48% compared to 5% for the S&P 500 and 14% for the S&P 500 Industrials.
Base Period
Company/Index 2020 2021 2022
CNH Industrial $ 100 $ 153 $ 148
S&P 500 $ 100 $ 129 $ 105
S&P 500 Industrials $ 100 $ 121 $ 114
Note: TSR calculated based on dividend-adjusted closing prices as defined by Bloomberg Professional Services from Jan. 1, 2021 to Dec. 31, 2022.
CNH Industrial has also outperformed both the S&P 500 and S&P 500 Industrial companies across a range of other metrics.
When compared to the S&P 500:
•CNH Industrial’s two-year adjusted diluted Earnings Per Share (“EPS”) compounded annual growth rate (“CAGR”) of 86.4% would be ranked 90th percentile.
•CNH Industrial’s two-year revenue CAGR of 26.2% would be ranked 80th percentile.
•CNH Industrial’s two-year TSR would be ranked 80th percentile.
•CNH Industrial’s ongoing CEO total target direct compensation would be ranked 70th percentile.
When compared to the S&P 500 Industrial companies:
•CNH Industrial’s two-year adjusted diluted EPS CAGR would be ranked 90th percentile.
•CNH Industrial’s two-year revenue CAGR would be ranked 80th percentile.
•CNH Industrial’s two-year TSR CAGR would be ranked 90th percentile.
•CNH Industrial’s CEO ongoing total direct target compensation would be ranked 80th percentile.
When compared to the Compensation Peer Group:
•CNH Industrial’s two-year EPS CAGR is ranked 90th percentile.
•CNH Industrial’s two-year revenue CAGR is ranked 80th percentile.
•CNH Industrial’s two-year TSR CAGR is ranked 80th percentile.
•CNH Industrial’s CEO ongoing total direct target compensation is ranked 76th percentile.
Note: CAGR calculated based on 2022 fiscal year results or estimates vs. 2020 fiscal year results. Financial information for S&P 500 companies based on information available in Bloomberg Professional Services as of February 14, 2023.
The above results, overseen by Mr. Wine and achieved through contributions across our leadership team and Company as a whole, demonstrate the value of the investments made in our talent over recent years and the effectiveness of our NEOs.
Furthermore, Mr. Wine holds 639,119 shares whose value as of December 31, 2022 exceeds the five-times multiple of base salary under his share ownership guidelines which was required within five years of hire, as he personally invested in the Company’s stock to reach the guideline before his second anniversary. The CEO purchased 200,000 shares of the Company’s common shares in 2021 and a further 150,000 shares in 2022 and held 100% of the 289,119 shares that vested in 2022, electing not to sell any shares to cover tax withholding and paying cash instead. Mr. Wine’s investment of his own money in the Company’s stock constitutes a strong testament of the alignment between Mr. Wine’s and the shareholders’ interests, during his tenure. The Company’s stock ownership policy and executive compensation practices ensure that this alignment with shareholders’ interests will continue over time.
Our executive compensation framework is designed to continue to align and promote the alignment of pay and performance to the benefit of our shareholders.
Aligning Pay and Performance
Our business strategy is focused on enhancing our culture, continuously improving our productivity, and relentlessly innovating to drive profitable growth for our customers, employees, shareholders and all stakeholders. CNH Industrial’s compensation program is designed to motivate our employees to execute this strategy.
Under the leadership of Mr. Wine, CNH Industrial’s financial and operational results, including all of the metrics linked to incentive pay, have not only sequentially increased but have also exceeded the challenging 2022 goals validated by both the HCC Committee and the Board of Directors. Based on the Scorecard summarized below and detailed further in the balance of this CD&A, the Company performance payout factor in respect of 2022 performance was 145.89% of target.
2022 Company Bonus Plan Measure Weight Target Actual Actual vs. Target Weighted Payout
Factor
Consolidated Adjusted EBIT Margin (%) 40% 11.0% 12.4% Exceeded Target 60.37%
Consolidated Revenues @ CC(1) ($M)
20% $22,981 $24,185 Exceeded Target 26.99%
Cash Conversion Ratio 20% 70.0% 79.6% Exceeded Target 25.49%
CO2 Emissions
10% -25.0% -30.6% Exceeded Target 20.00%
Accident Frequency Rate(2)
10% 0.153 0.146 Exceeded Target 13.04%
Company Performance Payout Factor 100.0% 145.89%
(1) At constant currency
(2) Accident Frequency Rate has a declining goal value for maximum payout, so a value lower than target indicates that the achievement level exceeded target.
While no performance-based equity awards vested during fiscal 2022, fiscal 2022 results contribute favorably to the three-year cumulative adjusted EPS, average Industrial ROIC and relative TSR goals attached to PSUs granted in 2021 and 2022.
The NEOs’ remuneration in 2022 was consistent with the Company’s performance and achievement of its strategic objectives. In the Pay versus Performance (“PvP”) section, we elaborate on performance trends for the key metrics and the trends in the CEO compensation and the average of the other NEO’s compensation.
CEO Compensation
Mr. Wine was appointed as CEO of CNH Industrial in 2021, and under his leadership the Company has achieved results that have improved year-over-year, exceeding goals and expectations in a challenging operating environment. At the time of his appointment, the HCC Committee established a market-informed total target compensation package that would remain locked for five years, meaning that regardless of performance there would be no increase in Mr. Wine’s base salary, target annual incentive or target equity incentive grant value. Furthermore, there is no individual performance upside on his bonus payout; in other words, 100% of the bonus payout is exclusively linked to Company performance relative to objective, quantifiable goals. Over 90% of Mr. Wine’s target compensation is variable in nature, whereas 70% of his target compensation is in equity grants that must be held for a minimum of five years following the date of grant, further solidifying long-term shareholder alignment.
Mr. Wine’s annual incentive payout is based solely on CNH Industrial’s company performance payout factor, which itself comprises objective quantitative performance goals. Based on the achievements summarized above and detailed further in the CD&A, Mr. Wine earned an annual incentive equivalent to 145.89% of target for 2022.
At the time of his appointment and as disclosed in previous Renumeration Reports, the HCC Committee also approved the necessary cash and equity-based payments to secure Mr. Wine’s appointment. These payments are customary when companies intend to attract high-caliber candidates and are intended to replace the compensation that such candidates would be forfeiting with their prior employers. In the case of Mr. Wine such payments had exactly this rationale and were structured to emphasize performance-based equity. This maximized the immediate alignment of his interests with those of our shareholders, other executives, employees more broadly and all of our stakeholders. To address feedback from our shareholders, we have again included a summary of these payments, with additional detail on the various components. This can be found in the “New Hire” section of the CD&A.
Key HCC Committee Activities
In 2022, the HCC Committee approved adjustments to the 2021-2023 long-term incentive (“LTI”) awards due to the impact of the Demerger. As disclosed in the Company’s 2021 report, an equitable adjustment to the number of outstanding LTI awards was approved given the change in the Company’s capital structure. Additionally, the HCC Committee approved revised performance goals for the outstanding three-year PSUs (2021-2023) to account for the Company’s reduced perimeter of operations. The new goals are disclosed in detail in the Equity Incentives section of the CD&A.
Compensation Design
Compensation Philosophy
CNH Industrial’s vision to sustainably advance the noble work of global agricultural and construction workers is supported by a culture that drives long-term results for all shareholders and stakeholders, including our customers and employees. To effectively deliver on this vision in our large, global and complex company as evidenced through the geographic dispersion of our customers, employees and operations, we need to attract and retain highly qualified leaders who are aligned with the Company’s commitments and are effective operators in intricate multinational matrix organizations. Our compensation philosophy and programs are designed to instill a strong performance culture through pay for performance, rigorous performance management and Company goal-aligned incentives.
Principle How we achieve this at CNH Industrial
Align pay with strategy Compensation is linked to achievement of goals that align with our objectives
Pay for performance Compensation is based on merit, taking into account Company performance, individual performance and promotion of Company values
The majority of the NEOs’ compensation is delivered through short and long-term at-risk elements
Align pay with long-term shareholder value creation Performance goals align with the interests of our shareholders and other stakeholders
LTIs are delivered in CNH Industrial stock, with PSUs subject to a relative TSR modifier
Shareholder ownership guidelines reinforce long-term thinking and a focus on sustainable value creation
Provide competitive compensation opportunities Compensation levels are set to be competitive relative to a clearly defined, comparable, market-reference peer group, that targets a median revenue broadly aligned with CNH Industrial
Encourage prudent risk-taking Incentives are designed to discourage unnecessary or excessive risk taking
Policies (e.g., Compensation Recoupment Policy) encourage long-term thinking and safeguard against high-risk behaviors through claw-back policy
Strategic Alignment
Five priorities underpin CNH Industrial’s strategic roadmap and are reflected across our compensation programs. The measures that we use to determine compensation under our compensation programs, in particular with respect to our annual bonus and PSU awards, seek to align our NEO’s compensation with our commitment to drive results for all of our stakeholders.
STRATEGIC PRIORITIES
Customer Inspired Innovation Technology Leadership Brand
& Dealer Strength Operational Excellence Sustainability Stewardship
Financial Measures
Annual Bonus
Consolidated Adjusted EBIT Margin
Measures our success in optimizing productivity and focuses on profitable product and services sales mix
x x x x x
Consolidated Revenues
Measures our success in boosting customer demand for our products
x x x x
Cash Conversion Ratio
Measures our success in working capital management and encourages informed capital expenditure decision-making
x x
Environmental, Social & Governance (“ESG”) Measures
Annual Bonus
CO2 Emissions
Measures our success in promoting energy efficient operations
x x x x
Accident Frequency Rate
Measures our success in improving workplace safety and encourages accountability for preventative action
x x
PSUs
Adjusted EPS
Measures our success in delivering bottom-line earnings
x x x x x
Return on invested capital (industrial activities)
Measures our success in efficiently using capital
x x x x
Relative TSR
Measures our success in delivering superior market returns
x x x x x
Compensation Framework
The following table summarizes the fundamental purpose and features of our core compensation elements for our NEOs in 2022.
Element and Purpose 2022 Target Compensation Mix Key Features and Pay for Performance Rationale
CEO Other NEOs (1)
Base Salary Attract and retain well-qualified executives; provide sufficient fixed pay to discourage inappropriate risk-taking
•Fixed cash compensation
•Target at median reference for relevant benchmark
•Set based on the NEO’s role, market data, skills, geographic scope and prior experience
Element and Purpose 2022 Target Compensation Mix Key Features and Pay for Performance Rationale
CEO Other NEOs (1)
Annual Bonus
Focus and drive near-term business priorities; motivate achievement of objectives critical to annual operating and strategic plans, safety and sustainability.
•At-risk variable cash compensation
•Earned based on achieving quantifiable performance objectives
•For any incentive to be earned, a minimum level of Consolidated Adjusted EBIT Margin must be achieved
•No guaranteed minimum
•Threshold provides for 30% of the target opportunity
•Maximum capped at 200% of the target opportunity
•CEO’s incentive is based 100% on Company performance; other NEOs’ incentive is based on a combination of Company performance and an individual performance modifier range of 0%-125%
•Subject to the Compensation Recoupment Policy (clawback)(2)
Long-term Equity Incentives
Encourage achievement of long-term strategic objectives; encourage stock ownership and retention; motivate sustainable value creation; align NEOs’ interests with those of shareholders
•Incentive linked to long-term value creation
•Target awards combine PSUs (75% CEO; 67% other NEOs) and RSUs (25% CEO; 33% other NEOs)
•At-risk variable PSUs earned three years from grant based on achieving quantifiable performance objectives, with the maximum number of shares that can be earned capped at 200% of target
•CEO awards subject to a five-year holding period from the date of grant
•Subject to the Recoupment Policy (clawback)(2)
Benefits and Contractual Agreements
Attract and retain well-qualified leaders by providing post-employment security and other benefits
- - •See Benefits Summary table by NEO in the Benefits Section
•Alignment with local market norms extended to other employees
•Certain provisions and contractual terms for certain Senior Leadership Team members
(1) “Other NEOs” column reflects the average for the non-CEO NEOs calculated in local currency.
(2) No variable remuneration has been clawed-back, and no variable remuneration has been adjusted retroactively from Executive or Non-Executive Directors or Other NEOs as no relevant occurrence was identified.
Compensation Policies and Practices
Our compensation framework is supported by various Company policies and practices that further support our compensation philosophy and reflect our high corporate governance standards. Our policies also reflect the global nature of our executive leadership team and are designed to align with local market norms where relevant.
•Set challenging performance targets with pre-determined stretch goals set at the beginning of the performance period
•Pay for performance, balancing short- and long-term time horizons, conducting scenario analyses to assess alignment
•Deliver the majority of NEO compensation in the form of at-risk, performance-based pay
•Maintain robust stock ownership guidelines
•Apply a clawback policy to all incentive pay
•Consider pay ratios when establishing NEO compensation
•Operate a simple, transparent structure with goals, values and performance management that cascades through the Company
•Double trigger equity treatment applies on a change in control
•Apply a five-year holding period to CEO equity awards from the date of grant
•Encourage prudent risk taking and design programs that do not encourage unnecessary or excessive risk
•Apply compensation caps to incentive outcomes (200% of target) and permit no payout for performance below threshold
•Prohibit guaranteed compensation and loans for NEOs
•Avoid excessive compensation practices
•Engage with our shareholders to inform decision making
Compensation Governance
Role of the HCC Committee
The HCC Committee is comprised of four directors, three of whom are independent, and is responsible for oversight of executive compensation, the Company’s remuneration policy, compensation of non-executive directors, and broader human capital management matters, in accordance with Dutch laws and the DCGC.
In undertaking its role, the HCC Committee has continued interaction with the CEO, Executive Chair and other members of the senior leadership team, including the CHRO and Head of Total Rewards. No individual is present when the HCC Committee considers and discusses matters concerning such individual’s compensation. The Company also engages a compensation consultant, Willis Towers Watson (“WTW”), who routinely provides support to the HCC Committee upon request, across a broad range of compensation matters, inclusive of peer group development, market benchmarking and incentive compensation design. The HCC Committee invites WTW to attend meetings at their discretion.
Shareholder Engagement
An important input in the HCC Committee’s discussions and review of CNH Industrial’s compensation practices are the views of our shareholders.
While a majority of our shareholders are supportive of our approach to executive compensation, as evidenced by the fact that 69.8% of shares advised positively in relation to our remuneration report at our 2022 annual general meeting, a minority of shareholders did not support the application of our remuneration policy in 2021.
To better understand shareholders’ perspectives on our executive compensation programs, in 2022, we engaged with a sizable number of our largest shareholders in conversations on executive compensation, governance and sustainability, who provided valuable insights. The outreach effort was led by Mr. Houle, Chair of the HCC Committee, and included members of our Executive Compensation, Legal and Compliance and Investor Relations teams. The following is what we heard and provided clarity on:
What We Heard CNH Industrial Response
Lack of details regarding the CEO’s go-forward equity grant opportunity as a result of the transition to annual awards We have sought to enhance the clarity of our compensation disclosures in this year’s CD&A
Request for further information regarding the level of the CEO’s compensation and the potential maximum payouts CNH Industrial prides itself on the fact that the majority of NEO compensation is at-risk variable pay (73% for our CEO and an average of 59% for our other NEOs), delivered through annual bonus and PSUs.
The majority of at-risk variable pay is delivered in CNH Industrial equity in the form of PSUs whose value: i) will depend only on achievement of pre-set goals closely aligned with shareholders’ interests and ii) will vary based on our performance relative to pre-set goals and CNH Industrial’s stock price performance between the grant date and vesting date.
With the RSU element of pay, which has the function of retaining very effective leadership, the CEO has 70% of his target compensation tied to equity, which further ties this portion of CEO’s compensation to shareholders’ interests.
As a result of our exceptional performance over the last two years, the equity incentives awarded in 2021 (2020 for NEOs) are currently expected to achieve the maximum predetermined performance goals , and will reflect our stock price appreciation over that period to the extent 2023 performance reflects our current expectations.
While this combined with the shares appreciation, may result in potential values that are much higher than the fair values as of the grant date, this possibility reflects our alignment of pay and performance as well as the favorable effects of our leadership’s actions on our long-term shareholders, who over the same period have benefited from strong stock price returns and robust return of cash initiatives (buy back and dividends).
Mr. Wine’s total compensation package was fixed on appointment and will not increase prior to 2026, during which time the overhand/surplus to market median will reduce, and while this compensation package is in the upper percentile relative to our compensation peer group, the HCC Committee and the Board determined this pay package was necessary to secure Mr. Wine’s appointment (also to compensate him for the forfeited compensation package at his previous company) and was in the best interests of our shareholders, employees and broader stakeholders
Several shareholders expressed an interest in seeing CNH Industrial adopt ESG performance measures in our long-term incentives, to supplement our market-leading use of CO2 Emission reduction and Accident Frequency goals in the annual cash incentive plan. Market data from S&P 500 companies and peer group show specific and weighted ESG in LTI metrics in the industrial sector are uncommon. ESG priorities are reflected in sustainability stewardship being a top five strategic initiative while safety is a top five employee area, and we cascade the ESG goals to LTI participants. We believe in embedding the sustainability measures at the individual level to reinforce their priority and impact results across the board. The HCC Committee will reconsider this feedback in future reviews of the incentive framework.
As an international company, with a global shareholder base, we believe that it is important for us to understand and consider the diverse views of our shareholders and other stakeholders, which we seek to balance when reaching decisions on compensation. Through various forms and levels of engagement, we have solicited input from shareholders with ownership combined interests surpassing 40% in aggregate (including Exor excluding special voting rights). CNH Industrial remains committed to maintaining an ongoing dialogue with our major stakeholders and reaching out to shareholders to consider their views on the compensation formulation process.
Use of Market Data
The Company periodically benchmarks its executive and NEO compensation programs utilizing a pre-approved peer group. In 2022, the HCC Committee approved a revised peer group, which reflects CNH Industrial’s diverse business and revenues, the completion of the Demerger , and the associated impact on CNH Industrial’s size and primary industry classification (the “2022 Compensation Peer Group”).
While CNH Industrial is headquartered in Europe, the U.S. market has a prominent impact on our business. This is evident as after the Demerger, although we are listed on the New York Stock Exchange (“NYSE”) alongside and the Borsa Italiana (the Italian stock exchange), majority of the trading has shifted to the NYSE. Further evidence is supplied by our strong commercial presence in the U.S., the robust returns generated by such presence, the high concentration of our peer companies and competitors in the U.S., the talent markets in which we operate, and the nationalities represented in our leadership team. Accordingly, our compensation peer group appropriately reflects this reality.
Consistent with prior years, the 2022 Compensation Peer Group is comprised of a combination of companies based in the U.S. and Europe with a view to positioning CNH Industrial around the median of key financial scoping criteria, primarily revenue and market capitalization. At the time the 2022 Compensation Peer Group was approved by the HCC Committee, CNHI ranked at the 46th percentile on projected 2022 revenue, and the 38th percentile on market capitalization amongst its peers.
CNH INDUSTRIAL 2022 COMPENSATION PEER GROUP (the “2022 Compensation Peer Group”)
European-Listed Companies US-Listed Companies
New peers in 2022 ACS, Actividades de Construcción y Servicios, S.A.
Alstom SA
KION GROUP AG
Sandvik AB
Illinois Tool Works, Inc.
Parker-Hannifin Corporation
Westinghouse Air Brake Technologies Corporation
Retained peers from 2021 AB Volvo
Continental AG
AGCO Corporation
Caterpillar Inc.
Cummins Inc.
Deere & Company
General Dynamics, Inc.
PACCAR, Inc
Prior peers removed for 2022 given reduced relevance following the Demerger BAE Systems plc
Rolls-Royce Holdings plc
Traton SE
Valeo SA Honeywell International, Inc.
Magna International
When benchmarking compensation for NEOs other than Mr. Wine, the Company considers a combination of available data for this peer group and survey data provided by its consultant, WTW. Similar principles are used in identifying survey peers based on size and industry applicability. In assessing compensation levels, the Company primarily references median figures, considering various factors, such as location and scope of role, in setting individual NEO pay relative to median.
Compensation and Risk
CNH Industrial is committed to maintaining and enhancing a culture focused on integrity and accountability. The Company has adopted several policies, including those detailed below, that reflect our culture as well as our compensation principles of aligning executives’ interests with long-term shareholder value creation and encouraging prudent risk taking.
Stock Ownership Requirements
Our NEOs are subject to robust stock ownership guidelines, which require them to build up an interest in CNH Industrial stock over time as summarized below.
Minimum Requirements CEO: five-times base salary with an interim milestone of two and a half-times base salary as of December 31, 2022
Other NEOs: three-times base salary
Time Horizon Within five years of policy implementation (2021) or an NEO’s date of appointment as applicable
Counted Equity Interests Beneficially owned shares or shares in which the executive has a beneficial interest, e.g., owned by a spouse
Unvested equity awards do not count towards the requirement
Retention Requirement The CEO must hold vested shares for five years from grant date
Other NEO’s must hold 50% of net shares following vesting until the stock ownership requirement is met
At the end of 2022, all NEOs were progressing towards their stock ownership requirement within the permitted five-year time horizon or in compliance with their respective stock ownership requirement.
Compensation Recoupment Policy
Our compensation recoupment policy (the “Compensation Recoupment Policy”) authorizes the Company to recover, or “clawback,” incentive compensation with the ability to retroactively adjust if any cash or equity incentive award was predicated upon achieving financial results and the financial results are subsequently subject to an accounting restatement.
Covered Employees All current or former executive officers
Triggering Events Substantial accounting restatements of financial results that informed incentive outcomes, regardless of fraud or misconduct
Covered Compensation Awards made under our equity incentive plan, which encompasses all incentive compensation awarded to NEOs including annual cash incentives under the Company Bonus Plan (“CBP”) and equity grants of PSUs and RSUs. The Company reserves the right to recoup excess amounts over that which would have been paid under an accounting restatement to the extent practicable.
Time Horizon Incentive compensation received during the three-year period preceding the date on which the Company is required to prepare an accounting restatement
No recoupment of incentive compensation was warranted under any of the Company’s incentive plans during 2022.
2022 Compensation Decisions and Outcomes
The following sections detail NEO compensation and incentive outcomes for 2022 and explain the impact of the Demerger on the 2021-2023LTI awards as approved by the HCC Committee in 2022.
Base Salary
None of our NEOs’ base salaries were increased in 2022. As previously disclosed, the CEO’s target compensation, including his base salary, is fixed for the five-year duration of his employment agreement.
Named Executive Officer 2021
Base Salary
(USD)1
Base Salary
(USD)1
Increase
Scott W. Wine 1,700,000 1,700,000 -%
Oddone Incisa 663,421 663,421 -%
Derek Neilson 580,389 580,389 -%
Stefano Pampalone 524,056 524,056 -%
Kevin Barr 500,000 500,000 -%
1 The non-US base salaries of Messrs. Incisa, Neilson, and Pampalone are converted to U.S. dollars at the 2022 full year average exchange rate for both 2021 and 2022 for a constant currency comparison per the following table:
NEO Local Currency 2022 Average Exchange Rate
Oddone Incisa EUR 1.053
Derek Neilson GBP 1.2348
Stefano Pampalone CHF 1.0481
Annual Cash Incentive
Our NEOs’ annual variable compensation, delivered under the CBP, is contingent on the achievement of pre-established, rigorous financial measures and other designated performance objectives, such as ESG KPIs. The goals of our incentive plans align to our five strategic priorities which, in addition to customer service, emphasize safety, quality, delivery and profitability for all stakeholders. Awards under our CBP are subject to our Compensation Recoupment Policy.
TARGET BONUS OPPORTUNITY X COMPANY PERFORMANCE X INDIVIDUAL PERFORMANCE = EARNED BONUS
75% - 200% of year-end salary 0 - 200% of target CEO: 0-100% of target;
Other NEOs: 0 - 125% of target To earn any bonus, a threshold hurdle rate of Consolidated Adjusted EBIT Margin must be achieved
Subject to an overall cap of 200% of target
The HCC Committee approved the 2022 compensation design with reference to CNH Industrial’s strategic priorities, communicated goals and market practices. With respect to any annual bonuses, a threshold hurdle rate of Consolidated Adjusted EBIT Margin must be achieved. Company performance is assessed based on three financial performance measures and two ESG measures, with established threshold, target and maximum goals. Achieving threshold performance earns 30% of the target opportunity, and maximum performance earns 200% of the target opportunity.
2022 CBP Measures(1)
Weight Definition
Consolidated Adjusted EBIT Margin % 40% Consolidated Adjusted EBIT divided by Consolidated Revenues, goal must be achieved for plan to pay out
Consolidated Revenues @CC $ 20% Consolidated Revenues in constant currency
Cash Conversion Ratio % 20% Free Cash Flow of Industrial Activities divided by Adjusted Net Income
CO2 Emissions %
10% Reduction in emissions versus 2018, measured as percentage change in tons of CO2 emissions per hours of production in the manufacturing processes
Accident Frequency Rate 10% Number of injuries divided by the number of hours worked multiplied by 100,000
(1)We make adjustments to U.S. GAAP financial measures for purposes of our financial performance measures to ensure the results properly reflect management contributions.
CBP Outcomes
The following goals and achievements applied for 2022, with the HCC Committee approving a Company performance payout factor of 145.89% of target.
Measure(1)
Weight Threshold Target Maximum Actual Actual vs. Target Weighted Payout
Factor
Consolidated Adjusted EBIT Margin Hurdle(2)
7.7% 12.4% Exceeded
Consolidated Adjusted EBIT Margin 40% 9.6% 11.0% 13.7% 12.4% 112.7% 60.44%
Consolidated Revenues @ CC ($M) 20% $20,108 $22,981 $26,428 $24,185 105.2% 26.99%
Cash Conversion Ratio 20% 59.5% 70.0% 105.0% 79.6% 113.7% 25.49%
CO2 Emissions
10% -23.8% -25.0% -28.8% -30.6% 122.4% 20.00%
Accident Frequency Rate(3)
10% 0.161 0.153 0.130 0.146 95.4% 13.04%
Company Performance Payout Factor 30.0% 100.0% 200.0% 145.89%
(1) We make adjustments to U.S. GAAP financial measures for purposes of our financial performance measures to ensure the results properly reflect management contributions.
(2) If this hurdle level of Consolidated Adjusted EBIT Margin is not achieved, no annual cash incentive will be paid, regardless of the level of performance achievement in respect of the other measures
(3) Accident Frequency Rate has a declining goal value for maximum payout, so a value lower than target is an exceeds target achievement.
While the CEO is only subject to the company performance payout factor and any negative discretion applied by the HCC Committee, other NEOs’ awards are also subject to an individual performance factor, which can range from 0% - 125%, based on achievements against previously determined performance goals. Following an assessment of individual performance during 2022, the HCC Committee approved individual performance factors ranging from 90%-125% of target.
The table below summarizes the resulting annual cash incentives in U.S. dollars earned by the NEOs under the CBP in respect of 2022 performance, which were paid in March 2023:
Named Executive Officer Target Annual Cash Incentive
(USD)(1)
2022 Earned Annual Cash Incentive
(USD)(1)
% of Target Cash Incentive Earned in 2022
Scott W. Wine(2)
3,400,000 4,960,300 145.89%
Oddone Incisa 663,421 1,064,632 160.48%
Derek Neilson 580,389 1,058,407 182.36%
Stefano Pampalone 524,056 688,086 131.30%
Kevin Barr 375,000 601,800 160.48%
(1) The non-U.S. target and earned annual cash incentives of Messrs. Incisa, Neilson, and Pampalone are converted to U.S. dollars at the 2022 full year average exchange rate as previously disclosed in the Base Salary section above.
(2) See the breakout of Mr. Wine’s CBP payment by each KPI in the Dutch disclosures section of the report.
Equity Incentives
Our equity incentives delivered under our LTI plan are a vital component of our NEOs’ overall reward packages. Equity incentives support our long-term strategy and recognize our NEOs’ leadership and the achievement of our strategic objectives. As of 2022, the Company grants equity awards on an annual basis, whereas awards granted in and prior to 2021 were made on a ‘front-loaded’ basis, meaning awards were generally made once every three years. This change was made in response to shareholder feedback, to better align our design with competitive market norms, to enhance the retention impact of our awards, and to maximize alignment with our strategic priorities. Equity is delivered in a combination of PSUs and RSUs, both of which are subject to the terms of our Compensation Recoupment Policy. The Company does not pay dividends or dividend equivalents on PSUs and RSUs.
Named Executive Officer Target Annual
LTI Opportunity
(USD)1
PSU Weight RSU Weight
Scott W. Wine 12,000,000 75.0% 25.0%
Oddone Incisa 2,487,827 67.7% 33.3%
Derek Neilson 2,176,458 67.7% 33.3%
Stefano Pampalone 1,048,113 67.7% 33.3%
Kevin Barr 1,000,000 67.7% 33.3%
1The non-U.S. target LTI of Messrs. Incisa, Neilson, and Pampalone are converted to U.S. dollars at the 2022 full year average exchange rate as previously disclosed in footnote under the Base Salary section.
Mr. Wine is required to hold any shares that vest for a period of up to five years from the date of grant. Other NEOs are required to hold 50% of net shares that vest to the extent that they have not achieved their stock ownership guideline.
2022-2024 Performance Share Unit (“PSU”) Awards
The performance measures for the 2022 PSU awards comprise two weighted financial metrics and a modifier based on CNH Industrial’s TSR performance relative to a group of our peers. All measures are calculated over the period of 1.1.2022 - 12.31.2024.
50%
Adjusted EPS + 50%
Industrial ROIC x 0.75x - 1.25x
Relative TSR Multiplier = FINAL PAYOUT
2022-2024 PSU Measures(1)
Weight Definition
Adjusted EPS 50% Net income (loss) excluding any nonrecurring items (after tax), divided by the weighted average outstanding number of common shares on a fully diluted basis, measured on a cumulative basis
Industrial ROIC 50% Adjusted EBIT (after-tax) divided by Average Industrial Invested Capital, calculated as a three-year average
Relative TSR Modifier Three-year TSR measured relative to peers (see further detail below)
(1) We make adjustments to U.S. GAAP financial measures for purposes of our financial performance measures to ensure the results properly reflect management contributions.
The payout ranges for our PSU awards range from a threshold of 50% of target to a maximum of 200% of target for outstanding performance. If the threshold performance goals are not achieved, none of the PSUs will vest.
Cumulative 2022 - 2024 Adjusted EPS
< Threshold Threshold Target Outstanding Relative TSR Modifier
< $3.88 $3.88 $4.56 ≥ $5.54
Average 2022 -2024 Industrial ROIC Outstanding ≥ 20.2% 100% 125% 150% 200% X Outstanding ≥ 75th Percentile
1.25
Target 18.0% 50 75% 100% 150% Target 50th Percentile
Threshold 15.3% 25% 50% 75% 125% Threshold ≤ 25th Percentile
0.75
< Threshold < 15.3% 0% 25% 50% 100%
PSU payouts are pro-rated for performance between the threshold, target and outstanding performance goals. The maximum payout is subject to an overall cap of 200% of target.
Relative TSR performance will be assessed against a single peer group of sixteen companies that reflect both the agriculture and construction equipment aspects of our business.
Agriculture Peers Construction Equipment Peers Composite Peers (Agriculture and Construction Equipment)
AGCO Corporation AB Volvo Komatsu Ltd. Bucher Industries AG
Husqvarna AB Alstom SA Sandvik AB Cummins Inc.
Kubota Corporation Caterpillar Inc. Terex Corporation Deere & Company
The Toro Company Kion Group AG Westinghouse Air Brake Technologies Corp Trimble Inc.
Performance in respect of all measures will be assessed over the three-year period ending December 31, 2024.
2022 RSU Awards
The 2022 RSU awards also vest on a cliff basis, following the conclusion of a three-year period, subject to continued service and satisfactory individual performance.
2021 - 2023 PSU Awards
As a result of the Demerger in 2022, the performance period of the 2021-2023 PSU awards spans pre- and post-Demerger periods. The HCC Committee realigned the performance conditions for the proportional post-Demerger CNH Industrial scope of business operations only. The HCC Committee sought to ensure that the performance goals remained challenging and reflected the same degree of stretch after the perimeter adjustment.
The 2021 PSU awards were subject to a similar performance matrix used for the 2022 PSUs, assessing cumulative Adjusted EPS, average Industrial ROIC and a relative TSR modifier. To reflect the Demerger, the HCC Committee approved updated Adjusted EPS and Industrial ROIC goals to simply reflect CNH Industrial’s contributions pre- and post-Demerger. In addition, the HCC Committee determined that the TSR component would be assessed relative to the original peer group for 2021 performance, and the updated peer group disclosed in respect of the 2022 PSUs for the remaining two years of the performance period. The resulting modifier would be weighted one-third based on 2021 performance and two-thirds based on 2022 - 2023 performance when approving a final outcome.
The adjusted 2021- 2023 performance goals, restated to reflect CNH Industrial’s (off-highway) performance contributions contemplated in the original goals are as follows:
Cumulative 2021 - 2023 Adjusted EPS
< Threshold Threshold Target Outstanding Relative TSR Modifier
< $1.67 $1.67 $2.09 ≥ $2.51
Average 2021 - 2023 Industrial ROIC Outstanding ≥ 12.0% 100% 125% 150% 200% X Outstanding ≥ 75th Percentile
1.25
Target 10.1% 50% 75% 100% 150% Target 50th Percentile
1.00
Threshold 8.4% 25% 50% 75% 125% Threshold ≤ 25th Percentile
0.75
< Threshold < 8.4% 0% 25% 50% 100%
The relative TSR modifier for 2021 has been assessed relative to the original peer group which comprised AB Volvo, AGCO Corporation, Caterpillar Inc., Cummins Inc., Deere & Company, Komatsu Ltd., Kubota Corporation, PACCAR Inc., and Traton SE. CNH Industrial ranked first relative to these companies for 2021, and so one-third of the final relative TSR modifier will be scored at 1.25. Two-thirds of the modifier will be based on CNH Industrial’s performance relative to the peer group disclosed in respect of the 2022 PSUs for the final two years of the performance period.
As with the 2022 PSUs, payouts are pro-rated for performance between the threshold, target and outstanding performance goals, and the maximum payout is subject to an overall cap of 200% of target.
New Hire Awards
When the HCC Committee and/or the Board determine it appropriate, the Board, at the recommendation of the HCC Committee, may approve additional compensation associated with the recruitment of new executives. In relation to the recruitment and appointment of Mr. Wine as CEO, effective January 2021, the HCC Committee recommended, and the Board approved, payments to secure Mr. Wine’s appointment. As disclosed in 2021, these payments were made to compensate Mr. Wine for amounts that he was forfeiting with his prior employer upon accepting the role at CNH Industrial.
Replacement For Vehicle Key Terms Value
Forfeited 2020 annual cash incentive Cash Intended to replace Mr. Wine’s fully earned but unpaid annual cash incentive for 2020 performance
Paid to Mr. Wine in April 2021 and included in the bonus column of the Summary Compensation Table for 2021
Total: $1,573,000
2021: $1,573,000
Forfeited 2018-2020 long-term incentive awards Cash Intended to replace portions of Mr. Wine’s LTI awards granted in 2018, 2019 and 2020 for which he had contributed to the performance achievement of but would not earn and weren’t covered by CNH Industrial’s 2021-2023 front-loaded target LTI awards described below
Replacement value will be paid in three cash installments in 2022, 2023 and 2024 broadly aligned to the timing and values of the original awards that would have vested at his prior employer
The agreed amount reflects the estimated performance achievements and value associated with the underlying awards for the time Mr. Wine was employed
The first payment was made in 2022 and is included in the bonus column of the Summary Compensation Table for 2022
The payments are payable in the event of a Qualifying Termination but would be forfeited if the CEO voluntarily terminated prior to the payment dates.
Total: $7,578,000
2022: $4,248,000
2023: $2,355,000
2024: $975,000
Equity The one-time 3X annual target LTI award served multiple purposes:
Using 2X of the RSU awards ($6 M) in addition to the Cash LTI Sign-On ($7.578 million noted above) to compensate Mr. Wine for the total value of his 2018, 2019 and 2020 LTI awards forfeited with his prior employer on joining CNH Industrial, an estimated total value of $13.578 million at the time of the offer
Using 1X each of the RSUs and PSUs to cover the annual target LTI award for the 2021 grant cycle for the 2021-2023 performance period, and providing the remaining 2X PSUs as a one-time highly leveraged at risk PSU award to incentivize Mr. Wine to join and be immediately invested in the long-term success of CNH Industrial and aligned with shareholder interests
The majority of the award was delivered in PSUs with performance conditions consistent with those applicable to other 2021-2023 NEO PSU awards. The value of these awards is included in the Stock Awards column of the Summary Compensation Table for 2021
The on-going annual LTI awards are $12M at target.
2021 grant date fair value: $36,090,720
75% in PSUs
25% in RSUs
As a result of payments being staggered to align with the LTI awards Mr. Wine forfeited on joining CNH Industrial, amounts will appear in our Summary Compensation Table for 2022, as well as 2021, 2023 and 2024. No other new hire or one-time awards were made to our NEOs during 2022.
Mr. Wine’s first two years with CNH Industrial have been impressive, with stellar financial results, reinforcing the HCC Committee’s conviction that the right candidate was selected and the use of performance-based equity in his buyout was appropriate. As a result, the value of his outstanding compensation is positively linked to the Company’s performance. For further discussion, see the “Pay versus Performance” section of this CD&A.
The HCC Committee considered multiple factors when establishing Mr. Wine’s ongoing target compensation, including what was considered appropriate to secure and retain a high-caliber leader with an exceptional track record who previously had a highly competitive compensation arrangement. As previously discussed, Mr. Wine’s regular annual target compensation is fixed through 2025 and totals $17.1 million, with 73% tied to the Company’s performance and 70% in CNH Industrial equity awards.
Benefits
CNH Industrial seeks to align NEO benefits with local market norms and to provide eligible NEOs with participation in broader employee benefits programs offered in the countries where each NEOs is based. Some provisions are specific to the NEO’s Senior Leadership Team role. The following table summarizes the key benefits offered to each of the NEOs:
Benefits Summary Wine, Scott W. Incisa, Oddone Neilson, Derek Pampalone, Stefano Barr, Kevin
CEO CFO & President, Financial Services President, Agriculture President, Construction CHRO
Post-Employment Benefits Defined Contribution(1)
401k & NQ Deferred Compensation Plans Italy contract DC Plan: FIPDAF U.K. DC plan: GPP and supplemental benefits Swiss DC plan: LPP (second pillar) 401k & NQ Deferred Compensation Plans
Pension(2)
N/A Closed DB effective Feb 1, 2020; prior service benefits N/A
U.S. Retiree Healthcare(3)
Vests after five years CEO service and minimum age of 55 N/A Vests after three years SLT service and minimum age of 55
Other Benefits Car Benefit(4)
Per country lease car policy Reimbursement in lieu of Swiss leased car Per country lease car policy
Personal Usage of Corporate Aircraft(5)
limited to 175 flight hours per year N/A
Benefit Allowances(6)
N/A Legacy international transfer benefits N/A
Tax Equalization(7)
N/A N/A
Contractual Agreements Country of Agreement U.S. employment agreement Italy national contract plus 2019 SLT terms agreement U.K. employment agreement with union provisions plus 2019 SLT terms agreement Swiss employment agreement plus 2019 SLT terms agreement U.S. employment agreement
Restrictive Covenants(8)
One year Non-Compete and Non-Solicitation One year Non-Compete and Non-Solicitation Two year Non-Compete and Non-Solicitation One year Non-Compete and Non-Solicitation Two year Non-Compete three year Non-Solicitation
Severance(9)
12 months 34 months 24 months 17 months 24 months
(1) All of the NEOs participate in the defined contribution plans in their respective countries. In the U.S., CNHI Industrial also has a non-qualified deferred compensation plan that allows contributions over the qualified 401(k) plan limits to continue plus allows additional elective deferrals. There are no supplemental plans offered by the Company in Italy or in Switzerland. For Mr. Neilson, contributions made into the U.K. GPP are over tax limits and as such are taxable which the Company covers. Additional supplemental contributions are paid as he earns them and are his tax responsibility.
(2) Mr. Neilson has a U.K. defined benefit that has been closed to service accruals as of February 1, 2020.
(3) Messrs. Wine and Barr are eligible for post-employment supplemental retiree healthcare if they remain employed until age 55 and have five years as CEO and three years as Senior Leadership Team member service, respectively.
(4) Senior Leadership Team members' benefits follow their respective country's lease car policy with the exception of a larger variety of brands/models are available, if available in their country. Mr. Pampalone receives reimbursement for car leased in Italy in lieu of Swiss leased car. Mr. Barr elects not to use the leased car benefit available per the U.S. policy for Executives.
(5) The CEO's personal use of private aviation for commuting from his residence to Chicago is limited to 100 flight hours per year and additionally for a maximum of 75 hours per year of other personal travel. Any taxes associated with the use of the aircraft will be the sole responsibility of the CEO.
(6) Mr. Pampalone receives an annual housing allowance of CHF 30,000, taxable to him, as part of a legacy agreement when he transferred to Lugano Switzerland from Italy in December 2012.
(7) Mr. Pampalone’s position is based in Lugano, Switzerland but also maintains tax residency in Italy. Per his employment agreement, he is tax equalized to Switzerland taxes, meaning the Company pays any higher Italy taxes, net (grossed up).
(8) There is no additional compensation during the restrictive covenant period(s) as their Senior Leadership Team terms and conditions are deemed full consideration for the restrictions.
(9) See the table for "Potential Payments at Termination" for estimates based on eligibility as of December 31, 2022 and explanation of benefits. The eligible pay for Mr. Incisa’s months of severance is base salary, the average of 3-year bonus and car benefit. The other NEO’s eligible pay is base salary.
Additional Information
HCC Committee Report
The HCC Committee has reviewed and discussed with management the CD&A set forth above. Based on such review and discussions, the HCC Committee recommended to the Board that the CD&A be included in this Form 10-K for filing with the SEC and in the Remuneration section of our Annual Report.
Léo W. Houle (Chair)
Alessandro Nasi
Catia Bastioli
Howard W. Buffett
Executive Compensation Tables
In this section, we provide tabular and narrative information regarding the compensation of our NEOs for fiscal 2022. All values are in US dollars unless otherwise noted.
Fiscal 2022 Summary Compensation Table
NEO & Position Year Salary ($) (1)(2)
Bonus ($) (3)
Stock Awards ($) (4)
Non-Equity Incentive Compensation ($) (5)(6)(7)
Change in Pension Value and Nonqualified Deferred Compensation Earnings($) (8)(9)
All other Compensation ($) (10)
Total ($)
Scott W. Wine
CEO
2022 1,700,000 4,248,000 11,511,892 4,960,300 18,640 476,829 22,915,662
2021 1,700,000 1,573,133 36,090,720 5,100,000 2,588 337,846 44,804,287
Oddone Incisa
CFO & President, Financial Services
2022 663,421 2,470,857 1,064,632 323,954 4,522,864
2021 679,773 - 1,587,829 156,117 2,423,719
2020 555,465 8,272,864 508,391 111,563 9,448,283
Derek Neilson President, Agriculture
2022 580,389 2,177,993 1,058,407 - 119,959 3,936,748
2021 646,679 - 1,527,815 - 173,559 2,348,053
2020 573,227 8,800,187 579,248 175,279 117,999 10,245,939
Stefano Pampalone
President, Construction
2022 524,056 1,010,805 688,086 240,749 2,463,696
2021 546,984 - 1,148,667 237,386 1,933,037
2020 506,813 4,069,254 426,781 178,443 5,181,291
Kevin Barr
CHRO
2022 500,000 989,480 601,800 4,324 175,410 2,271,014
2021 386,538 3,381,283 656,300 405 - 4,424,526
(1) For Messrs. Wine and Barr, the amounts include deferrals into the CNH Industrial Deferred Compensation Plan. Salary amounts deferred in fiscal 2022 are shown in the Fiscal 2022 Nonqualified Deferred Compensation Table.
(2) For the non-U.S. based NEOs, their local currency base earnings were converted to USD using the full year average exchange rate for the given year. For each fiscal year, the table below shows the exchange rates (USD per local currency) used for each of the non-U.S. based NEOs:
Name Local Currency 2022 Average Exchange Rate 2021 Average Exchange Rate 2020 Average Exchange Rate
Oddone Incisa EUR 1.0530 1.1827 1.1422
Derek Neilson GBP 1.2348 1.3759 1.2838
Stefano Pampalone CHF 1.0481 1.0940 1.0670
(3) The amount in 2022 represents the first of three annual installments of a cash award which will total $7.578 million. This award replaces the CEO’s forfeited long-term awards which were not covered under the CNH Industrial 2021-2023 LTI awards. The second and third installments will equal $2.355 million and $0.975 million, respectively, and are set to be paid in 2023 and 2024. The 2023 payment was made in fiscal 2023 and will be reported in the Company’s executive compensation disclosure for fiscal 2023. The amount in 2021 was a cash sign-on paid upon hiring to compensate for the forfeited 2020 bonus from the prior employer.
(4)Represents the aggregate grant date fair value of PSUs and RSUs computed in accordance with FASB ASC Topic 718. The values in this column exclude the effect of estimated forfeitures. Assumptions made in the calculation of these amounts are included in Note 17, "Share-Based Compensation,” of our consolidated financial statements. For PSUs, the value at the grant date is based upon a target payout of the performance metrics over the three-year performance period. For the 2022 PSUs, if the highest level of performance were achieved, the value of the PSU awards as of the grant date would be as follows: $20,189,638 (Wine), $4,128,914 (Incisa), $3,639,516 (Neilson), $1,689,099 (Pampalone), and $1,653,464 (Barr). RSUs will vest three years after the grant date, at which time they may be settled in CNHI common stock. Refer to the Fiscal 2022 Grants of Plan-Based Awards table and footnote 17 "Share-Based Compensation" thereto for a detailed description of the grant date fair value of our stock awards.
(5)As discussed in the CD&A under “CBP Outcomes” in the Annual Cash Incentive section, based on actual company performance, the NEOs earned a CBP award equal to 145.89% of the target opportunity. The awards for NEOs other than the CEO were adjusted for individual performance by a factor that ranged from 90% to 125.
(6)Mr. Wine deferred 50% of the earned CBP bonus into the CNH Industrial Deferred Compensation Plan. Bonus amounts deferred in 2022 are shown in the Fiscal 2022 Nonqualified Deferred Compensation Table and relate to the 2021 plan year bonus.
(7)Messrs. Incisa, Neilson and Pampalone’s local currency cash bonuses were converted to USD using the full year average year exchange rate for the given year, as shown in the Base Salary section above.
(8)For Messrs. Wine and Barr, these amounts include above market interest earned on deferred compensation for each year.
(9)For Mr. Neilson, these amounts include the change in present value (“PV”) of his defined benefit plan accumulated benefits. The U.K. CNH Pension Scheme was discontinued effective January 31, 2020 for additional service, but benefits increase annually for inflation as measured by the U.K. retail price index (“RPI”). The valuation changes for market conditions impacting the assumptions, primarily the discount rate. The change in the PV of the Accumulated Benefit over 2021 (a reduction of £40,858) and 2022 (a reduction of £914,553) have been set to zero for disclosure purposes.
(10)All Other Compensation incurred in fiscal 2022 is detailed and explained in the following table:
NEO Car ($)(a)
Personal Usage of Corporate Aircraft ($)(b)
Benefit Allowances ($)(c)(d)
Tax Equalization ($)(e)
Retiree Healthcare ($)(f)
Defined Contribution Savings Plan Company Contributions
($)(g)(h)(i)
Total ($)
Scott W. Wine 16,075 124,947 131,808 204,000 476,830
Oddone Incisa 10,110 51,033 262,812 323,955
Derek Neilson 47,580 72,379 119,959
Stefano Pampalone 18,866 31,443 19,662 170,778 240,749
Kevin Barr 129,256 46,154 175,410
a.The NEOs are eligible for a leased car pursuant to the Company’s car policy in each country in connection with the Company’s arrangements with Stellantis NV. The values provided above reflect the value of each NEO’s selected car, as selected from a list of Fiat Chrysler brands and per the respective NEO’s countries’ tax code. Mr. Barr does not utilize the lease car benefit that is available under the U.S. car policy.
b.Per Mr. Wine’s employment agreement, he is entitled to limited personal usage of the Company’s corporate aircraft.
c.Mr. Incisa received a seniority premium of 1/13th annual salary per the Italy Contract terms in recognition of his 25th work anniversary.
d.Mr. Pampalone receives an annual housing allowance of CHF 30,000, taxable to him, as part of a legacy agreement when his role transferred to Lugano, Switzerland from Italy in December 2012.
e.Mr. Pampalone’s position is based in Lugano, Switzerland but he is also a resident of Italy for tax purposes. Per Mr. Pampalone’s employment agreement, he is tax equalized to Switzerland taxes, meaning the Company pays any amount in respect of Italian taxes that would result in Mr. Pampalone’s net taxes exceeding what he otherwise would have paid in Switzerland.
f.Messrs. Wine and Barr are eligible for post-employment supplemental retiree healthcare if they remain employed until age 55 and Mr. Wine has five years as CEO and Mr. Barr has three years as Senior Leadership Team member service, respectively. The amounts provided above represent the annual service costs of future potential benefits per the annual actuarial valuation.
g.All the NEOs participate in their countries’ defined contribution plan for salaried employees, and in the case of Mr. Incisa, for Directors as defined in the Contratto Collettivo di Lavoro per i Dirigenti, (“Italy Contract”), the collective labor contract for Directors. The amounts provided above include the 2022 contributions the Company made into their respective savings plans.
h.For Messrs. Wine and Barr, company matching amounts above the qualified 401(k) plan limits are also included above and are also disclosed in the non-qualified deferred compensation table.
i.For Mr. Neilson, the amount listed above includes supplemental contributions over the tax qualified limits which are paid directly to Mr. Neilson as they are earned. The supplemental benefits are described in a later section regarding Pension Benefits. Of the total amount provided above, $15,212 covers the tax and gross-up on the portion that is tax-protected by the Company.
Fiscal 2022 Grants of Plan-Based Awards
The following table provides additional information regarding both the short-term and LTI awards and potential payout ranges for awards that were granted in fiscal 2022. The short-term incentive awards were granted under the 2022 CBP and the LTI awarded solely in equity awards consists of RSU and PSU awards under the CNH Industrial 2022-2024 LTI plan. The equity awards will
deliver payout in future years subject to meeting the vesting and performance conditions. These awards are further described in the CD&A under “2022 Compensation Decisions and Outcomes | Annual Cash Incentives | Equity Incentives.”
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2)
Estimated Future Payouts Under Equity Incentive Plan Awards(3)
Number of Shares of Stock Units
All Other Stock Awards: Number of Shares of Stock or Units(4)
Grant Date Fair Value of Stock Awards(5)
NEO & Position Grant Date(1)
Threshold Target Maximum Threshold Target Maximum
Scott W. Wine
CEO
4/28/2022 $1,020,000 $3,400,000 $6,800,000
5/20/2022 313,050 626,100 1,252,200 208,700 $11,511,892
Oddone Incisa
CFO & President, Financial Services
4/28/2022 $199,026 $663,421 $1,326,841
5/20/2022 57,934 115,867 231,734 57,933 $2,470,857
Derek Neilson
President, Agriculture
4/28/2022 $174,117 $580,389 $1,160,778
5/20/2022 51,067 102,133 204,266 51,067 $2,177,993
Stefano Pampalone
President, Construction
4/28/2022 $157,217 $524,056 $1,048,113
5/20/2022 23,700 47,400 94,800 23,700 $1,010,805
Kevin Barr,
CHRO
4/28/2022 $112,500 $375,000 $750,000
5/20/2022 23,200 46,400 92,800 23,200 $989,480
(1) For the non-equity incentive plan awards, the grant date is the date on which the Committee approved the range of estimated potential payouts for the 2022 performance year under the CBP. For equity awards, the grant date is the notification date for awards granted to the NEOs after the Committee approved the 2022-2024 LTI plan. For the non-U.S. based NEOs, the range of payout was converted to USD using the 2022 full year average exchange rates (see the related footnote in the Summary Compensation Table for the FX rates).
(2) The threshold, target and maximum columns show the range of potential payouts under the CBP for achievement of the Company’s performance metrics. The metrics and range of performance goals for threshold, target and maximum are described in the CD&A in the “2022 Compensation Decisions and Outcomes | Annual Cash Incentives” section. If actual performance is between the threshold, target and maximum amounts, the earned CBP award will be prorated. For the NEOs other than the CEO, an individual modifier between 0% and 125% will be applied based on the CEO’s assessment of their individual and team goals set in the Company’s Performance Management Process (“PMP”) for 2022.
(3) Represents the potential payout range of PSUs granted in May 2022. The number of shares that vest is based on the achievement of predetermined performance metrics’ goals for the three-year period, January 1, 2022 through December 31, 2024. The metrics and range of performance goals for threshold, target and maximum are described in the CD&A in the “2022 Compensation Decisions and Outcomes | Equity Incentives” section. At the end of the three-year performance period, the actual award, delivered as CNH Industrial common stock, can range from 0% to 200% of the original grant. The awards may be forfeited for unfavorable individual performance at the sole discretion of the Committee. No dividend equivalents are earned during the vesting period.
(4) Represents the number of RSUs granted in May 2022. RSUs will vest on April 30, 2025, at which time they will be settled in CNH Industrial common stock. The awards may be forfeited for unfavorable individual performance at the sole discretion of the Committee. No dividend equivalents are earned during the vesting period.
(5) Amounts shown represent the grant date fair value of equity awards granted to the NEOs in fiscal 2022 calculated in accordance with FASB ASC Topic 718. The values in this column exclude the effect of estimated forfeitures. For both the PSUs and RSUs, fair value is the market value of the underlying stock on the grant date, excluding dividends. The valuation of the PSUs assumes a target payout.
For additional information on the valuation assumptions, refer to Note 17, “Share-Based Compensation,” of CNH Industrial’s consolidated financial statements.
Outstanding Equity Awards at Fiscal 2022 Year-End
The following table itemizes outstanding RSUs and PSUs held by the NEOs, for the fiscal year ending December 31, 2022. Valuation depends stock price and PSUs also depend on achievement/overachievement of set goals included in our strategic business plan.
Stock Awards
NEO & Position Grant Date Number
of Shares
or Units of
Stock That
Have Not
Vested(1)
Market Value
of Shares for
Units of Stock
That Have Not
Vested(2)
Equity Incentive Plan Awards
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(3)
Equity Incentive
Plan Awards
Market or Payout
Value Unearned
Shares, Units
Other Rights That
Have Not Vested(4)
Scott W. Wine
CEO
01/04/2021 578,240 9,032,621 5,206,448 82,067,545
05/20/2022 208,700 3,173,612 1,252,200 19,382,926
Total 786,940 12,206,233 6,458,648 101,450,471
Oddone Incisa
CFO & President, Financial Services
12/03/2020 155,497 2,429,001 1,038,996 16,377,356
05/20/2022 57,933 880,963 231,734 3,587,033
Total 213,430 3,309,964 1,270,730 19,964,389
Derek Neilson
President, Agriculture
12/03/2020 131,557 2,055,037 1,087,182 17,136,896
05/20/2022 51,067 776,554 204,266 3,161,853
Total 182,624 2,831,591 1,291,448 20,298,749
Stefano Pampalone
President, Construction
12/03/2020 56,753 886,532 480,260 7,570,182
05/20/2022 23,700 360,396 94,800 1,467,418
Total 80,453 1,246,928 575,060 9,037,600
Kevin Barr
CHRO
04/01/2021 50,048 781,794 304,836 4,805,031
05/20/2022 23,200 352,793 92,800 1,436,460
Total 73,248 1,134,587 397,636 6,241,491
(1) Includes the outstanding RSUs that were granted in 2021 and 2020 that will vest in two remaining equal installments on 4/30/2023 and 4/30/2024. The RSUs granted in 2022 will vest on 4/30/2025. The RSUs will be settled in CNH Industrial common stock.
(2) The amounts shown represent the number of RSUs that have not vested multiplied by the FMV/unit of as of 12/31/2022.
(3) The outstanding PSUs that were granted in 2021 and 2020 vest on 02/28/2024, subject to the final determination of the three-year performance. The number of PSUs for those grants represents the expected performance payout based on achievement through 12/31/2022, which is at maximum, 200% of target. The PSUs granted in 2022 vest on 02/28/2025, subject to the final determination of the three-year performance, and the number of PSUs represents maximum payout as expected payout is over target. The share units will be settled in CNH Industrial common stock.
(4) The amount shown represents the number of PSUs that have not vested multiplied by the FMV/unit of as of 12/31/2022.
Stock Awards Vested at Fiscal 2022 Year-End
The following table shows the equity awards that vested during 2022 for the CEO. No vesting of awards occurred for the other NEOs in 2022.
NEO & Position Vesting Date Number of Shares Acquired on Vesting (#)(1)
Value Realized on Vesting ($)(2)
Scott W. Wine 4/30/2022 289,119 $4,157,531
(1) The amount reflects the vesting of the first of three annual installments of the 2021-2023 LTI RSU award.
(2) FMV at date of vesting was $14.38/share.
Pension Benefits
Mr. Neilson, who is located in the U.K., is the only NEO who participates in a qualified defined benefit pension plan that provides a benefit based on an individual’s service and salary. Mr. Neilson participates in the CNH Pension Scheme (the “Scheme”) which all
salaried U.K. employees hired prior to December 31, 2002 participate in. The Scheme was closed to future service accruals from January 31, 2020.
The following table shows the present value of accumulated benefit using assumptions consistent with the Company’s financial disclosure on the Scheme.
NEO & Position
Plan Nam
Number of Years of Credited Service(1)
Present Value of Accumulated Benefit(2)
PaymentsDuring Last Fiscal Year
Derek NeilsonPresident, Agriculture
CNH Pension Scheme 22.8 £883,299 £ 0
(1) The years of credited service ended January 31, 2020 when the plan was discontinued for additional service.
(2) The present value of the accumulated benefit fluctuates year-over year for market conditions impacting the financial assumptions used, primarily the discount rate. The actual benefit is adjusted annually for inflation.
Plan Features of the Scheme Definition/Description
Form of Benefit Lifetime benefit begins at retirement based on individual’s service and salary. Members have the option to exchange up to 25% of their pension for a tax-free cash lump sum.
Pensionable Service Mr. Neilson is entitled to senior staff benefits under the Scheme and as such received pensionable service credit based on his actual service (“Pensionable Service”).
Pensionable Pay Final pensionable pay varies by service period, but Mr. Neilson is subject to capped pensionable pay levels.
Accrual Rates For service up to March 31, 2012, the accrual rate is 1/55th of final pensionable pay for each complete year of service. The accrual rate applied for service from April 1, 2012 is 1/80th
Normal Retirement Date The earliest date for an unreduced benefit is age 65.
Revaluation Prior to Retirement Pensions earned in respect of Pensionable Service on or before April 5, 2009 will be revalued each year in line with the Retail Price Index (“RPI”), up to a maximum of 5.0% a year.
Pensions earned in respect of Pensionable Service on or after April 6, 2009 will be revalued each year in line with the annual increase in the Consumer Prices Index (“CPI”), up to a maximum of 2.5% each year.
Increases in Payment Pensions earned in respect of Pensionable Service completed before April 6, 1997 are not guaranteed to increase in payment, but they are reviewed annually by the Company and are increased at its discretion when financial resources permit.
Pensions earned in respect of Pensionable Service completed between April 6, 1997 and April 5, 2005 will be increased automatically each year in line with the CPI, up to a maximum of 5% a year.
Pensions earned in respect of Pensionable Service on or after April 6, 2005 will be increased automatically each year in line with the annual increase in the Consumer Prices Index (“CPI”), up to a maximum of 2.5% each year.
Defined Contribution Benefits
Each of the NEOs participates in a Company-sponsored defined contribution plan available to salaried employees in their country of employment. All such defined contribution plans are tax-qualified plans. The U.S. based NEOs, Messrs. Wine and Barr also participate in a nonqualified deferred compensation plan for limits over the tax-qualified plans, as described in the “Nonqualified Deferred Compensation” section. Mr. Neilson receives supplemental contributions over the tax-qualified limits which are paid to him directly for his own personal retirement savings.
The following table provides an overview of certain provisions of the defined contribution plans of the NEOs:
NEO & Position Plan Employee Contributions Employer Matching Contributions Supplemental Contributions
Scott W. Wine
CEO
CNH Industrial U.S. Retirement Savings / CNH Industrial Deferred Compensation Plan Up to 10% of base salary to receive maximum Company match
In 2022, 20% deferral elected Maximum 12% of base salary 401(k) elections continue over the qualified plan limits
See Deferred Compensation Section
Oddone Incisa
CFO & President, Financial Services
FIPDAF (Fondo Integrativo Previdenza Dirigenti Aziende Fiat)
Termination Indemnity or TFR (Trattamento di Fine Rapporto) fund accumulates as earned
Both per Italy Contract
3.5%
None
5.0% on uncapped earnings
7.41% (1/13.5th of salary) on regular, repetitive nature pay
None
None
Derek Neilson
President, Agriculture
CNH Industrial Group Personal Pension Plan (the GPP)
None £ 19,666 per U.K. fiscal year, tax protected, per 2012 agreementrevalued each April for RPI
£ 27,306 per U.K. fiscal year, not tax protected; per 2020 pension subsidy agreement
revalued each April based on U.K. Pension Earnings Cap
Stefano Pampalone
President, Construction
LPP (2nd Pillar) pension
5% of base + bonus (capped beginning 2022); 21.5% combined employer and employee contributions up to max insured salary per Swiss law, 2022: CHF 860’400 (base + bonus) None
Kevin Barr
CHRO
CNH Industrial U.S. Retirement Savings / CNH Industrial Deferred Compensation Plan Up to 10% of base to receive maximum Company match
In 2022, 10% deferral elected Maximum 12% of base salary 401(k) elections continue over the qualified plan limits
See Deferred Compensation Section
Nonqualified Deferred Compensation Plan Benefits
In the U.S., CNH Industrial offers the Case New Holland Industrial Inc. 2005 Deferred Compensation Plan (the “CNH Industrial Deferred Compensation Plan”) to certain U.S. salaried employees, including U.S. based NEOs, to provide longer-term savings opportunities on a tax-efficient basis for retirement and future income needs. Similar deferred compensation benefits are commonly offered by U.S. companies with which we compete for talent. Messrs. Wine and Barr participate in the CNH Industrial Deferred Compensation Plan.
Key Features of the CNH Industrial Deferred Compensation Plan
Contributions
Eligible participants may elect annually to tax defer up to 90% of their salary and eligible bonus and also elect supplemental contributions over the qualified limits under the CNH Industrial U.S. Retirement Plan (a 401(k) plan).
There are two types of supplemental contributions under the CNH Industrial Deferred Compensation Plan:
•Elective Deferrals, also called Excess 401(k) Contributions (made by employees)
•Employer Matching Contributions (Company matching contributions on Excess 401(k) contributions)
Elective Deferrals: Once the participant has reached the elective deferral limit in the CNH Industrial U.S. Retirement Savings Plan, supplemental tax-deferred contributions (Excess 401(k) Contributions) are credited to their CNH Industrial Deferred Compensation Plan account for the remainder of the year.
Employer Matching Contributions: Supplemental Employer Matching Contributions are made based on Excess 401(k) Contributions. The participant must complete a year of eligibility service to begin receiving matching contributions. The Company matches 200% of the first 2% of eligible pay and then 100% of the next 8% of pay that is contributed to the 401(k) plan and the CNH Industrial Deferred Compensation Plan, for a maximum match of 12% of eligible pay.
The first-year eligibility for Company matching contributions was waived for Mr. Wine, as part of his CEO employment agreement. The amounts were credited to Mr. Wine’s CNH Industrial Deferred Compensation Plan account at the end of 2021. No exceptions were made for Mr. Barr or other NEOs in the CNH Industrial Deferred Compensation Plan.
The U.S. based NEO’s 2022 deferral elections are noted in the footnotes to the Nonqualified Deferred Compensation table.
Earnings
CNH Industrial Deferred Compensation Plan accounts are credited with a rate of return based on the effective annual yield of 130% of Moody’s Corporate Bond Index on all participant and company matching contributions. The earnings are also on a tax-deferred basis, thus maximizing the combined benefit of pre-tax deferrals and tax-deferred growth.
Because this rate of return was above the U.S. applicable federal rate (“AFR”) each year, earnings in excess of the AFR are included on the Summary Compensation Table.
Vesting
•Participant deferrals and related earnings are 100% vested.
•Employer Matching Contributions vest after three years of continued service.
Forms of Payment
The CNH Industrial Deferred Compensation Plan provides flexible payment options for participants who remain employed as of a specific date (a “scheduled distribution”) and/or after the participant retires or otherwise terminates their employment with the Company.
Retirement Accounts: Can be elected to be paid in a lump sum (after six months of termination for key employees such as the NEOs) or in annual installments over a period of up to 10 years.
•If installments are elected, that election will apply if the participant at the time of termination of employment reaches age 62 or reaches age 55 with 10 years of credited service.
•If the participant is not retirement eligible at the time of termination of employment with the company, accounts will be paid in a lump sum.
•If the participant becomes disabled while employed, accounts are treated as retirement payments, regardless of reaching retirement eligibility.
Scheduled Distributions: Can be paid in a lump sum or annual installments up to five years.
•The payment commencement year must be at least five years after the plan year when the schedule is established.
•All scheduled distribution subaccounts that commence in a year after the participant’s termination of employment will be paid according to the participant’s retirement election for that plan year.
Fiscal 2022 Nonqualified Deferred Compensation Table
NEO & Position Plan Executive Contributions in Last FY (1)
Registrant Contributions in Last FY (2)
Aggregate
Earnings in
Last FY (3)
Aggregate
Withdrawals
/Distributions in
Last FY (3)
Aggregate Balance at Last FYE (4)
Scott W. Wine
CEO
CNH Industrial Deferred Compensation Plan 3,713,846 188,308 224,450 - 5,382,469
Kevin Barr
CHRO
CNH Industrial Deferred Compensation Plan 279,500 35,269 23,661 - 613,208
(1)The amounts in this column represent employee compensation deferrals that are included in the Fiscal 2022 Summary Compensation Table under the “Salary” and “Non- Equity Incentive Plan Compensation” columns. Mr. Wine deferred 20% of his salary in excess of tax-qualified 401(k) plan limits and additional 50% of salary and bonus, while Mr. Barr deferred 10% of his salary in excess of tax-qualified 401(k) plan limits and an additional 70% of his salary to the extent possible after covering FICA taxes and employee benefit contributions.
(2)The amounts in this column represent the Company’s matching contributions during the fiscal year and are included in the Fiscal 2022 Summary Compensation Table under the “All Other Compensation” column, which also includes the Company matching contributions on deferrals under the tax-qualified 401(k) plan.
(3)The account balances earn 130% of the Moody’s Bond Index. The annual rates of return by quarter in fiscal 2022 are shown in the following table.
2022 Quarters 130% of Moody’s Bond Rate
Qtr 1 3.861%
Qtr 2 5.044%
Qtr 3 6.125%
Qtr 4 6.708%
(4)Of the aggregate balance, the amounts that were reported as compensation in the Summary Compensation Table in 2021, the first year of participation for Messrs. Wine and Barr, were $1,233,127 and $ 271,674, respectively.
Fiscal 2022 Potential Payments Upon Termination or Change in Control
Potential Payments upon Change in Control
The CNH Industrial N.V. Equity Incentive Plan (the “EIP”) includes change in control provisions that apply to participants’ outstanding equity awards and are intended to facilitate continuity of management in the event of a change in control (as defined in the EIP) (“CIC”).
The Committee believes the EIP’s CIC provisions:
-Encourage executives to act in the best interest of shareholders when evaluating transactions that, without a CIC arrangement, could be personally detrimental;
-Keep executives focused on running the business in the face of definitive, contemplated or rumored transactions;
-Protect CNH Industrial’s value by retaining key talent despite potential corporate changes;
-Protect CNH Industrial’s value after a CIC by including restrictive covenants (such as non-compete provisions) and a general release of claims in favor of CNH Industrial; and
-Help CNH Industrial remain competitive in its ability to attract and retain skilled executives.
Other Potential Payments Upon Other Qualifying Terminations
In addition, the NEOs and other Senior Leadership Team members have qualifying termination terms and conditions which include other qualifying terminations.
No severance payments were made to Executive or Non-Executive Directors.
Fiscal 2022 Potential Payments upon Termination Table (USD)
Payments in connection with a CIC or other qualifying termination are shown in the following table and described by each NEO below:
NEO & Position CIC
Provision Salary(1)
Bonus LTI Welfare benefits Total
Scott W. Wine
CEO
Change in Control with Qualifying Termination 1,700,000 3,330,000 62,931,469 22,209 67,983,678
Qualifying Termination - Other than Change in Control 1,700,000 3,330,000 62,276,770 22,209 67,328,979
Oddone Incisa
CFO & President, Financial Services
Change in Control with Qualifying Termination 3,987,356 - 13,292,158 - 17,279,514
Qualifying Termination - Other than Change in Control 3,987,356 - - - 3,987,356
Derek Neilson
President, Agriculture
Change in Control with Qualifying Termination 1,130,421 - 12,980,966 14,111,387
Qualifying Termination - Other than Change in Control 1,130,421 - - - 1,130,421
NEO & Position CIC
Provision Salary(1)
Bonus LTI Welfare benefits Total
Stefano Pampalone
President, Construction
Change in Control with Qualifying Termination 767,247 - 5,765,728 - 6,532,975
Qualifying Termination - Other than Change in Control 767,247 - - - 767,247
Kevin Barr
CHRO
Change in Control with Qualifying Termination 1,000,000 - 4,255,332 33,834 5,289,166
Qualifying Termination - Other than Change in Control 1,000,000 - - 33,834 1,033,834
(1) For Messrs. Incisa, Neilson, and Pampalone, their local currency potential payments for termination were converted to U.S. dollars using the December 31 year end exchange rate, as shown in the table below:
NEO Local
Currency 2022
year end
Incisa EUR 1.0666
Neilson GBP 1.2026
Pampalone CHF 1.0832
CIC and a Qualifying Termination
In the event of a CIC and a Qualifying Termination within 24 months following the CIC, all terms and conditions of the outstanding equity awards shall be deemed met on RSUs and all performance criteria shall be deemed achieved at target levels and all other terms and conditions met on PSUs; and all RSUs and PSUs shall be paid out as promptly as practicable (but in no event later than 60 days following the termination event). If the awards are not assumed as part of a CIC, awards vest prior to the CIC. All performance criteria shall be deemed achieved at target levels and all other terms and conditions shall be considered met on PSUs.
Termination Provisions by NEO
Scott W. Wine
Per the employment agreement between Mr. Wine and CNH America LLC, effective January 4, 2021, a Qualifying Termination other than a change in control is defined as a termination of Executive's service as an employee of the Company and all CNH Industrial Group entities due to (A) a termination by the Company other than Cause, (B) the Executive's resignation with Good Reason, (C) the Executive's death, or (D) the Executive's Disability. Good Reason is without the Executive's consent a material diminution of salary, target bonus, and/or duties, responsibilities, and authority or a material breach of the employment agreement by the Company occurred, which the Executive gave the Company notice of termination within 90 days of the event constituting Good Reason and the Company did not cure such event within 30 days of the Executive's notice.
Under a Qualifying Termination, Mr. Wine would be entitled to the following:
•Cash severance equal to one (1) times the Executive’s annual base salary (gross), in accordance with DCGC for Executive Directors,
•Any unpaid Sign-On Cash Long-Term Award (shown in the Bonus column in the table),
•A portion of the outstanding equity awards will continue to vest based on the time employed during the vesting period and subject to the performance terms and conditions; provided, however, that with respect to the Initial RSU Award, no less than two-thirds of the Initial RSU Award (taking into account any portion of such award settled prior to the date of the Qualifying Termination) will continue to vest, and
•Company provided health care benefits and life, accidental death and dismemberment, and disability insurances continue for the duration of the severance period unless electing a lump sum payment.
Oddone Incisa
Under the statutory requirements of the Italy Contract, upon an involuntary termination without cause, Mr. Incisa would be entitled to 12 months of eligible pay for the notice period, plus 22 months of additional indemnity based on his service, age and having dependents. Eligible pay is defined based on annual base salary plus the average of last three years’ cash bonus plus any taxable car benefit value.
In the case of any other termination, Mr. Incisa would be entitled to the following:
•Termination with cause: no payment
•Resignation: no payment
•Retirement: 22 months of eligible pay
•Death due to illness: 12 months of eligible pay
Derek Neilson
Upon an involuntary termination without cause, Mr. Neilson is entitled to certain benefits, as provided in the employment agreement between Mr. Neilson and CNH Industrial, effective March 22, 2019. Mr. Neilson will be entitled to receive cash severance equal to two times his annual base salary (gross), less any statutory and/or contractual severance payments, garden leave payment and/or pay in lieu of notice payments, except in the event that Mr. Neilson elects the Separation Payment with Early Retirement Pension as defined in the December 14, 2006 Enabling Agreement between CNH UK Limited and the Transport and General Workers’ Union (the “TGWU”).
A qualifying termination is defined as a termination by the Company of Mr. Neilson's service as an employee of the Company and all of its affiliates during Mr. Neilson’s service on the Senior Leadership Team for any reason other than: (i) Mr. Neilson’s death; (ii) Mr. Neilson’s disability (as defined in the employment agreement); (iii) Mr. Neilson's resignation or retirement (other than with good reason within 24 months after a change of control, in each case as defined in the employment agreement); or (iv) for cause (as defined in the employment agreement).
Stefano Pampalone
Under the Swiss Salaried separation policy, upon an involuntary termination without cause, Mr. Pampalone would be entitled to 12 months of base pay for severance, three months' base pay for the notice period and two months' base pay for a seniority separation indemnity, for a total of 17 months' base pay. In the case of any other termination, Mr. Pampalone would be entitled to the following:
•Termination with cause: no payment
•Resignation: no payment
•Retirement or Death: two months seniority separation
•Disability: the Company may terminate employment after six months' absence and three months’ notice period and two months seniority separation is payable.
Kevin Barr
Upon an involuntary termination without cause, Mr. Barr is entitled to certain benefits, as provided in the employment agreement between Mr. Barr and CNH America LLC, effective April 1, 2021. Mr. Barr will be entitled to receive cash severance equal to two times his annual base salary (gross). The Company-provided health care benefits and life, accidental death and dismemberment, and disability insurances continue for the duration of the severance period unless electing a lump sum payment.
A Qualifying Termination is defined as a termination by the Company of Mr. Barr's service as an employee of the Company and all of its affiliates during Mr. Barr's service on the Senior Leadership Team for any reason other than: (i) Mr. Barr’s death; (ii) Mr. Barr’s disability (as defined in the employment agreement); (iii) Mr. Barr’s resignation or retirement (other than with good reason within 24 months after a change of control, in each case as defined in the employment agreement); or (iv) for Cause (as defined in the employment agreement).
Fiscal 2022 Pay Versus Performance (“PvP”)
A key principle of the Company’s compensation philosophy, incorporated throughout our compensation policies and programs, is pay for performance. CNH Industrial leverages variable pay elements tied to challenging Company goals that are aligned to the business strategy, while ensuring no adverse risk taking by offering appropriate and competitive fixed pay elements. The following tables, supporting footnotes and narrative and graphic disclosure aim to demonstrate the link between compensation actually paid, per the SEC definition, for our NEOs to the Company’s performance, both in absolute terms and as compared to the market for the fiscal years 2022, 2021 and 2020.
Specifically, this PvP section discusses the relationship between:
•“Compensation actually paid” (“CAP”) by the Company and the total compensation as disclosed in the Summary Compensation Table (“SCT”);
•CAP and the Company’s financial performance (TSR, GAAP Net Income, Adjusted Diluted EPS and Consolidated Revenues); and
•The Company’s TSR and peer group TSR.
Year SCT
Total for PEO 1
$(1)
CAP to PEO 1
$(1)
SCT
Total for PEO 2
$(2)
CAP to PEO 2
$(2)
SCT
Total for PEO 3
$(3)
CAP to
PEO 3
$ (3)
Average SCT Total for
non-PEO NEOs
$(4)
Average CAP to non-PEO NEOs
$(4)
Value of Initial Fixed $100 Invest
based on: Net
Income
$B(7)
Company Selected Measure: Adjusted Diluted EPS $(8)
Company Selected Measure: Consolidated Revenues
$(9)
CNHI
TSR (5)
Peer Group TSR(6)
2022 n/a n/a n/a n/a 22,915,662 24,697,237 3,298,580 3,502,374 173 121 2,039 1.46 23,511
2021 n/a n/a n/a n/a 44,804,287 108,388,604 2,782,334 11,403,669 178 130 1,801 1.28 19,496
2020 2,031,133 447,010 3,149,194 3,149,194 n/a n/a 8,291,838 9,092,540 117 109 (198) 0.42 14,799
(1)These columns reflect the SCT and CAP for Hubertus Mühlhäuser, CEO until his departure on March 22, 2020.
(2)These columns reflect the SCT and CAP for Suzanne Heywood’s Acting CEO role in 2020 who assumed the role upon the departure of Hubertus Mühlhäuser.
(3)These columns reflect the SCT and CAP for our CEO, Scott W. Wine, who served as our Principle Executive Officer (PEO) in 2021 and 2022.
(4)These columns reflect the average SCT and CAP for Messrs. Incisa, Neilson, Pampalone and Barr for each respective year of 2022, 2021, and 2020.
(5)CNH Industrial TSR is indexed from 2019, source S&P Capital IQ.
6)The Peer Group used for TSR comparisons reflects S&P 500 Industrial Index indexed from 2019, source S&P Capital IQ.
(7)Net Income per U.S. GAAP is a required metric for the PvP Table but is not currently used in our variable incentive plans as a performance measure.
(8)Adjusted Diluted EPS, a company selected metric, is a key metric in the LTI Plan and for investor guidance. This measure is a non-GAAP measure, and the reconciliation can be found on page 91.
(9)Consolidated Revenues is a key supplementary Company selected metric used, which is used in the CBP and for investor guidance. It represents the Consolidated Revenues for continuing operations in each year to show a comparable trend.
To calculate CAP for our PEOs and other NEOs the following adjustments were made to SCT total pay:
Adjustments CEO serving as PEO Other NEO Average
2022 2021 2020
(PEO 1)
(PEO 2)
2022 2021 2020
Summary Compensation Table Total 22,915,662 44,804,287 2,031,133 3,149,194 3,298,580 2,782,334 8,291,838
Deduction for amount reported in “Stock Awards” column of the Summary Compensation Table 11,511,892 36,090,720 1,662,284 845,321 7,047,435
Addition of fair value at fiscal year (FY) end, of equity awards granted during the FY that remained outstanding 17,710,807 99,675,037 2,402,570 1,454,332 6,412,380
Addition of fair value at vesting date, of equity awards granted during the FY that vested during the FY 1,615,486
Addition of change in fair value at FY end versus prior FY end for awards granted in prior FY that remained outstanding (8,574,871) (536,492) 7,287,773 (123,259)
Addition of change in fair value at vesting date versus prior FY end for awards granted in prior FY that vested during the FY 4,157,531 (375,222) 724,552
Deduction of the fair value at the prior FY end for awards granted in prior FY that failed to meet their vesting conditions 1,208,900
Deduction for values reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table 58,426
Addition for the Service Cost attributable to services rendered during the FY 1,957
Adjustments CEO serving as PEO Other NEO Average
2022 2021 2020
(PEO 1)
(PEO 2)
2022 2021 2020
Compensation Actually Paid 24,697,237 108,388,604 447,010 3,149,194 3,502,374 11,403,669 9,092,540
Memo: Total Equity Value under CAP 13,293,467 99,675,037 (1,584,122) - 1,866,078 9,466,657 7,904,607
CAP equity valuations are calculated on a basis consistent with grant date fair valuations, with assumptions updated to reflect the respective measurement dates. The following tables summarizes the assumptions used for each fiscal year end valuation:
Performance Stock Units
Measurement Year 2022 2021 2020
Performance Factor 1.5 x for 2022-2024
2.0x for 2021-2023 PSU 2.0x for 2021-2023 PSU 1.0x for 2021-2023 PSU
Dividend Yield $0.30 $0.13 $-
Stock Price $16.06 $19.43 $12.84
Fair Values
2021-2023 PSU $15.76 $18.83 $12.11
2021-2024 PSU $15.48 N/A N/A
Restricted Stock Units
Measurement Year 2022 2021 2020
Dividend Yield $0.30 $0.13 $-
Stock Price $16.06 $19.43 $12.84
Fair Values
2021-2023 RSU - Tranche 1 N/A $19.13 $12.71
2021-2023 RSU - Tranche 2 $15.76 $18.83 $12.11
2021-2023 RSU - Tranche 3 $15.48 $18.53 $11.81
2022-2024 RSU - Cliff Vest $15.21 N/A N/A
Compensation Actually Paid Versus Company Performance
CNH Industrials’ compensation framework emphasizes pay for performance, as evidenced in only 10% of the CEO’s target direct compensation being fixed in the form of base salary. Given Mr. Wine’s appointment as CEO in 2021, both the Summary Compensation Table pay and Compensation Actually paid figures comprise multiple elements of equity compensation, namely:
•A 2021 equity grant, comprising PSUs (75%) and RSUs (25%) was awarded at three-times the target annual value. As explained in the “New Hire Awards” section on page 63 these awards served multiple purposes including buying out Mr. Wine’s forfeited awards on joining CNH Industrial, providing an initial equity grant as part of the 2021-2023 performance cycle, and lastly a one-time inducement for joining through performance-based PSUs. The three-times multiple was the framework approved by shareholders for Executive Directors and consistent with the awards to other NEOs as part of our transition to an annual equity grant framework in response to feedback from our shareholders.
•A 2022 equity grant with a target grant value of $12M, consistent with the annual target package approved by the HCC Committee on Mr. Wine’s appointment and fixed for five years, again delivered in a combination of PSUs (75%) and RSUs (25%).
These awards are subject to vesting periods and the only realized value so far from these awards is from the first tranche of the 2021-2023 RSUs that vested in 2022 and must be held by the CEO until January 4, 2026.
•The remaining RSUs granted in 2021 and 2022 will vest in 2023 and 2024 for the 2021 grant and in 2025 for the 2022 grant and will remain subject to a holding period for a further two years into 2026 and 2027. During this time, they remain subject to stock price exposure, maximizing alignment with shareholder interests.
•The PSUs granted in 2021 and 2022 will not vest until 2024 and 2025 respectively and are subject to quantifiable, objective performance conditions based on cumulative Adjusted EPS, Average Industrial ROIC and relative TSR. Following vesting,
these shares will also remain subject to a two-year holding period. During these time horizons, the underlying awards will remain at-risk dependent on our performance, with the potential payout ranging from 0% - 200% of target, as well as being exposed to our stock price performance.
The table above calculates CAP in accordance with the required methodology, meaning that these outstanding awards have been valued prior to vesting based on fair values. The fair values take into account our performance to date, both in terms of stock price appreciation between the date of grant and our fiscal year ends and our projected payout factors relative to the performance measures applicable to the 2021 and 2022 PSUs. As a result of our performance in the first two years of Mr. Wine’s tenure as CEO, the values on this basis have increased materially since the date of grant. The equity value included in the CAP calculation reflects our FMV/unit appreciation of 31% and 12% since the date of grant in 2021 and 2022, respectively, the 2021 PSUs projecting a payout factor of 200% of target after two of the three years in the performance period having elapsed, and the 2022 PSUs projecting a payout factor of 150% of target after one of the three years in the performance period having elapsed.
The charts below illustrate the component factors that result in the differences between the grant date fair values and the measurement date fair values as included in our 2021 and 2022 CAP calculations for our CEO serving as PEO in those years.
Compensation Actually Paid Versus Company Performance
The charts below illustrate the component factors that result in the differences between the grant date fair values and the measurement date fair values as included in our CAP calculations.
PEO and Average NEO CAP versus TSR 2020-2022. The Company outperforms the peer in TSR.
As shown below, CNH Industrial’s stock performance has outperformed the peer group. This material increase during 2021 is a contributing factor to the increase in CAP during the same period relative to the grant date fair value included in SCT pay. The following charts show the TSR trend versus the PEO’s SCT compensation and CAP and other NEO's SCT compensation and CAP, respectively.
PEO and Average NEO CAP versus U.S. GAAP Net Income
The chart below shows the relationship between CAP and U.S. GAAP Net Income. The Company does not use U.S. GAAP Net Income in our compensation program; however, significant improvement in Net Income from 2020 contributed to stock price, and shareholder value and impacted long term incentive valuation.
PEO and Average NEO CAP vs Adjusted Diluted EPS 2020-2022
The chart below shows the relationship between CAP and our company selected measure of Adjusted Diluted EPS, which features in our PSU performance measures for 2021 and 2022. There was a significant increase in Adjusted Diluted EPS during 2021, and a further increase in 2022 which contributed to the assessment of mid-cycle PSU payout factors in establishing the fiscal year end fair values for outstanding awards.
PEO and average NEO CAP versus Consolidated Revenues
The chart below shows the relationship between CAP and our supplementary performance measure of Consolidated Revenues. While this is not an explicit performance measure used to determine the vesting of PSUs, we believe it is an important driver of stock price performance and accordingly it will influence the value of outstanding equity awards.
Tabular List of Company Performance Measures
The following table alphabetically lists the measures we believe are most important in linking compensation actually paid to company performance during 2022.
(1) Adjusted Diluted EPS ($)
(2) Cash Conversion
(3) CNH Industrial TSR
(4) Consolidated Adjusted EBIT Margin (%)
(5) Consolidated Revenues ($)
(6) Industrial Return on Invested Capital (“Industrial ROIC %)
All of the identified financial measures are listed. Further details on these measures and how they feature in our compensation plans can be found in our Compensation Discussion & Analysis.
Fiscal 2022 Pay Ratio
As required by and pursuant to SEC 17 C.F.R. § 229.402, the Company’s median employee total compensation as compared to Scott W. Wine, CEO, for 2022 has been calculated.
•The annual total compensation for our median employee was $ 47,208.
•The annual total compensation of our CEO as reported in the Summary Compensation Table was $ 22,915,662.
•The ratio of Mr. Wine’s total compensation to our median employee’s total compensation for fiscal year 2022 was approximately 485 to 1.
Our median employee was identified using the following methodology:
•We chose November 30, 2022 as the date to determine median employee
•We included all full-time, part-time, temporary, and seasonal employees globally (excluding the CEO) for a total of 39,883 employees, 26.2% being located in the USA and 73.8% outside the USA
•The Company did not exclude any employees when determining our employee population.
•We used annualized base pay as our consistently applied compensation measure to identify the median employee.
The CEO pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC 17 C.F.R. § 229.402 based on the methodologies and assumptions described above.
Compensation of Directors
The Board of Directors consists of a one-tier structure including Executive Directors (the Chair and the CEO roles) with managerial roles and Non-Executive board members with supervisory roles. The Board as a whole has collective responsibility for the strategy of the Company and is currently composed of nine Directors. The Board of Directors of the Company appointed the following internal committees: (i) an Audit Committee, (ii) an Environmental, Social and Governance Committee, and (iii) an HCC Committee. The Board also appointed Mr. Léo W. Houle Senior Non-Executive Director.
The CEO is also the primary NEO in this report whose compensation is disclosed in detail in the CD&A and corresponding compensation tables section. The Chair’s compensation is disclosed in this section with the Non-Executive Directors, although her compensation is structured differently, as indicated below.
We have structured the compensation of our Non-Executive Directors with the following objectives in mind:
•Offer competitive compensation to attract and retain highly qualified leaders to guide and govern a large, global, complex organization;
•Recognize the substantial investment of time and expertise necessary for the directors to discharge their duties;
•Ensure that compensation is easy to understand and is regarded positively by our shareholders and employees; and
•Comply with Dutch corporate governance best practices and comply with Dutch and U.S. SEC regulations.
The compensation of our Non-Executive Directors is fixed and not dependent on the Company’s financial results, in accordance with DCGC which sets governance practices and expectations for companies incorporated in the Netherlands. Accordingly, they receive their annual retainer fee, committee membership, and committee chair fee payments (collectively, “Fees”) entirely in cash. Non-Executive Directors do not receive benefits upon termination of their service as directors, nor any other benefit, perquisites. No meeting fees are paid, but we do reimburse directors for expenses related to meeting attendance. For some countries, Non-Executive Directors and the Company are subject to social contributions on the fees earned.
Compensation is reviewed annually for the Chair and Non-Executive Directors by the HCC Committee.
Compensation for Non-Executive Directors
The compensation of Non-Executive Directors is governed by the CNH Industrial N.V. Directors’ Compensation Plan within the scope of the CNH Industrial N.V. Remuneration Policy. The following chart describes amounts we pay to Non-Executive Directors:
Non-Executive Director Compensation Total
Annual cash retainer $125,000
Additional retainer for Audit Committee member $25,000
Additional retainer for Audit Committee Chair $35,000
Additional retainer for member of other Board committees $20,000
Additional retainer for Chair of other Board committees $25,000
In 2019, upon the recommendation of the HCC Committee, the Board resolved to implement share ownership guidelines for the Non-Executive Directors. Applicable to Non-Executive Directors appointed or reappointed in April 2019 or thereafter, Non-Executive Directors are required to own Company shares in an aggregate amount of not less than 1x their annual retainer fee, which is $125,000, within 24 months of first appointment to the Board. The Non-Executive Directors are expected to hold Company shares as a long-term investment and, as such, are expected to hold their Company shares while on the Board and for an additional three months after their Board service terminates. All of the Non-Executive Directors have currently met the guideline except for the newly appointed Directors, Messes. Bastioli and Ms. Tamsons who have until December 23, 2023 to meet the guideline.
Compensation for the Chair
The Chair role, held by Suzanne Heywood, is an Executive Director managerial board role, whose compensation differs from the Non-Executive supervisory board members. The Chair is not a NEO and therefore her compensation is not included in the CD&A section of this report.
The following table summarizes the fundamental purpose and features of the Chair’s compensation elements for 2022:
Element and Purpose Chair Key Features
Base Salary Provide competitive salary; provide sufficient fixed pay to discourage inappropriate risk-taking
•Fixed cash compensation
•Target at median reference for relevant benchmark for Chair only role
•Set taking into account role scope, market data, and an individual’s skills and prior experience
•Base salary for fiscal 2022 was set at $500,000 (fixed)
Long-term Equity Incentives (LTI)
Encourage achievement of long-term strategic objectives; encourage share ownership and retention; motivate sustainable value creation; align Chair’s interests with those of shareholders
•At-risk variable equity compensation
•Target awards combine PSUs (75%) and RSUs (25%)
•PSUs earned based on achieving quantifiable performance objectives, with the maximum number of shares that can be earned capped at 200% of target
•Chair awards subject to a five-year holding period from the date of grant
•Subject to the Recoupment Policy (clawback)
•Prorated equity award vesting in the event of death, disability, or involuntary termination by the Company (not for cause).
•The target equity grant value for fiscal 2022 was $1,500,000
•The associated maximum equity value, before share price movements are taken into account is $2,625,000 (assumes 75% of the award is earned at 200% of target and 25% of the award is earned at 100% of target)
Post-employment Benefits
Provide future income security
•Retirement savings benefits comparable to UK-based salaried employees
•No cash severance benefit
Other Benefits
Attract and retain well-qualified executives
•Select U.K. Executive benefits including life, accident, and disability insurance.
•Limited personal usage of car service for security
Share ownership guidelines
Align Chair’s interests with those of shareholders
•Acquisition and holding of CNHI common shares with a value of five-times base salary within five years of appointment to the Board.
•Requirement already met
Equity Awards
The Chair participates in the same CNH Industrial LTI programs as the NEOs and select key leaders of the Company which are described in the CD&A section of this report. The following series of tables show the activity of the Chair’s LTI awards for the fiscal year 2022.
Grants of Plan Based Awards
(for fiscal year ending 12/31/2022)
Estimated Future Payouts
Under Equity Incentive Plan Share Unit Awards(1)
All Other Share Unit Awards (#)(2)
Grant Date Fair Value of Share Units ($)(3)
Grant Date Threshold (#) Target (#) Maximum (#)
Suzanne Heywood, Chair 5/20/2022 39,150 78,300 156,600 26,100 $1,439,676
(1) The PSUs cover the performance period January 1, 2022 through December 31, 2024 and vest in February 2025 subject to the achievement of predetermined metrics and goals. The metrics and goals are disclosed in the CD&A LTI section.
(2) The RSUs vest in full on 4/30/2025.
(3) The RSUs were granted at a FMV of $13.58/share or $354,438, and the PSUs were granted at a FMV of $13.86/share or $1,085,238
Outstanding Equity Awards at Fiscal Year End (12/31/2022)
Stock award grant date Number of Shares Units of Stock that Have Not Vested (#) Market Value of Shares Units of Stock that Have Not Vested ($)(1)
Equity Incentive Plan Awards: Number of Unearned Shares Units that Have Not Vested (#)(2)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares Units that Have Not Vested ($)(1)(2)
Suzanne Heywood, Chair 12/3/2020 78,781 $1,230,629 709,032 $11,176,241
5/20/2022 26,100 $396,892 156,600 $2,424,027
(1) The December 31, 2022 FMV/unit is the year end share price, $16.06, less the present value of dividends which varies by award. Unvested awards do not receive dividend equivalents.
(2) The performance assumption for the PSUs is maximum payout or 200% of target.
In the event of a qualifying termination, including involuntary termination not for cause, death, or disability, the Chair would be entitled to prorated vesting of the outstanding awards and subject to performance vesting conditions. The value of the potential payout of the outstanding awards as of December 31, 2022 upon the qualifying termination would be $8.5 million.
In the event of a CIC and a qualifying termination, all of the outstanding awards at target would vest. The value of the potential payout as of December 31, 2022 under this scenario would be $8.4 million.
Stock Awards Vested (during fiscal year 12/31/2022)
Vesting Date Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($)(1)
Suzanne Heywood, Chair 4/30/2022 39,391 $566,443
(1) FMV at date of vesting was $14.38/share.
Directors’ Compensation Table:
The following table summarizes remuneration paid or awarded (in USD) to CNH Industrial N.V. non-NEO Directors for the years ended December 31, 2022 and 2021:
Name Position Year Fees Earned or Paid in Cash (1)
Stock Awards(2)
All Other Compensation(3)
Total
Suzanne Heywood Chair 2022 500,000 1,439,676 225,757 2,165,433
2021 500,000 - 144,142 644,142
Catia Bastioli Director 2022 128,993 - - 128,993
Howard W. Buffett Director 2022 165,000 - - 165,000
2021 128,792 - - 128,792
Léo W. Houle Senior
Non-Executive Director 2022 170,000 - - 170,000
2021 132,694 - - 132,694
John Lanaway Director 2022 160,000 - - 160,000
2021 122,083 - - 122,083
Karen Linehan Director 2022 76,083 - - 76,083
Alessandro Nasi Director 2022 170,000 - - 170,000
2021 132,694 - - 132,694
Vagn Sørensen Director 2022 150,000 - 20,309 170,309
2021 117,083 - 13,835 130,918
Åsa Tamsons Director 2022 118,820 - - 118,820
(1) All fees earned in fiscal year 2022 for services as a Director, including committee chairperson and member fees.
(2) Represents the aggregate grant date fair value of PSUs and RSUs computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation - Stock Compensation and does not correspond to the actual value that will be realized by the Chair. For fiscal 2022, the grant date was May 20, 2022, and the grant price was $13.58 for the 26,100 RSUs and $13.86 for the 78,300 PSUs granted.
(3) The amounts in All Other Compensation for the Chair include the following:
Suzanne Heywood Personal Usage of Car Service Executive Health Assessment Defined Contributions National
Insurance Total
2022 32,215 9,385 19,894 164,263 225,757
2021 6,656 11,007 21,101 105,378 144,142
For the Non-Executive Directors, the amounts include Pension and Similar benefits, specifically, social security and national insurance contributions, as required in their countries.
The following table discloses the 2021 remuneration paid or awarded (in USD) of CNH Industrial Board of Directors who terminated their CNH Industrial board service in 2021:
Name Position Year Fees Earned or Paid in Cash (1)
Stock Awards Pension & Similar Benefits Total
Tufan Erginbilgic(1)(2)
Director 2021 128,792 - 15,388 144,180
Lorenzo Simonelli(1)
Director 2021 117,083 - - 117,083
Jacqueline Tammenoms Bakker(3)
Director 2021 46,292 - 4,003 50,295
Jacques Theurillat(3)(4)
Director 2021 44,889 - - 44,889
(1) Mr. Erginbilgic and Mr. Simonelli resigned from the CNH Industrial Board of Directors on December 23, 2021. Their final quarterly retainer and committee fees were paid on January 10, 2022 in the amount of $41,250 and $37,500, respectively.
(2) The Company was subject to UK national insurance contributions for Mr. Erginbilgic in 2021, as shown in the table under Pension & Similar Benefits.
(3) Ms. Bakker and Mr. Theurillat were members of the Board until April 15, 2021.
(4) The Company was subject to UK national insurance contributions for Ms. Bakker in 2021, as shown in the table under Pensions & Similar Benefits.
The following table summarizes remuneration paid or awarded (in USD) to Directors of CNH Industrial N.V. for roles held in subsidiaries of CNH Industrial N.V. for the year ended December 31, 2021:
Name Position Year(1)
Fees Earned or Paid in Cash Stock Awards All Other Compensation(2)
Total
Alessandro Nasi Chairman Iveco Defence S.p.A. 2021 174,427 - 785 175,212
(1) In 2022, no roles in subsidiaries of CNH Industrial N.V. were held by Directors of CNH Industrial N.V.
(1) All Other includes a car allowance and contributions for healthcare insurance.
Disclosures according to Dutch Civil Code and Dutch Corporate Governance Code
Implementation of Remuneration Policy in 2022
The following table summarizes remuneration paid or awarded (in USD) for the years ended December 31, 2022 and 2021 to CNH Industrial N.V. Executive Directors (the “Summary Remuneration Table”):
Executive Directors Position
Year(1)
Fixed Remuneration Variable Remuneration Extra-ordinary Items(5)
Pension & Similar Benefits(6)
Total Remuneration Proportion of fixed to variable remuneration(7)
Base Salary or Fees Fringe Benefits(2)
One-year Variable(3)
Multi-year Variable(4)
Scott W. Wine CEO 2022 1,700,000 176,866 4,960,300 23,504,170 4,248,000 586,393 35,175,729 7%
2021 1,700,000 167,675 5,100,000 21,476,147 1,573,133 265,743 30,282,698 7%
Suzanne Heywood Chair 2022 500,000 46,344 - 2,765,089 - 184,157 3,495,590 22%
2021 500,000 20,778 - 2,517,515 - 126,479 3,164,771 24%
Notes:
(1) For the CEO, the amount includes a Company leased vehicle, health care and life insurances, and personal usage of aircraft. For the Chair, the amount includes personal use of a Company-provided car service, healthcare and life insurances and executive health assessment. Typical employee benefits for healthcare and life insurance are not included in the Summary Compensation Table.
(2) The 2022 amount represents the bonus approved for the performance year and paid in 2023. See the Incentives section in the CD&A for details of the payout and in the “CEO’s 2022 Company Bonus Plan Performance Factor Calculations:” shown in the next table.
(3) The Chair does not participate in the annual cash incentive plan.
(4) The amounts represent each fiscal year’s share-based compensation (SBC) expense under applicable accounting standards relating to grants issued with a portion of the vesting period in the fiscal year. For 2022, the amount includes the 2022-2024 and the 2021-2023 LTI plans. The performance factor assumption is1.5 for the 2022-2024 LTI PSUs and 2.0 for the 2021-2023 LTI PSUs. This valuation differs from the equity value in the Summary Compensation Table under the U.S. SEC 10k regulations which applies the FMV at grant date of the awards granted during the fiscal year.
The following shows the SBC expense comparing the range of payout at target, assumed performance, and maximum:
Executive Director Position Year AtTarget ($)
At Assumed Performance($) AtMaximum($)
Scott W. Wine CEO 2022 14,018,559 23,504,170 24,452,627
2021 12,998,327 21,476,147 21,476,147
Suzanne Heywood Chair 2022 1,652,281 2,765,089 2,883,703
2021 1,521,504 2,517,515 2,517,515
(5) The amount in 2022 represents the first of three annual installments of a cash award which will total $7.578 million. This award replaces the CEO’s forfeited long-term awards which were not covered under the CNH Industrial 2021-2023 LTI awards. The second and third installments will equal $2.355 million and $0.975 million, respectively, and are set to be paid in 2023 and 2024. The 2023 payment was made in fiscal 2023 and will be reported in the Company’s executive compensation disclosure for fiscal 2023. The amount in 2021 was a cash sign-on paid upon hiring to compensate for the forfeited 2020 bonus from the prior employer.
(6) For the CEO, the 2022 amount includes expense recorded for accruing retiree healthcare benefits and Company contributions into deferred retirement savings plans and U.S. Social Security and Medicare. For the Chair, the amount includes Company contributions for retirement savings and U.K. National Insurance. U.S. Social Security and Medicare and UK National Insurance contributions are not included in the Summary Compensation Table .
(7) The ratio is the percentage of fixed pay elements over the percentage of variable pay elements. Variable elements include variable incentives and extraordinary items.
CEO’s 2022 Company Bonus Plan Performance Factor Calculations:
Measure(1)
Weight Threshold Target Maximum Actual Actual vs. Target Weighted Payout
Factor
Consolidated Adjusted EBIT Margin % a) 40% 9.60% 11.00% 13.70% 12.40% 112.70% 60.37%
b) $ 408,000 $1,360,000 $2,720,000 $2,052,600
Consolidated Revenues $M (@CC) a) 20% $20,108 $22,981 $26,428 $24,185 105.20% 26.99%
b) $ 204,000 $ 680,000 $1,360,000 $917,670
Cash Conversion Ratio % a) 20% 59.50% 70.00% 105.00% 79.60% 113.70% 25.49%
b) $ 204,000 $ 680,000 $1,360,000 $867,670
ESG KPI's CO2 Emissions %
a) 10% -23.80% -25.00% -28.80% -30.60% 120.00% 20.00%
b) $ 102,000 $ 340,000 $ 680,000 $680,000
Accident Frequency Rate(2)
a) 10% 0.161 0.153 0.130 0.146 95.00% 13.04%
b) $ 102,000 $ 340,000 $ 680,000 $443,360
Total a) 100% 145.89%
b) $1,020,000 $3,400,000 $6,800,000 $4,961,300
Final CBP Determination $4,961,300 145.89%
(1) We make adjustments to U.S. GAAP financial measures for purposes of our financial performance measures to ensure the results properly reflect management contributions.
(2) Accident Frequency Rate has a declining goal value for maximum payout, so a value lower than target indicates that the achievement level exceeded target.
Year-Over-Year Remuneration
For year-over-year reference, as required by the Dutch Civil Code requirements, the following table shows the compensation change over each of the past five years (in US$ 000s):
Table - Remuneration over the last five reported financial years
Board of Directors Position 2022 vs 2021 2021 vs 2020 2020 vs 2019 2019 vs 2018
Scott W. Wine(1)
CEO 4,893 30,283 - -
Suzanne Heywood(2)
Acting CEO - (3,595) 3,595 -
Hubertus Mühlhäuser(2)
CEO - (2,107) (7,335) 5,911
Richard Tobin(3)
CEO - - - (508)
Suzanne Heywood(3)(4)
Chair 331 2,747 (339) 757
Sergio Marchionne(3)
Chair - - - (2,840)
Howard W. Buffett(5)
Director 36 129 - -
Catia Bastioli(6)
Director 129 - - -
Nelda Connors(5)
Director - - - -
Tufan Erginbilgic(5)(11)
Director (144) 144 - -
Mina Gerowin(7)
Director - - (81) (81)
Suzanne Heywood(3)
Director - - - (170)
Léo W.Houle (8)
Senior Non-Executive Director 37 48 (87) 2
Peter Kalantzis(7)
Director - - (85) (85)
John Lanaway Director 38 47 (75) -
Karen Linehan(6)
Director 76 - - -
Alessandro Nasi(9)
Director 37 48 - 85
Silke Scheiber(10)
Director - (84) (98) 14
Lorenzo Simonelli(9)(11)
Director (117) 42 - 75
Board of Directors Position 2022 vs 2021 2021 vs 2020 2020 vs 2019 2019 vs 2018
Vagn Sørensen(5)
Director 39 131 - -
Guido Tabellini(7)
Director - - (73) (73)
Jacqueline Tammenoms Bakker(11)
Director (50) (42) (95) 25
Åsa Tamsons(6)
Director 119 - - -
Jacques Theurillat(11)
Director (45) (37) (97) -
(1) In 2021, Scott W. Wine joined the Company as CEO, effective January 4, 2021 and was appointed Executive Director of the Board at the April 15, 2021 AGM. The increase in 2022 is primarily the 2022-2024 LTI awards expensed for 2022 and the first of three annual installments of a cash hiring incentive which replaces in part the CEO’s forfeited long-term awards of his prior employer.
(2) Effective March 22, 2020, Hubertus Mühlhäuser stepped down from the CEO role and Suzanne Heywood assumed the Acting CEO duties in addition to her Chair duties for the remainder of 2020.
(3) During 2018, the Company’s Executive Directors changed. At the end of April, the former CEO, Richard Tobin, left the Company voluntarily. On September 17, 2018, Hubertus Mühlhäuser, assumed the position of CEO. On July 21, 2018, the Board of Directors, having been apprised of the deteriorating health situation of its Chairman Sergio Marchionne, appointed Suzanne Heywood as Chair with immediate effect. They were appointed as Executive Directors by shareholders at the November 29, 2018 Extraordinary General Meeting.
(4) The increase in 2022 for the Chair is primarily the valuation of 2022-2024 LTI awards expensed for 2022.
(5) The following Directors were appointed their Board of Directors roles in 2020: Mr. Sørensen, Mr. Buffett, and Mr. Erginbilgic. Ms. Connors stepped down from her Board of Directors roles in 2020.
(6) The following Directors were appointed their Board of Directors roles in 2022: Ms. Bastioli, Ms. Linehan, and Ms. Tamsons.
(7) The following Directors stepped down from their Board of Directors’ roles in 2019: Ms.Gerowin, Mr. Kalantzis, and Mr. Tabellini.
(8) Mr. Houle was appointed Senior Non-Executive Director in 2017.
(9) Mr. Nasi and Mr. Simonelli were appointed Board of Directors in 2019.
(10) Ms. Scheiber was appointed to the Board of Directors in 2016 and stepped down in 2020.
(11) The following Directors stepped down from their Board of Directors’ roles in 2021: Ms. Tammenoms Bakker, Mr. Theurillat, Mr. Erginbilgic and Mr. Simonelli.
CNH Industrial confirms the following:
•No severance payments were made to Executive or Non-Executive Directors;
•No variable remuneration has been clawed-back, and no variable remuneration has been adjusted retroactively from Executive or Non-Executive Directors; and
•No personal loans have been granted to Executive or Non-Executive Directors and no guarantees have been granted in favor of any Executive or Non-Executive Directors.
Share Awards
The following table summarizes unvested performance share units and restricted share units held by Executive Directors as of December 31, 2022:
Table - Shares awarded or due to the Directors for the reported financial year
The main conditions of share unit plans Information regarding the reported financial year
Opening Balance During the Year Closing Balance Accounting Expense (1
Name of Director, Position Award Name Performance Period Award Date Vesting Date End of Holding Period Shares Awarded at the Beginning of the Period Shares Awarded Shares Forfeited Shares Vested Share Subject to a Performance Condition Shares Unvested Shares Subject to a Holding Period
FMV at Grant (US$000s) FMV at Vest (US$000s) US$000s
Scott W. Wine,
CEO 2022-2024 PSU(2)
01/01/22- 12/31/24
05/20/22 02/28/25 05/20/27 - 626,100 - - 626,100 626,100 626,100
8,678 2,845
2022-2024 RSU(2)
01/04/22 - 04/30/25 05/20/22 04/30/25 05/20/27 - 208,700 - - - 208,700 208,700
2,834 584
2021-2023 PSU(2)
01/01/21- 12/31/23 01/04/21 02/28/24 01/04/26 2,603,224 - - - 2,603,224 2,603,224 2,603,224 17,074
2021-2023 RSU(2)
01/04/21 - 04/30/24 01/04/21 04/30/22 01/04/26 289,119 - - 289,119 - - 289,119 3,000
4,158
04/30/23 289,120 - - - - 289,120 289,120
04/30'24 289,120 - - - - 289,120 289,120
Suzanne Heywood, Chair 2022-2024 PSU(2)
01/01/22- 12/31/24
05/20/22 02/28/25 01/04/26 78,300 - - 78,300 78,300 78,300
1,085 356
2022-2024 RSU(2)
01/04/22 - 04/30/25 05/20/22 04/30/25 01/04/26 26,100 - - - 26,100 26,100
354 73
2021-2023 PSU(3)
01/01/21- 12/31/23 12/14/20 2/28/24 12/14/25 354,516 - - - 354,516 354,516 354,516 1,988
2021-2023 RSU(3)
12/14/20- 4/30/24 12/14/20 4/30/22 12/14/25 39,391 - - 39,391 - - 39,391 348
4/30/23 39,390 - - - - 39,390 39,390
4/30/24 39,391 - - - - 39,391 39,391
Total Shares: 3,943,271 939,200 - 328,510 3,662,140 4,553,961 4,882,471
Total FMV ($000s) 12,952 4,724 26,269
Notes:
(1) The accounting valuation of share-based compensation expense is the value reported for equity awards in the Summary Remuneration table.
(2) The LTI plan includes the legacy 2021-2023 performance cycle awards and the 2022-2024 performance cycle awards which consists of a Company performance component, with potential vesting of PSUs, and an individual performance component, with potential vesting of RSUs. The PSUs for both cycles vest at the end of their respective performance cycle, while the legacy RSUs vest in three equal annual installments over the performance cycle and the 2022-2024 RSUs cliff vest on April 30, 2025.
In accordance with the DCGC, the Committee discussed with the CEO and the Chair their respective 2022 compensation, and each are fully aligned with the compensation awarded.
Internal Pay Ratios
When setting the Executive Directors’ compensation, the Committee considers both the appropriate external benchmark as well as the internal pay ratios within the Company. Although the primary consideration is market competitiveness to attract and retain highly qualified senior executives in a large, global, complex organization, a baseline internal comparison is set, and trends are tracked. The trend in executives’ compensation is evaluated in relation to the trend in employees’ compensation.
In line with the guidance under the DCGC, the CEO Pay ratio and trend is disclosed in the annual executive compensation disclosure of the annual report. The basis of the pay ratio comparison uses the prevalent Dutch methodology of average employee compensation, including all labor costs. Consistent with prior years, CEO compensation and average employee compensation use the accounting value of equity awards. Under this methodology, the value of an equity award is allocated over the period between grant and vesting.
The CEO’s pay in 2022 and 2021 reflect the pay of Scott W. Wine, hired on January 4, 2021 with a highly competitive pay package and hiring incentive awards to attract him to join CNH Industrial and leave a highly paid CEO position at this former employer. Additionally, the incentive included one-time highly leveraged performance-based equity awards to align him with CNH Industrial shareholders and provide upside potential reward linked to performance for the risk he assumed changing from a known company and industry to a much larger and globally diverse and complex company in a different industry. His performance-based equity awards have experienced above target performance under Mr. Wine’s leadership across each of the metrics, Adjusted Diluted EPS and Industrial ROIC and relative TSR. The 2022 value of the equity awards reflects PSUs achieving the maximum, 2x target, for the 2021-2023 LTI PSUs and 1.5x target for the 2022-2024 LTI PSUs. Additional explanation of the CEO’s pay in 2022 and 2021 and the strong link to Company and share price performance can be referenced in the CD&A and the Pay versus Performance section of this report.
The average employee compensation is the total personnel costs reported in the Annual Report, which excludes Executive Director compensation, divided by average year headcount reported in the Annual Report, less the CEO who is included in the total average year headcount. Over the five-year period, the average employee compensation has been impacted, due to changing business conditions, by shifts in the labor market in the different geographies.
The five-year trend of CEO pay versus average employee compensation is shown in the following table:
2022 2021 2020 2019 2018 5-year trend
CEO compensation ($000s)(1)
35,176(1)
21,805(2)
5,702(3)
6,632(4)
8,738(5)
403%
Average Employee compensation (6) ($000s)
76.4 69.7 60.2 60.5 64.3 119%
CEO Pay Ratio 460 313 95 110 136 338%
Notes:
(1) The compensation for the CEO is as reported in the Summary Remuneration table per the DCGC and Dutch Civil Code unless otherwise noted in subsequent footnotes. In 2022, the CEO’s compensation includes the value of the CEO’s performance-based equity awards with an expected 2x payout for the 2021-2023 LTI PSUs and 1.5x payout for the 2022-2023 LTI PSUs and the extraordinary compensation of $4.2 million related to the first installment of three of the hiring cash incentive which replaces the forfeited equity not covered under the 2021-2023 LTI awards. Mr. Wine’s target total direct compensation which is fixed for five years is $17.1 million, which would result in a CEO pay ratio of 224 and maximum payout opportunity of $29.5 million, resulting in a ratio of 386.
(2) The CEO, hired January 4, 2021, received a signing incentive to leave his prior employer before his 2020 bonus payout. The ratio excluding that one-off payment is 290. The equity expense included in the total CEO compensation is assuming target payout for the company performance share units. The actual payout is at the end of the performance period and will be determined in February 2024. The ratio assuming maximum payout for the company performance share units is 434.
(3) For 2020, data incorporates the compensation of the former CEO and the Acting CEO, as was reported in the Summary Remuneration table.
(4) For 2019, CEO compensation is consistent with the Summary Remuneration table include in the 2019 report, excluding the 2019 accounting value of the CEO’s one-time “Make Whole” award, which vested in September 2019. Including the 2019 Make Whole accounting value of $2.8 million, the CEO pay ratio would be 156. The 2019 CEO Pay Ratio calculation includes $2.9 million in accounting value related to the 2017-2019 PSUs that did not meet the threshold achievement for any payout and have been forfeited. The CEO Pay Ratio excluding the forfeited PSU award would be 62.
(5) For 2018, a targeted full year compensation is shown for year-over-year comparison.
(6) Average Employee compensation is derived from personnel costs reported under IFRS, which does not include personnel costs for the Executive Directors, divided by the average headcount. Personnel costs as disclosed with the IFRS Annual Report for 2022, 2021, 2020, 2019, and 2018 are $2,976 million, $4,695 million, $3,820 million, $3,909 million and $3,591 million respectively. Average number of employees as disclosed within the IFRS Annual Report for 2022, 2021, 2020, 2019, and 2018 are 38,966, 67,318, 63,482, 64,596 and 64,045 respectively.
For perspective, the Company`s key performance metrics for the same past five years are shown below:
Selected Performance Data (1)(2)
2022 2021 2020 2019 2018 5-year trend
Net Income - US GAAP ($ million) 2,039 1,801 (198) 797 1,099 186%
Adjusted Diluted Earnings/(Loss) per share ($) 1.46 1.28 0.42 0.64 0.8 183%
Absolute Total Shareholder Return - Indexed from 2017(3)
146 150 99 84 69 146%
Notes:
(1) Includes non-GAAP metrics derived from financial information prepared in accordance with U.S. GAAP.
(2) Figures from 2019 to 2022 reflect the continuing operations scope of CNH Industrial, that is excluding the Iveco Group businesses results. The 2018 figures reflect the entire scope of CNH Industrial in 2018.
(3) Using dividend-adjusted closing prices at the ending of each year and indexing from a 2017 year end baseline (i.e., index at 100).
Under the leadership of the current CEO, the 2022 and 2021 operational results on numerous key metrics hit record levels and shareholders earned a high cumulative two-year return as well. In the Pay versus Performance section, additional metrics are shown, including a comparison to the relative TSR of the S&P 500 Industrial index, a group of about industrial peers. As that section illustrates, CNH Industrial’s performance trend on many fronts has been stellar.
The linkage of CEO pay to performance is very strong with 73% tied to the CEO’s compensation at target and 84% at maximum. The investment in securing Mr. Wine’s expertise, vision and leadership has already paid off through the increased value delivered to shareholders and stakeholders.
Non-GAAP Measures Reconciliation
Reconciliation of Adjusted net income and Adjusted income tax (expense) benefit to Net income (loss) and Income tax (expense) benefit and calculation of Adjusted diluted EPS and Adjusted ETR under US-GAAP
Years ended December 31,
(in millions) 2022 2021 2020
Net income (loss) - Continuing Operations $ 2,039 $ 1,801 $ (198)
Adjustments impacting Income (loss) before income tax (expense) benefit and equity in income of unconsolidated subsidiaries and affiliates (a) (41) 97 903
Adjustments impacting Income tax (expense) benefit (b) 6 (151) (118)
Adjusted net income (loss) $ 2,004 $ 1,747 $ 587
Adjusted net income (loss) attributable to CNH Industrial N.V. 1,994 1,738 573
Weighted average shares outstanding - diluted (million) 1,362 1,361 1,351
Adjusted diluted EPS ($) $ 1.46 $ 1.28 $ 0.42
Income (loss) from continuing operations before income tax (expense) benefit and equity in income of unconsolidated subsidiaries and affiliates 2,682 1,939 (179)
Adjustments impacting Income (loss) before income tax (expense) benefit and equity in income of unconsolidated subsidiaries and affiliates (a) (41) 97 903
Adjusted income (loss) from continuing operations before income tax (expense) benefit and equity in income of unconsolidated subsidiaries and affiliates $ 2,641 $ 2,036 $ 724
Income tax (expense) benefit (747) (229) (85)
Adjustments impacting Income tax (expense) benefit (b) 6 (151) (118)
Adjusted income tax (expense) benefit $ (741) $ (380) $ (203)
a) Adjustments impacting Income (loss) from continuing operations before income tax (expense) benefit and equity in income of unconsolidated subsidiaries and affiliates
Restructuring expenses 31 35 49
Loss on repurchase of notes - 8 -
Pre-tax gain related to the 2018 modification of a healthcare plan in the U.S. (90) (119) (119)
Pre-tax gain related to the 2021 modification of a healthcare plan in the U.S. (24) (5) -
Pre-tax settlement charge related to the purchase of annuity contracts to settle a portion of U.S. pension obligations - - 125
Goodwill impairment charge - - 585
Other assets impairment charges - - 255
Asset write-down: Industrial Activities, Russia Operations 43 - -
Asset write-down: Financial Services, Russia Operations 17 - -
Spin related costs 25 133 -
Gain on sale of real estate (65) - -
Monarch Tractor investment fair value adjustment - (12) -
Other discrete items - 57 8
Activity of the Raven Segments held for sale, including loss on sale of the Aerostar and Engineered Films Division 22 - -
Total $ (41) $ 97 $ 903
b) Adjustments impacting Income tax (expense) benefit
Tax effect of adjustments impacting Income (loss) before income tax (expense) benefit and equity in income of unconsolidated subsidiaries and affiliates(1)
61 10 $ (106)
Adjustment to valuation allowances on deferred tax assets (55) (161) (12)
Total $ 6 $ (151) $ (118)
(1) In 2022, this line includes $12 million of increase to the valuation allowances on historical deferred tax assets as a result of the suspension of operations in Russia.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Persons Owning More than Three Percent of CNH Industrial Common Shares
The following table shows the number of shares of CNH Industrial common stock beneficially owned as of January 31, 2023, (unless otherwise indicated) by each person who, to our knowledge, beneficially owns more than 3% of our common stock.
Shares Beneficially Owned and Held Percent of Common Shares(4)
Greater Than 5% Owner
EXOR N.V.(1)
366,927,900 27.3 %
Harris Associates L.P.(2)
91,391,645 6.8 %
Blackrock, Inc.(3)
59,893,991 4.5 %
(1)In addition, EXOR N.V. holds 366,927,900 special voting shares; EXOR N.V.'s beneficial ownership in CNH Industrial is 42.8%, calculated as the ratio of (i) the aggregate number of common and special voting shares owned by EXOR N.V. and (ii) the aggregate number of outstanding common shares and special voting shares of CNH Industrial. There were 1,715,313,924 outstanding common shares and special voting shares at January 31, 2023.
(2)Based on a Schedule 13G/A (Amendment No. 3) filed with the SEC on February 14, 2023, Harris Associates L.P.'s reported beneficial ownership in CNH Industrial is 5.3% calculated as the ratio of (i) the number of common shares owned by Harris Associates L.P. and (ii) the aggregate number of outstanding common shares and special voting shares of CNH Industrial. Based on a filing made by Harris Associates L.P. with the public register of substantial holdings and gross short positions held by the AFM on September 24, 2021, Harris Associates reported having indirect (real) voting rights over 87,178,442 common shares.
(3)Based on the filing made by BlackRock, Inc with the public register substantial holdings and gross short positions held by the AFM on January 9, 2023, BlackRock, Inc reported holding (i) indirectly (real) 49,859,946 common shares with 59,844,409 voting rights and (ii) indirectly (potential) 6,566 common shares with 49,582 voting rights. BlackRock, Inc.’s beneficial ownership in CNH Industrial is 3.5%* calculated as the ratio of (i) the number of common shares owned by BlackRock, Inc. and (ii) the aggregate number of outstanding common shares and special voting shares of CNH Industrial.
(*) The amount does not include potential holdings where BlackRock, Inc. has a contractual right to indirectly acquire common shares potentially enabling the increase of common share and voting rights.
(4)There were 1,344,240,971 outstanding common shares at January 31, 2023. The “Percent of Common Shares” was calculated by using the publicly disclosed number of owned common shares as the numerator, respectively, and the number of the Company’s outstanding common shares as the denominator.
As of January 31, 2023, EXOR N.V.’s voting power in CNH Industrial as a result of the loyalty voting program was approximately 42.8%. EXOR N.V., through its voting power, has the ability to significantly influence the decisions submitted to a vote of our shareholders, including approval of annual dividends, the election and removal of directors, mergers or other business combinations, the acquisition or disposition of assets and issuances of equity and the incurrence of indebtedness.
At January 31, 2023, there were 408 registered holders of our common stock in the U.S., including 124 shareholders that hold special voting shares associated with their common shares. As of January 31, 2023, based on the Company's share register and other sources available to us, approximately 198,148,846 common shares (3,766,107 of which had associated special voting shares) were held in the U.S.
Security Ownership of Directors and Executive Officers
The following table shows the number of shares of CNH Industrial common stock beneficially owned as of January 31, 2023,(unless otherwise indicated) by:
•each individual who was serving as a non-employee director as of January 31, 2023
•each of the named executive officers listed in the Summary Compensation Table in Item 11
•all individuals who served as directors or executive officers on January 31, 2023 as a group
A beneficial owner of stock (represented in column (a)) is a person who has sole or shared voting power (meaning the power to control voting decisions) or sole or shared investment power (meaning the power to cause the sale or other disposition of the stock). A person also is considered the beneficial owner of shares to which that person has the right to acquire beneficial ownership (within the meaning of the preceding sentence) within 60 days. For this reason, the following table includes PSUs, restricted shares, and RSUs that could become exercisable or be settled within 60 days of January 31, 2023, at the discretion of an individual identified in the table (represented in column (c)).
Shares Beneficially Owned and Held (a) Options, PSUs, Restricted Shares, and RSUs Available Within 60 Days (c) Total Percent of Shares Outstanding(1)
Non-Employee Directors
Catia Bastioli 4,000 - 4,000 *
Howard W. Buffett 17,866 - 17,866 *
Suzanne Heywood 150,210 - 150,210 *
Alessandro Nasi 356,203 - 356,203 *
Vagn Sørensen 27,000 - 27,000 *
Åsa Tamsons - - - *
Karen Linehan 11,903 - 11,903 *
Léo W. Houle 57,259 - 57,259 *
Named Executive Officers *
Kevin Barr 14,536 - 14,536 *
Oddone Incisa 173,059 - 173,059 *
Derek Neilson 444,913 - 444,913 *
Stefano Pampalone 111,673 - 111,673 *
Scott W. Wine 639,119 - 639,119 *
All directors and executive officers as a group 2,007,741 - 2,007,741 *
(1)There were 1,344,240,971 common shares outstanding as of January 31, 2023. All these common shares have the same rights and entitlements. The “Percent of Common Shares” was calculated by using the publicly disclosed number of owned common shares as the numerator, respectively, and the number of the Company’s outstanding common shares as the denominator.
* Less than 1% of the outstanding shares of CNH Industrial N.V. common shares.
All individuals listed in the table above have sole voting and investment power over the shares unless otherwise noted.
The following table sets forth certain information, as of December 31, 2022, concerning securities authorized for issuance under all of our equity compensation plans:
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)
Plan Category (a) (b)
Equity compensation plans approved by security holders $ 27,118,711 $ 10.94 $ 18,893,115
Equity compensation plans not approved by security holders $ - $ -
Total $ 27,118,711 $ 10.94 $ 18,893,115
a) This amount includes 27,118,711 PSUs and RSUs awarded under the CNH Industrial N.V. Equity Incentive Plan. Under the Company’s long-term incentive programs, the PSUs are payable only in stock after the three-year performance period is ended and the RSUs vest in equal installments over three years, on the first, second and third anniversaries of the date of grant. The number of shares reflects the maximum number of shares that may be earned under the PSUs.
b) This amount includes 18,893,115 shares available under the CNH Industrial N.V. Equity Incentive Plan. Under the CNH Industrial N.V. Equity and Incentive Plan, the Company may award shares in connection with stock options and stock appreciation rights, performance shares or performance share units, restricted stock or restricted stock units, or other awards based on Common Shares determined by the Committee. In addition, shares covered by outstanding awards become available for new awards if the award is forfeited or expires before delivery of the shares.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions and Director Independence
Certain Relationships and Related Transactions
The Audit Committee has adopted a written Related Party Transactions Policy that governs reviewing, approving, or ratifying all related person transactions. The written Related Person Transactions Approval Policy applies to: (1) executive officers and directors of the Company; (2) any person or enterprise owning, directly, or indirectly an interest in the voting power of the Company that give gives it significant influence over the Company; and (3) immediate family members of anyone in category (1) or (2).
Each year, our directors and executive officers complete questionnaires designed to elicit information about potential related person transactions. In addition, the directors and officers must promptly advise our Chief Legal and Compliance Officer if there are any changes to the information they previously provided. Transactions deemed reasonably likely to be related person transactions are submitted to the Audit Committee for pre-approval at its next meeting. Mr. Howard W. Buffett’s father is Chairman and Chief Executive Officer of the Howard G. Buffett Foundation (the “Foundation”). In 2022, the Foundation purchased approximately $1,000,000 of Company agriculture machinery for donation to the Ukrainian Ministry of Agriculture. This donation was part of the Foundation’s charitable contributions in the areas of food safety and conflict mitigation.
Director Independence
We have a one-tier management structure (i.e. management board that may be composed of both members having responsibility for our day-to-day operations, who are referred to as “executive directors”, and members not having such responsibility, who are referred to as “non-executive directors”). Our executive directors, Ms. Heywood and Mr. Scott Wine, and the non-executive directors were elected at the Company's annual general meeting of shareholders held on April 13, 2022. The term of office of the current Board of Directors will expire on April 14, 2023, the date of the Company’s next AGM.
Six directors (67%) qualify as independent for purposes of NYSE rules, Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Dutch Code.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Ernst & Young LLP, the member firms of Ernst & Young and their respective affiliates (collectively, the “Ernst & Young Entities”) were appointed to serve as our independent registered public accounting firm for the years ended December 31, 2022 and 2021. We
incurred the following fees from the Ernst & Young Entities for professional services for the years ended December 31, 2022 and 2021, respectively:
2022 2021
Audit fees $ 8,215,000 $ 12,413,000
Audit-related fees 1,604,000 5,921,000
Other fees 34,000 37,000
Total $ 9,853,000 $ 18,371,000
“Audit Fees” are the aggregate fees from the Ernst & Young Entities for the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. “Audit-Related Fees” are fees charged by the Ernst & Young Entities for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” This category comprises fees for the procedures performed as part of the demerger activities, audit of employee benefit plans and pension plans, agreed-upon procedure engagements and other attestation services subject to regulatory requirements.
Under the laws and regulations of the Netherlands, the Ernst & Young Entities audit tenure will conclude upon the completion of their 2022 financial year audits due to mandatory audit firm rotation rules. At the April 13, 2022 Annual General Meeting of the Shareholders, Deloitte Accountants B.V., was appointed the Company’s independent auditor for the 2023 financial year.
Audit Committee’s Pre-Approval Policies and Procedures
Our Audit Committee nominates and engages our independent registered public accounting firm to audit our consolidated financial statements. Our Audit Committee has a policy requiring management to obtain the Audit Committee’s approval before engaging our independent registered public accounting firm to provide any other audit or permitted non-audit services to us or our subsidiaries. Pursuant to this policy, which is designed to ensure that such engagements do not impair the independence of our independent registered public accounting firm, the Audit Committee reviews and pre-approves (if appropriate) specific audit and non-audit services in the categories Audit Services, Audit-Related Services, Tax Services, and any other services that may be performed by our independent registered public accounting firm. During the year ended December 31, 2022, all audit and non-audit services provided by our independent registered public accounting firm were pre-approved in accordance with such policies and procedures.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements - CNH Industrial N.V. and Subsidiaries
The following are contained in this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm - (PCAOB ID 42)
Consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020
Consolidated statements of comprehensive income for the years ended December 31, 2022, 2021, and 2020
Consolidated balance sheets as of December 31, 2022 and 2021
Consolidated statements of cash flows for the years ended December 31, 2022, 2021, and 2020
Consolidated statements of changes in equity for the years ended December 31, 2022, 2021, and 2020
Notes to consolidated financial statements
The Report of Independent Registered Public Accounting Firm, the Consolidated Financial Statements, and the Notes to the Financial Statements listed above are filed as part of this Report and are set forth beginning on page 130 immediately following the signature pages of this Report.
(a) 2. Financial Statement Schedules
Schedules are omitted because they are not applicable, the information required to be contained in them is disclosed elsewhere on our Consolidated Financial Statements, or the amounts involved are not sufficient to require submission.
(a) 3. Exhibits
Exhibit Description
3.1 Articles of Association of CNH Industrial N.V., dated September 29, 2013 (Previously filed as Exhibit 1.1 to the Annual Report on Form 20-F of the registrant for the year ended December 31, 2014 (File No. 001-36085) and incorporated herein by reference).
3.2 Regulations of the Board of Directors of CNH Industrial N.V. dated September 9, 2013 (Previously filed as Exhibit 1.2 to the Annual Report on Form 20-F of the registrant for the year ended December 31, 2014 (File No. 001-36085) and incorporated herein by reference).
4.1 Indenture, dated as of August 18, 2016, by and between CNH Industrial N.V., as issuer, and U.S. Bank National Association, as trustee, relating to the CNH Industrial N.V. debt securities. (Previously filed as Exhibit 4.1 to the report on Form 6-K of the registrant (File No. 001-36085) and incorporated herein by reference).
4.2 Officers’ Certificate, dated as of August 18, 2016 (including Form of 4.50% Note due 2023 included therein). (Previously filed as Exhibit 4.2 to Form 6-K of the registrant on August 18, 2016 (File No. 001-36085) and incorporated herein by reference).
4.3 Officers’ Certificate, dated as of November 14, 2017 (including Form of 3.850% Note due 2027 included therein). (Previously filed as Exhibit 4.1 to Form 6-K of the registrant on November 14, 2017 (File No. 001-36085) and incorporated herein by reference).
4.4 Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Exchange Act
There have not been filed as exhibits to this Form 10-K certain long-term debt instruments, none of which relates to indebtedness that exceeds 10% of the consolidated assets of CNH Industrial N.V. CNH Industrial N.V. agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of CNH Industrial N.V. and its consolidated subsidiaries.
10.1 CNH Industrial N.V. Directors’ Compensation Plan (Previously filed as Exhibit 4.5 to the Registration Statement on Form S-8 of the registrant on October 1, 2013 (File No. 333-191477) incorporated herein by reference).
10.2 Case New Holland Industrial Inc. 2005 Deferred Compensation Plan, restated effective January 1, 2012 (Previously filed as Exhibit 4.9 to the Annual Report on Form 20-F of the registrant for the year ended December 31, 2014 (File No. 001-36085) and incorporated herein by reference).
10.3 CNH Industrial N.V. Equity Incentive Plan (Previously filed as Exhibit 4.2 to the Registration Statement on Form S-8 of the registrant on June 3, 2020 (File No. 333-238912) incorporated herein by reference).
10.4 Form of Performance Share Agreement (2021-2023)
10.5 Form of Restricted Stock Units Agreement (2021-2023)
10.6 Form of Performance Share Agreement (2022-2024)
10.7 Form of Restricted Stock Units Agreement (2022-2024)
10.8 Employment and Severance Agreement with Kevin Barr
10.9 Employment and Severance Agreement with Derek Neilson
10.10 Employment and Severance Agreement with Scott W. Wine
10.11 Agreement and Plan of Merger among Raven Industries, Inc., CNH Industrial N.V. and CNH Industrial South Dakota, Inc.
10.12 Credit Agreement dated as of March 18, 2019
10.13 Amendment to the Credit Agreement dated March 18, 2019
21.0 Subsidiaries and affiliates of the registrant
23.0 Consent of Ernst & Young LLP.
31.1 Certification of Chief Executive Officer of CNH Industrial NV, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer of CNH Industrial NV, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer of CNH Industrial NV and Chief Financial Officer of CNH Industrial NV, as required pursuant Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CLA Inline XBRL Taxonomy Extension Calculation Linkbase Document
101DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover page Interactive Data File is formatted in Inline XBRL and is contained in Exhibits 101