SRC enters venture with Fiat subsidiary

Springfield-based SRC Holdings Corp. is pursuing a full-scale remanufacturing operation with farm and construction equipment manufacturer CNH Global N.V. - a strategic alliance expected to culminate with a local production facility employing hundreds of area workers.

The companies announced a joint venture -- dubbed CNH Reman - last week during a biannual meeting with vendor dealers at Chateau on the Lake in Branson.

This isn't the first venture for the two companies, which aligned 15 years ago to form Megavolt, a remanufacturing outfit in Partnership Industrial Center. SRC holds a 60 percent stake in Megavolt, which remanufactures rotating electrics, such as starters, alternators and generators, for CNH's various heavy-duty equipment lines.

Eric Bippus, vice president of sales and marketing for CNH Parts & Service, said anticipated growth in the North American remanufacturing market prompted CNH to expand its long-term relationship with SRC.

"Together with SRC, we are positioned to reach aggressive growth targets designed to serve our dealer and customer needs and meet investor expectations," Bippus said in a news release.

CNH and SRC are scouting possible sites in Springfield for the remanufacturing facility, said Bippus, who declined to provide a number of potential jobs created by the new venture. SRC Holdings Corp. CEO Jack Stack said similar deals involving SRC have generated between 200 and 300 qualified jobs.

"Remanufacturing is a labor-intensive business; it creates jobs," he said.

Stack said the objective is to transfer SRC's stake in Megavolt and CNH Reman to CNH within three years. Tom Hilmes, general manager of SRC Power Systems in Marshfield, will initially head up CNH Reman, which Stack said will be housed in SRC's overflow space until a suitable standalone facility is secured.

Earlier this year, Burr Ridge, Ill.-based CNH (NYSE: CNH) partnered with SRC to launch the CNH Reman Technical Center, which provides dealers with part numbers, availability, pricing, warranty information and technical support.

The center's director is Steve Choate, who was formerly general manager of SRC Heavy Duty - a post now held by Stack's son, Ryan.

"That's a technical backbone to support our dealers and our salespeople in the field," Bippus said of the technical center. "We chose SRC because of our longstanding relationship and also because of their technical expertise. Leveraging their two decades worth of knowledge to the benefit of our sales and marketing organization was a real easy fit for us."

Bippus said a CNH Reman facility would house the technical center as well as remanufacturing operations for diesel engines, transmissions, rotating electrics, electronics and hydraulics. CNH equipment brands supported by the remanufacturing plant would include Case IH Agriculture, Case Construction, New Holland Agriculture and Kobelco plus Fiat Powertrain Technologies.

CNH Global -- created by the 1999 merger of New Holland N.V. and Case Corp. - is a majority-owned subsidiary of Fiat Group, the Italy-based industrial manufacturing behemoth that also is the parent company of Italian automakers Ferrari and Maserati. Last month, Fiat closed a deal to acquire Chrysler's good assets and eventually become a majority shareholder in the bankrupt U.S. automaker.

According to CNH, the remanufacturing joint venture with SRC will enable customers to buy replacement assemblies and components that are just like new at a reduced price and with a competitive warranty. Reduced repair times also will be advantageous to customers concerned about costly downtime during peak seasons, the company said.

In conjunction with the July 23 unveiling of CNH Reman, CNH Parts & Service also announced its plans to expand its Fiat Powertrain dealer network in North America and occupy a 250,000-square-foot distribution center in Portland, Ore., serving 130 equipment dealerships in the Pacific Northwest.

The changes come on the heels of a less-than-stellar second quarter for CNH Global.

In a July 22 earnings conference call, CNH officials said markets for agricultural and construction equipment aren't expected to improve in the second half of 2009, paving the way for a net loss on the year. Net equipment sales were down 33 percent to $3.6 billion in the second quarter.

CNH executives said the company would spend up to $250 million this year on consolidation and reorganization efforts. Year to date, CNH has reduced its work force by 7 percent - a number that is expected to reach as much as 12 percent by year's end, said Steve Bierman, chief financial officer of CNH Capital. Most of the personnel cuts this year have been in North America.

The day before the earnings report was released, CNH announced a restructuring of its construction equipment business, which saw a staggering 62 percent sales decline in the second quarter, to streamline operations and reduce structural costs. The company plans to close a manufacturing plant in Italy and relocate the production to other facilities as part of the restructuring.

CNH Global N.V. shares closed July 23 at $15.34, compared to a 52-week range of $5.69 to $40.50.