By Daniel Flynn
MADRID, June 25 (Reuters) - The world's largest maker of tractors and combines, CNH Global , expects to make a small profit in 2002, helped by an upturn in the agricultural machinery market and cost savings from a 1999 merger.
CNH's Chief Executive Paolo Monferino said the company expected to save a total of $850 million in operating costs thanks to synergies from the Case-New Holland merger, which formed CNH two and a half years ago.
"We're more or less at 50 percent of that figure, there is still $420 million to go to complete the process," he told a news conference.
CNH, which is 85 percent owned by Italian auto giant Fiat SpA , also expects to save $280 million from a radical overhaul of its production line.
The company will shift to a system pioneered by automotive production lines, which uses a common base to build a wide variety of models.
The company also plans to incorporate more parts from suppliers, thereby reducing fixed costs and better positioning the company to weather future market downturns.
After posting a $332 million loss last year, a recovery in the agricultural equipment market in both North America and Western Europe should help the company to return to profitability in 2002, Monferino said.
"This year I think we will make a little, little profit," he said, but declined to give a precise figure.
FINANCIAL SAVINGS TOO
A recent debt for equity swap with parent company Fiat should save the company a further $80 million a year in financial costs, said Chief Financial Officer Michel Lecomte.
The deal would reduce the company's debt to capitalization ratio from 75 percent to 54 percent, once it was completed, Lecomte said.
"Our aim is to reduce the debt to capitalization ratio to much lower levels. Our aim is 40 percent," Lecomte said.
Following the revamp of its production line, CNH aimed to launch eight new models during the remainder of 2002.
"We don't have the crazy obsession of growing market share and growing and growing. We are already the largest producer in the world and we are focusing on our profitability," said Monferino.
He said CNH's market share should remain roughly stable after the launches.
After shutting 16 of its 60 plants in the wake of the 1999 merger, CNH plans to close a further five plants with the loss of 1,000 jobs before the end of 2004.