Good morning and afternoon, ladies and gentlemen, and welcome to today's CNH Industrial 2020 Fourth Quarter and Full-Year Results Conference Call. For your information today's conference call is being recorded. After the speakers' remarks, there will be a question-and-answer session. The operator will now provide instructions for the question-and-answer session. At this time, I would like to turn the call over to Federico Donati, Head of Investor Relations. Please go ahead, sir.

Thank you, Jolly. Good morning and good afternoon, everyone. We would like to welcome you to the webcast and conference call for CNH Industrial fourth quarter and full-year 2020 results for the year ending December 31. This call is being broadcast live on our website and is copyrighted by CNH Industrial. Any other use, recording or transmission of any portion of this broadcast without the express written consent of CNH Industrial is strictly forbidden. We are pleased to have you here with us today: our Chairperson, Suzanne Heywood; our CEO, Scott Wine; and our CFO, Oddone Rocchetta, who will be hosting today's call. They will use the material available for download from the CNH Industrial website. After their presentation, we will be holding a Q&A session. Please note that any forward-looking statements we might be making during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company’s most recent Form 20-F and EU Annual Report, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission and the equivalent authorities in the Netherlands and Italy. The company presentation may include certain non-GAAP financial measures. Additional information, including reconciliation to the most directly comparable GAAP financial measures, is included in the presentation material. One final remark: once again, our team is connecting from different countries. So please forgive us if there are moments of silence during the call while we manage the transition between the speakers. I will now turn the call over to Scott Wine.

Thank you, Federico. I'm excited and honored to be part of this CNH Industrial team, and I look forward to sharing our progress and plans today and for many quarters to come. Our fourth quarter results and the positive momentum we developed across the portfolio throughout the second half of 2020 reflect the capability and dedication of our team. Suzanne and the senior leadership team ably positioned the business for solid improvements heading into 2021. I am motivated by the challenge of accelerating our progress and realizing the potential of the CNH Industrial business and brands. It is now my pleasure to turn the call over to Suzanne who will review our fourth quarter and 2020 results.

Thank you, Scott. I would like to start by welcoming you as well to this call and underlining your comment about the great potential that there is in the CNH Industrial businesses and brands. I know I'm echoing the views of the Board, the senior leadership team, and colleagues across CNH Industrial when I say how much I'm looking forward to working with you to realize that potential in the coming years. We've defined this as a year of firsts for many different reasons. Facing the pandemic has been challenging for all of us. As you know from our previous calls, going into the crisis, we prioritized protecting the health and safety of our workforce, supporting our dealers and customers, and actively managing our supply chain. While we're now guardedly optimistic about the impact of the vaccine rollout, the current global spiking COVID-19 cases means that we must continue to safeguard our employees and our businesses from the pandemic. CNH Industrial delivered solid results in Q4, ending 2020 with year-over-year profitability improvements across all industrial segments. The net financial position for our industrial activities at year end was $800 million. This is the first time that this figure has been positive in our company's history and it demonstrates the effectiveness of our cost containment and cash preservation actions. Together with our significant reduction in working capital, this enabled us to deliver positive free cash flow of $1.9 billion for the full year. During 2020, we invested in new technologies, embraced new ways of working and positioned the company for strong profitable growth. We are continuing the preparation work needed to spin the company into two parts, as we outlined in our 2019 Capital Markets Day. We are now entering 2021 in a strong position ready to support our customers and dealers and deliver an increasingly profitable future under Scott's leadership. Turning to Slide 4, I would like to share with you some of the industry volumes that we saw in Q4 as these will help put our business results into context. As you can see here, the agricultural machinery industry has continued to do well. This strong performance has been due to a range of factors including rising commodity prices, growing trade with China and the replacement of aging agricultural machinery fleets. Tractor sales worldwide were up 27% overall and were strong in all geographies especially North and South America. For combines, the picture was a little more mixed with the global market up 8%. Industry was particularly strong in Europe and South America, although this was partially offset by a flat market in North America. We feel confident that the Agriculture segment will continue to perform strongly in 2021 given the order backlog that we are seeing in the first half of the year. We will discuss this order backlog further later in this call. I'll turn now to Construction Equipment. Here, we have again seen strong growth in compact equipment driven by the continued strength in residential construction offset somewhat by weaknesses in other parts of the industry. On a regional basis, North America and Rest of World markets have been particularly strong. Compact equipment sales underpin the strength of the North American market, while Rest of World is strong across all construction categories. Within our truck segment, the European truck market was up 6% year-over-year in this quarter. Light-duty trucks were also up year-over-year for the quarter, which means that the segment overall was down only 7% for the full year despite the negative performance that we saw in the first half of the year. Medium and heavy-duty trucks were flat in Q4 but were down by 27% over the full year. Finally, as you can see here, the bus market was still down in the fourth quarter compared to last year across all regions, with Europe down 4% and South America down 35%. This weakness has been driven by the effects of the pandemic on travel, as well as delayed spending by municipal and regional transportation authorities. Moving on to Slide 5. Here, we lay out data for our retail sales, the red bars; our wholesale deliveries to dealers, the black bars; and our production across our different divisions, the gray bars for the fourth quarter of this year compared to the same period last year. I want to take a moment to describe our performance across the full year. But you can see from the quarterly bar graphs on this chart what was driving the underproduction and how it compares to the same cadence last year. For the full year 2020, worldwide tractors and combines under-produced relative to retail sales by 13% and 19%, respectively, while North America crop underproduction compared to retail was 17%. Our agricultural order book is now up triple-digits in some regions compared to last year for both tractors and combines, and is particularly strong in North and South America. For construction as a whole, we underproduced retail worldwide by 28%, with North America underproducing retail by 36% in the year. This has allowed us to keep reducing channel inventory. Our order books remained up year-on-year in most regions for Construction Equipment, driven by increases in demand in our North American Compact Equipment segment and in our South American Construction business. For trucks, we underproduced retail sales worldwide by 8% in the full year and we overproduced retail by 11% in Q4, while maintaining a strong order book. In Europe, we underproduced retail in light-duty trucks by 6%, while in medium and heavy trucks, we underproduced retail by 7% for the full year. Truck book-to-bill, in other words, the ratio of the orders that we've received to the orders that we've shipped and built in the quarter, in the EU was 0.96. South America ended the quarter at 0.94. Market share in Europe for trucks was slightly down for the year, with medium and heavy up 220 basis points versus the previous year. LNG market share was at 55%, higher than the previous year, and market penetration for LNG trucks was around 3%, an increase from about 2% in 2019. Order book in Europe was up by almost 150% compared to the fourth quarter of 2019. In summary, the combination of this truck retail performance in the quarter and the very strong order books that we are seeing across segments gives us confidence in the strength of our end markets in the first half of 2021. On Slide 6, we summarized the channel inventories by segment. I won’t go through them all but it’s worth noting that we’ve reduced inventories by double-digit percentages across all segments and sub-categories compared to December 2019. However, we've also kept our manufacturing inventories slightly higher than December 31, 2019. This positions us well as we exit the year. We will continue to monitor our production levels and to monitor any supply chain challenges that might emerge in the coming weeks and months. Our effort in lowering both company and dealer inventories will support pricing in 2021, and has put us in a much stronger position than we were at the end of 2019. The substantial reduction in our company inventory levels has also contributed to our improved working capital and free cash flow which Oddone will describe later. I will now turn the call over to Oddone to take you through some of the key financial details.

Thank you, Suzanne and good morning and good afternoon to everybody on the call. I’m now on Slide 7 which summarizes Q4 and end of year results. I think it is worth noting that this year has really been a tale of two halves with a strong back half partially offsetting the very difficult first half where pandemic containment measures halted production in our plants and sales stalled in most of our segments. For the top line, fourth quarter net sales were up 12% due to higher volume and price realization mainly in Agriculture and Commercial and Specialty Vehicles. However for the full year, net sales were down 7% due to high channel inventories at the start of the year and adverse COVID-19 impact in the first half. Moving down the P&L, Q4 adjusted EBIT increased by $219 million year-over-year driven by strong performance across segments. For the full year, adjusted EBIT was down 60% versus the previous year impacted by industry demand disruptions, negative absorption caused by destocking actions and plant shutdowns in H1, partially offset by cost-containment measures. Q4 adjusted net income of $432 million or adjusted diluted earnings per share of $0.30, was an increase of $153 million compared to 2019. The $0.10 per share improvement versus the first quarter 2019 is entirely due to operating performance of our Industrial segments. The adjusted effective tax rate for the quarter was 14% and the adjusted effective tax rate for the year was 27% due to our improved profitability and a more favorable mix of pretax income during Q4 as well as net sales tax benefits. I will talk later in the call about the strong free cash flow achieved this year, largely from a reduction in working capital. This in conjunction with numerous treasury activities added to an already strong liquidity position which covered spending in capital markets and bank debt. With a strong fourth quarter, we exit an otherwise challenging 2020 in a good place and set the stage for 2021 preliminary guidance Scott will go through shortly. On Slide 8, we focus on industrial activities net sales, which were up $821 million or 11.4% on a constant currency basis. As you can see at the bottom of the slide, sales by region and product in the quarter-over-quarter comparisons were up across the board with only one exception. Foreign exchange translation had an impact of less than 1% in the quarter. The net sales split by region was directionally in line with last year but with slightly greater share in Rest of World as in previous quarters this year. Agriculture net sales totaled $3.4 billion for the fourth quarter, up 19% on a constant currency basis versus prior year. The increase was mainly due to higher volumes in Europe, South America and Rest of World, and favorable price realization of around 3.8% globally. Construction net sales were $752 million in the quarter, up 8% on a constant currency basis because of higher volume and positive price realization. Commercial and Specialty Vehicles net sales reached $3.3 billion in the quarter, up 7% on a constant currency basis year-over-year, primarily driven by favorable volume and mix and positive price realization in all regions. Powertrain net sales totaled $1.2 billion in the quarter, up 14%, driven by higher shipments across all regions and sales to external customers accounted for 50% of total net sales. Moving now to Slide 9, we look at Industrial Activities adjusted EBIT by segment and drivers. Volume and net pricing are the drivers for the increase across all segments in the quarter, year-over-year and sequentially. Pricing has been positive throughout the year for our Agricultural and Commercial and Specialty Vehicle segments, whereas in Construction, the actions to reduce dealer inventory weighed heavily on pricing in the first nine months of the year. If we take a closer look at each segment: Q4 2020 adjusted EBIT for Ag was $379 million and adjusted EBIT margin was above 11%, driven by positive price realization, higher volumes and continued reduction of SG&A expenses, despite higher variable compensation in the quarter compared with the previous year. For Construction, adjusted EBIT was $10 million, an increase of $7 million due to positive price realization, cost containment and favorable volume and mix, partially offset by costs associated with continued product improvement initiatives. Commercial and Specialty Vehicles adjusted EBIT was $110 million, with an adjusted EBIT margin of approximately 3.3% driven by favorable volumes and mix in Europe and South America and positive price realization on the back of stronger demand. Powertrain adjusted EBIT was $110 million, an increase of $26 million with an adjusted EBIT margin of 9%, mainly due to favorable volume and mix and reduced spending for regulatory programs, partially offset by higher product cost. Moving now to Slide 10 on our financial services business, net income was $60 million, down $33 million compared to Q4 2019, primarily because of higher risk costs due to the expectation of deteriorating credit conditions and a lower average portfolio in North America, partially offset by improved performance on used equipment sales. In the quarter, retail originations were $2.9 billion and the managed portfolio including joint ventures at the end of the period was $26.6 billion. Delinquencies were down sequentially by 40 basis points and remain at historically low levels. But despite a continued low delinquency in the portfolio, financial services booked additional credit risk provisions in the year as economic consequences of the pandemic may have delayed the impact on some of our customers' ability to service debt. Next on Slide 11, I'd like to discuss the net financial position and free cash flow performance of our industrial activities. Net cash of industrial activities was $0.8 billion at December 31, 2020, up approximately $2.3 billion from a net debt position of $1.5 billion at September 30, 2020. This is the result of positive free cash flow of $2.4 billion on the back of a strong reduction in working capital of $2 billion, driven by continuous inventory reduction and increase in payables as we ramp up production at the beginning of 2021. Capital expenditures were below 2019 levels due to more targeted investments in a year of many uncertainties, and were at 2% of net sales for the full year. Turning to the next slide with available liquidity and debt maturities, the company entered the fourth quarter of 2020 with available liquidity of $15.9 billion, up 21% versus September end 2020, with a robust liquidity to 12 months revenue ratio of 61%. I won't go through them all in detail. But as you can see, we executed several capital markets transactions in the quarter in order to take advantage of very competitive rates and continue the reduction of our financing costs, including our first euro-denominated notes maturing in 2024. Given our stronger cash flow performance in December, the company prepaid £600 million of commercial paper issued in April 2020 and maturing in 2021, as well as £300 million in term loans through 2021 and 2022. This concludes my prepared remarks on the financial part of the presentation. I will now turn it over to Scott for his final remarks.

Thank you, Oddone. Despite the many distractions in 2020, we continued to develop our digital and precision farming offerings, structuring our solutions across three dimensions of field, fleet and farm. Field is the classic precision farming area, focused on optimizing yield and input costs to maximize profitability for our growers. In the fourth quarter, we launched 23 new field features, including further defined in-field data collection. When integrated alongside our automated in-field headland turn and sequence automation, which is all controlled through our award-winning display and armrest, this innovation provides the ease of use and data accuracy that our customers demand. Fleet is focused on improving the productivity of customers’ machines and our connected fleet has more than doubled year-over-year. We added 11 new features in our fleet solution last quarter and will add nearly 20 more in the coming months. Farm helps farmers enhance their profitability by combining a range of agronomic information including soil, weather and crop data to deliver seamless visualization and analysis of these data layers that facilitates better farm management decisions. Customization can be executed in the field utilizing cloud sharing directly to the machines. Lastly, we keep expanding our Ag Extend portfolio which brings some of the newest and most innovative precision farming solutions to our customers. We've recently added six new offerings into this portfolio and there will certainly be more to come. Our next generation farming solution co-designed by our customer and product teams is improving the performance of precision farming features: auto guidance, end-of-row turns, section control and more while greatly enhancing ease of use. Take rates for precision technology features on our large machines are close to 100%. This offers significant potential as we deploy across machine platforms including smaller tractors where current technology take rates are considerably lower. Our updated technology solutions are an excellent example of our customer-focused innovation and importantly a key driver of margin expansion. During the quarter prototypes from our Nikola joint venture continued to be tested both on Arizona test tracks and at our own facility in southern Germany. COVID travel restrictions required splitting the validation work to secure efficient and effective progress which actually accelerated our development work. As planned, we will proceed to road testing in the coming months once we complete validation of crucial systems. Our award-winning Iveco S-Way will be the backbone for both the battery electric Nikola tractor truck that is targeted to enter production in the last quarter of 2021 and the fuel cell trucks currently scheduled for production at the end of 2023. One of the key things that attracted me to this role was Suzanne and the board's unwavering commitment to ESG, exemplified by CNH Industrial being confirmed as an industry leader in the Dow Jones Sustainability Indices for the 10th consecutive year. Out of the 86 companies invited to participate in the machinery and electrical equipment category, only 13 were admitted of which CNH Industrial was ranked 1st. Additionally, we were among the 273 companies making the prestigious A list for CDP climate change, comprising only 3% of the almost 10,000 disclosing companies. We also scored an A- in CDP’s water security A-list attaining maximum scores in governance, integration and business strategy. We are proud of the scores and recognition but much more so of the progress we are making to be a better company for all of our stakeholders. As we shift our focus to 2021, our opportunities to accelerate profitable growth are abundant. But we are cognizant of the significant headwinds we face and the hard work required to capitalize on our potential. We are committed to enhancing customer focus and maximizing shareholder value through the spin-off of our on-highway activities as soon as practicable. Our team is working diligently to drive this forward. Our strong balance sheet signifies the rock solid stability of the company. It also positions us for prudent investments that augment the key aspects of product, brand and distribution to enhance our competitive positioning. With a healthy dealer network and bullish customers in most segments, we enter the year with robust order books and CNH Industrial is poised to deliver a strong start to 2021. Our dealers are eager for growth, and those that I have met are enthusiastic about their opportunities to gain market share with our expanding and improving product and service offerings. We see strengthening industries and rebounding economies in many of the geographies where we compete. There is solid demand opportunity as global markets continue to reopen. We expect the Ag industry recovery we saw in most regions in the latter part of 2020 to continue. At this point, we see notable strength in the Northern Hemisphere for combines and high-horsepower tractors with flat to slightly up markets in the rest of our regions. Farmer sentiment continues to track well, driven by higher commodity prices when we look at the WASDE stock-to-use data as well as surging Chinese soy and corn demand. Higher used equipment prices across the segment should also drive new retail sales and dealer inventory replenishment. For construction equipment, we have simplified our reporting segments into just two parts as we feel this is more consistent with how the industry views the market. We see industry demand continuing to recover with heavy equipment finally beginning to contribute. Dealers and customers are cautiously optimistic and we believe that global demand will be up in 2021 driven by South America as well as pockets in the EU and other regions. With the Democratic Party in charge of all three branches of government in the United States, there is conjecture regarding the possibility of an infrastructure bill, but it is too soon to count on anything especially given their slender majority. Demand for trucks and buses is where we see our most significant industry upside for 2021 with heavy and medium trucks in the EU increasing 20% to 25%, albeit not entirely returning to the 2019 levels. Truck orders have started an up cycle since the third quarter of 2020 and that trend has accelerated in the past couple of months. We expect that positive momentum to continue contingent upon the resurgence of the main economies in Europe. While we anticipate production up double-digits on an absolute basis versus 2020, most of this increase is planned for the first half of this year. This will lead to difficult sequential comparisons for the second half so it is worth noting that we see 2021 as a return to our historical production seasonality profile. Our intent is to produce closely in line with retail for the full year, now and going forward with some slight overproduction for buffer inventory should markets recover faster than expected. The financial expression of these markets and our execution is consistent with our long-term focus on profitable growth. For 2021, we expect net sales of industrial activities to be up between 8% and 12% year-over-year including the effects of currency translation. SG&A is expected to be equal to or lower than 7.5% of sales. R&D is expected to be around 4.5% of sales and we anticipate positive free cash flow for the year from industrial activities to be between $0.4 billion and $0.8 billion. CapEx is projected to be in excess of 2.5% of sales. With these results, the board of directors intends to recommend to the company's shareholders an annual cash dividend of €0.11 per common share totaling €150 million or approximately $180 million subject to the approval of shareholders at the AGM. Please note that this guidance assumes no further significant disruptions due to lockdown policies or substantial supply chain disruptions. With only a month in this role, I am facing a steep learning curve which I am working to flatten. I am spending a lot of time talking to employees at all levels of the company. Their insights and perspectives have been invaluable and one in particular drove home to me the importance of what we do. I was told that while in my previous role we used to build cool stuff, now I was part of an enterprise that was honored and proud to serve a noble customer base, responsible for feeding the world. That nobility equally applies to the drivers and workers who alongside the farmers define our business. Our legacy is largely built on great products and brands. We will endeavor to improve those areas while putting our dealers and customers at the center of everything we do. Targeting our investments with that in mind will mean accelerating innovation, especially with digital, alternative propulsion and sustainability. We have made tremendous progress in these areas, but we'll double down to enhance our competitiveness and drive growth. Profitable growth will be a primary goal and expediting gross margin expansion will be a company-wide priority. World-class manufacturing is the CNH Industrial vernacular for Lean and these efforts alongside our quality and profitability focus will be encapsulated within our world-class enterprise efforts. Our company reaches to all parts of the world and wherever we are, our commitment to operating safely and ethically remains steadfast. Consistently executing these fundamentals and delivering to our customers will result in strong cash flow and consistent quality earnings. I'm keenly aware of the notable challenges we must overcome to achieve a higher level of performance, but I am equally confident that this CNH Industrial team is up for the task. Our energy and efforts will demonstrate a constancy of purpose to define and realize our very bright future. This concludes our prepared remarks and I will now turn the call over to Jody to open the line for questions.

The operator will now open the line for the question-and-answer session and provide instructions. We will take our first question today from Ann Duignan from JPMorgan. Please go ahead.

Maybe you touched on only being there a short period of time and talking to customers and employees. But maybe if we take a step back, what do you consider your top priorities to be as you move forward? I mean, there is certainly a lot to bite off at CNH Industrial. I'd be interested to hear your perspective.

Yes. First of all, it's great to be here and join a team with a lot of momentum. What the company accomplished in 2020 puts a foundation in place that's a great place for me to start. My first priority is to learn the business, and at the same time get to work for our dealers, customers and stakeholders. There is no time to wait to make progress. I'm a big believer in personal accountability. For me, establishing a strong say-do ratio means delivering on our commitments. So, I have to work on setting the right goals and priorities. I went over this with the Board of Directors last week. Our first priority, as Suzanne and the team led last year, is to focus on keeping our employees safe through this pandemic until we get to the other side. We are pleased with the work we've done in doing that, but it's not done and we'll continue to make that a priority. Secondly, we're going to execute the spin or an alternative transaction, but our goal is to create two customer-focused businesses that allow us to reward shareholders and more importantly reward our customers. I'm going to try to drive a mindset shift within the company to really put the dealers and customers at the center of what we do. We're a very strong product and brand company but a lot of times we don’t have the customer centricity that can unlock much more potential. We'll execute that through a leaner organization model so we can be more efficient. Next, we want to drive profitable growth. Growth without profitability is not our objective. We'll focus on gross margin expansion. The opportunity is in material productivity, driving quality improvements and improving pricing actions. These are substantial opportunities but they will take work and time to realize. Part of the way we'll do that is through innovation both inorganic and organic, building on what we've done with precision ag, accelerating digital efforts and leveraging alternative powertrain technologies to ensure we are a leader in off-road as well as on-highway. Finally, we will continue to drive sustainability and lead with ESG. It's a great foundation for us as a company but we must continue to make progress. Those are the priorities. It's a lot of hard work, but I feel good about the team and am excited about what we can do in 2021.

Okay. I appreciate that color. And just as a quick follow-up, you said on the truck side, the spin or alternative transactions. Does that mean that you're open to something like an outright sale and/or something like a special-purpose spin-off?

We are committed to the spin. I think it's a great transaction for us and we are primarily focused on creating two customer-centric organizations and maximizing shareholder value. If there's an alternative transaction that would be better for customers and shareholders, we would certainly pursue that. I don't believe there would be much consideration for a special-purpose statutory spin where the business quality would require an unconventional approach. The quality of our businesses is strong and we can handle the due diligence of a road show; I don't believe we would need to consider anything else.

Our next question is from Steven Fisher from UBS. Please go ahead.

Great, thanks and welcome, Scott. And just a follow-up on Ann's question there about priorities and your goals, just anything that stands out initially as really kind of low-hanging fruit to address in the first six months in terms of either margin improvements or any of your priorities and a sense of what maybe is really underappreciated versus what expectations are what you've found so far?

Thanks, Steven. I don't think there is any low-hanging fruit. The work that Suzanne and the senior leadership team did last year to capture opportunities and deliver cash flow was significant. That doesn't mean there is not meaningful opportunity here, but it's not quick wins. The organization shows a lot of pride and willingness to do more across levels. Recognizing our dealers as partners and putting customers at the center offers an opportunity; it's a mindset shift more than a quick operational fix. From a margin perspective, the largest opportunity is in material productivity and improving quality — those are more structural and medium-term improvements rather than immediate low-hanging fruit. We'll drive sustainable, systematic improvements in gross margin via productivity, quality and pricing where appropriate.

And just for a follow-up, Suzanne you mentioned having good confidence in the first half of the year. How uncertain would you say the second half of the year is? How far out does your order book extend? And what do you see as the biggest uncertainties for the second half?

Thank you. As I mentioned earlier, the first half is looking strong. We have a very good order book across different segments. We are coming into this year in a much stronger position in terms of inventory levels. The second half of the year is harder to predict. Typically we have stronger sales in the first half of the year than in the second half. That pattern should return after the disruption in 2020, but predicting the second half is difficult due to ongoing pandemic uncertainty and other macro factors. At this point, order books give us confidence for a strong first half.

We will take our next question from David Raso from Evercore. Please go ahead.

Following up on that question about the second half and first half, just to be clear, for the second half are you more concerned about fundamentals or are there also supply chain issues to be thoughtful about in your ability to meet demand? Given the order book size, the age of the fleet, pricing power and how much you want to produce relative to retail, and then I have a quick price-cost question as a follow-up.

I'll address seasonality first. As Suzanne mentioned, the order books are very strong and cover the first half of the year. The second half has more difficult comparables. We have positioned inventory levels and worked to reduce dealer inventories to a healthy point. Our goal is to produce to retail throughout the year. If retail accelerates in the second half, I am confident our supply chain and plants can deliver. In the near term, supply chain constraints exist, and the team is doing an excellent job working through them. We do not expect supply chain conditions to deteriorate through the year and actually expect improvement.

Oddone, could you help us a little bit how to think about full-year price versus cost, and related to that the R&D going to 4.5% of revenue? Should we think of that as more of a run rate going forward versus the historical less than 4%?

On R&D, we curtailed some R&D in 2020 because some facilities were closed due to the pandemic. We restarted in Q4 and plan higher R&D in 2021 to support initiatives that require additional investment. In terms of price versus cost, we're pleased with price realization in 2020, particularly in Agriculture. On the cost side, we expect headwinds in 2021 due to raw material inflation and some supply chain bottlenecks. We've seen these in Q4 and probably will continue seeing some effects in Q1. We aim to offset most of this through pricing where possible.

So long story short, price-cost could be a drag on margin in the near term, but you have volume ramp and that volume is in some higher-margin businesses like North America high-horsepower Ag. Can you help with margin color? You gave SG&A and R&D guidance, but any sense on gross margin for the year or EBIT margin to level set operating leverage?

It's probably early for precise margin guidance. We expect incremental margin improvement versus 2020 and would consider 2019 a more normalized year to benchmark against. Mix will help margins this year, offset by commodity-related cost pressures. Many gross margin opportunities are longer-term — material productivity, quality improvements and pricing. Those are structural and will take time, but they are real opportunities for margin expansion.

We will take our next question from Ross Gilardi from Bank of America. Please go ahead.

Yes. Good morning, good afternoon, everybody and welcome, Scott.

Thank you.

I want to follow-up on the off-highway separation. There have been press articles about approaches for Iveco. Are you willing to say if you're leaning more heavily towards a sale over a spin versus your initial thought process at the 2019 Capital Markets Day? And if you were to sell the business are there any tax leakage considerations to take into account?

As both Suzanne and I said in our prepared remarks, we are committed to the spin and believe it will unlock significant value for both segments. We are not going to comment on press speculation. We have engaged with at least one interested party but it's far from a decision. We remain focused on separating the businesses and finding the transaction that is best for customers and shareholders. We won't speculate on tax implications for hypothetical transactions. Our commitment to the separation is solid.

I think Scott summarized it very well. Thank you.

Okay. Thank you. And then, Scott, you mentioned a couple of times the opportunity on gross margin to expedite progress for the company. Can you say what you're baking in for 2021 and can you comment on what the aspirational view would be on gross margin?

I won't provide a detailed gross margin number at this time. Mix will be a benefit this year and commodity pressure is a headwind — commodities drive both demand and cost. Most gross margin opportunities are medium to long term: driving quality, supplier performance and field service. These are not quick switches; they are structural improvements that will support pricing and margins over time. I view the long-term opportunity as material, but I have not yet completed the work to quantify it precisely.

Just a final follow-up on R&D at 4.5%: what would that figure look like for the on-highway business if you split it out?

I don't have that split calculated yet.

We will follow up with that detail if you don't mind.

Our next question comes from Martino De Ambroggi from Equita. Please go ahead.

A follow-up on the spin-off: based on the improved performance and improved market visibility, could the spin-off be a second-half event? And still on the perimeter, regarding Construction, once the spin-off is executed, would Construction be a core asset that you might look to acquire around, or do you still consider other strategic options for Construction?

On Construction, Stefano Pampalone and the team have done significant work to stabilize the CE business, as exemplified by improving Q4 results. We see synergies between Construction and Agriculture and believe there is potential to do more with the Construction business. We like the trajectory and intend to continue the turnaround and drive further profitable growth in that category. Regarding timing of the spin, historically we've aimed for early 2022. There is a lot of work to be done, but that timing is what we are driving towards.

And on guidance: you recorded strong incremental margins in Q4 for Ag and CE. Should we use those slightly lower incremental margins as a reference point for next year? And on free cash flow, what's the underlying assumption on net working capital — will we see a reversal in trend this year?

On incremental margins, remember Q4 2019 was a relatively soft quarter and Q4 2020 was a strong quarter, so I wouldn't project the same incremental margins for the remainder of the year. Regarding working capital for next year, we have a much better starting point this year. We are giving guidance on free cash flow for the year and the working capital component is expected to be modest.

Our next question for today is from Rob Wertheimer from Melius Research. Please go ahead.

Hello, everyone. Scott, welcome. A couple of big-picture questions: first, on Ag investment — with very high take rates on large Ag, what's your impression of past investment? Has the company invested enough and in the right balance between internal and external efforts? Second, what's your philosophy on operating systems, culture engagement and organizational improvement?

I am impressed with the progress on precision Ag and the tools in place. However, we still have ground to cover and are playing from behind in some areas. If we had invested enough historically, we wouldn't be in this position. There's good progress but we must accelerate investment and focus on customer needs: understand what growers, drivers and workers need and build capabilities that enhance their profitability and ease of use. That will guide our investment decisions going forward. On operating systems, I was encouraged by the world-class manufacturing approach — essentially Lean — that has been implemented in our plants. The underlying principle of starting with the customer and eliminating waste to add value is sound. My intention is to instill a rigorous operating rhythm: strong accountability for safety and quality with disciplined monthly management rhythms across the organization. I see opportunities to increase organizational efficiency while maintaining focus on customers and continuous improvement.

That's clear, thank you. Suzanne, is the Board supportive of a higher level of commitment to ag tech than in the past?

Yes. The Board is very much on board with the view that digital farming will become more important. Last year, despite careful cash management, we preserved spending in this area because we consider it fundamental to the company's future. The Board strongly supports continued investment.

Our next question is from Massimo Vecchio from UBI Banca. Please go ahead.

Good afternoon to everybody and welcome, Scott. My first question is on commodity prices. We are seeing higher commodity levels, approaching 2013 levels; current commodity prices are rising but U.S. combine registrations are still far below 2013 peaks. Can we expect a near-term full rebound in U.S. combine demand this year or next?

It's probably too early to call a full rebound. We have provided our guidance for the year and we will stick with that.

Second quick question: I saw underproduction relative to retail. How much of that was deliberate and did it drive any market share loss in some geographies or products?

Underproduction was predominantly driven by higher retail demand than expected. We do not believe inventory constraints were a driver of market share loss. Dealer and company inventories have been reduced, but there remains healthy inventory overall in the field.

Our next question is from Lawrence De Maria from William Blair. Please go ahead.

Hi, first, on ramping production in the first half you noted strong order books, but are you fully committed for seasonal first-half demand or are orders getting pushed out? Also, when taking orders for higher-horsepower Ag lines how far out are you booking?

We are running factories to meet demand and backlog is healthy. The team has positioned us to deliver in the first half. There are a few pockets of parts that require expediting and expedited logistics is a challenge, but overall we feel prepared to meet first-half demand. The key question is demand strength in the second half. We have been prudent and expect to produce closely to retail.

So are you sold out in the first half now or can you still ramp? And second, when will we see AI-enabled technology in CNH products such as see-and-spray capabilities?

There is not tremendous upside in production in the first half beyond current plans. Order books are strong and we will fulfill them. Regarding AI-enabled features, it's a core part of our development and teams are working on it, but I don't have specific timing to announce today.

Our next question is from Andrea Balloni from Mediobanca. Please go ahead.

Welcome Scott. A couple of questions: first, regarding heavy-duty trucks you mentioned gains at Q3 — can you update on Q4 performance for heavy-duty market share? Second, are you seeing any semiconductor shortages that could slow production in Q1?

We were encouraged by the work Gerrit Marx and the Iveco team did, resulting in market share gains and stronger performance in the year. There remains substantial opportunity going forward. On semiconductors, we are not immune to shortages and have seen challenges, but the team is managing through them. We do not expect unmanageable deterioration and are working to mitigate impacts.

Our final question for today comes from Courtney Yakavonis from Morgan Stanley. Please go ahead.

Hi, welcome Scott. Looking back at the 2019 Analyst Day there were 2022 targets by segment. Given the disruptions in 2020, which of those targets do you view as most achievable and which less achievable? And specifically on Construction Equipment, do you expect positive margins next year or could it still be negative?

The 2019 Analyst Day set ambitious but reasonable targets at the time. The key strategic pivot was the commitment to the spin, which I still support. I have not yet completed the detailed work to reconcile the 2019 targets to our current base after 2020's disruptions. I want to ensure the company is executing fundamentally before restating or confirming those historic targets. Regarding Construction, there is ongoing heavy lifting but we see a path to continued profitability improvement. The work Stefano and the team have done provides a basis to continue the turnaround.

Final question on cost reductions: originally you noted only about a third of cost cuts would flow through next year. Is that still the right way to think about temporary costs flowing back in and how should we think about R&D and SG&A given your guidance?

We provided guidance levels for SG&A and R&D as a percentage of revenues and CapEx. In 2020 we demonstrated the ability to adjust cost levels, and some of the cost reductions will remain while others will return as operations normalize. Our guidance reflects an approach tied to actual revenue performance and the needs of the business as conditions evolve.

That concludes the question-and-answer session. I will now turn the call back to Federico Donati for any closing remarks.

Thank you, everybody, and have a nice day. Thank you, bye.

That does conclude the call for today. Thank you all for joining. You may now disconnect.