"In total, worldwide industry retail unit sales of agricultural tractors and combines continued at last year's high levels in the first quarter, while worldwide construction equipment industry retail unit sales increased by over 6 percent compared with last year," said Harold Boyanovsky, CNH president and chief executive officer.  "In this strong industry environment, our net price realization efforts successfully enabled us to offset significant economic and materials cost increases in the quarter - increases which were in excess of economic forecasts.  In addition, our industrial efficiencies offset other cost increases.

"Meanwhile, CNH Capital delivered improved results in the quarter," Boyanovsky added, "with another successful asset backed securitization issue and lower credit losses. We also were pleased to reach a new six-year agreement with the United Auto Workers (UAW) at the end of the first quarter, which covers approximately 650 employees.

"Working together, the efforts of our employees and our independent dealers have combined to generate our fourth consecutive quarterly profit.  Although we were not fully able to take advantage of market opportunities, especially in North America, we believe several industrial initiatives launched in the first quarter will result in further profit improvements later in the year.  In particular, we remain committed to recovering, through pricing, any subsequent material or component costs increases that might occur," he concluded.

Highlights from the quarter included the following:

• In January, the company consolidated its European and Latin American construction equipment brands into two full-line brand families - Case and New Holland. As part of our ongoing strategy to leverage our dual brand, dual distribution network structure, this ongoing consolidation provides the opportunity to better serve our customer base by providing greater selection of products in each dealer network, and strengthening our marketing, parts and service support to our dealers.  Costs in the quarter for this initiative were in line with our investment expectations.
• Central to our ongoing product development strategy is a commitment that every new product we launch will be of higher quality and improved reliability than the product it replaces.  In keeping with that commitment, we delayed the launch of our new generation of skid steer loaders until later in the second quarter.     
• We reorganized our logistics operations in Europe to provide better service to our customers and anticipate ongoing cost savings of about 20% for the longer term, as a component of our profit improvement initiatives.

• The slowdown in the agricultural sector in Latin America, and particularly for the Brazilian combine market, was greater than expected, depressing quarterly revenues and margins.  As the market leader for combines, the downturn had a disproportionate impact, with net sales of combines down 52%.  Combine production has been curtailed to reduce this impact, and we do not expect any recovery in this market in the short term. Partially offsetting this decline in Latin America were substantially increased net sales of construction equipment, up 58% excluding currency variations compared with last year. 

• Components shortages - mostly in tires and engines - continued to impact production of some product lines and consequently retail product availability.  The company is working hard to resolve these issues with current suppliers and develop new sources of supply through our global sourcing initiatives.
• Our North American production of combine harvesters was down significantly this year, compared to the first quarter last year.  We closed our East Moline combine harvester assembly plant in the second half of 2004 and moved production to our Grand Island facility.  In anticipation of that event, production of combines at East Moline was unusually high in the first half of last year as we increased inventories.  This enabled us to provide product to customers during the relocation of these assembly operations and the ramp-up of new production at the Grand Island plant.  This new production includes the launch of a new-generation combine model, which will be more productive and reliable than the model it replaces.  We believe combine harvester production at Grand Island will exceed last year's production levels in the second half of the year.

The company's estimates of industry retail unit sales of agricultural tractors, combines and both heavy and light construction equipment are provided at the end of the release.  Estimates are included, in some detail, for the first quarter 2005 actual results and, more generally, for the company's expectations for the second quarter and full year 2005. 

EQUIPMENT OPERATIONS - First Quarter Financial Results 

Net sales of equipment, comprising the company's agricultural and construction equipment businesses, were $2.8 billion for the first quarter, compared to $2.7 billion for the same period in 2004.  Net of currency variations, net sales increased by 3% over the prior year's first quarter.

Agricultural Equipment Net Sales

• Agricultural equipment net sales were $1.9 billion for the first quarter, essentially at the same level as the prior year, but down 2% excluding currency variations.
• Sales in Latin America declined by approximately 35%, excluding currency translation, following the sharp market contraction, in particular for combines.  Sales in Europe were flat.  Sales in Rest of World markets were up 17%, and up 2% in North America.
• Total retail unit sales of CNH's agricultural tractors and combines decreased by approximately 5% compared to the first quarter last year.  First quarter 2005 production of agricultural tractors and combines was approximately 45% higher than retail, following the company's normal seasonal pattern to increase company and dealer inventories in anticipation of the spring selling season.

Construction Equipment Net Sales

• Net sales of construction equipment were $892 million for the first quarter, an increase of 20%, compared to $744 million in the first quarter 2004, and up 17% excluding currency variations.
• All regions contributed to sales growth in the quarter, including North America which was up 21%; Europe, up 9%; and Latin America, up 58%, but on a smaller base. (All calculations are exclusive of currency variations.)
• Total retail unit sales of CNH's major construction equipment products increased 4% compared to the first quarter last year.  Production was higher than retail by approximately 23%.

Gross Margin

Equipment Operations gross margin (net sales of equipment less cost of goods sold) for agricultural and construction equipment was $409 million in the first quarter of 2005, virtually the same as the first quarter last year ($414 million).

• Agricultural equipment gross margin declined compared to the prior year's first quarter, held back primarily by lower volumes of high-margin combines, as noted previously.
• Construction equipment gross margin was higher than in the prior-year first quarter, benefiting from volume improvements, manufacturing efficiencies and increased pricing which were partially offset by material cost and other economics increases and currency variations, especially in North America.

Industrial Operating Margin

Equipment Operations industrial operating margin (defined as net sales, less cost of goods sold, SG&A and R&D costs) was $99 million in the first quarter of 2005, or 3.5% of net sales, compared to $117 million or 4.4%, respectively, in the same period of 2004.  The reduction was largely driven by an increase, excluding currency variations, in SG&A and R&D strategic investments to better support our dealers, improve product quality and enhance our global sourcing initiatives.  Currency variations related to the SG&A and R&D investments, as well as a slight decline in gross margin, in dollars, accounted for the remainder of the reduction.

Adjusted EBITDA

Adjusted EBITDA for Equipment Operations (defined as net income excluding net interest expense, income tax provision, depreciation and amortization and restructuring) was $130 million for the quarter, or 4.6% of net sales, compared to $128 million in the first quarter of 2004, or 4.8% of net sales. Interest coverage (defined as adjusted EBITDA divided by net interest expense) was 2.2 times for the first quarter 2005, compared to 2.0 times for the prior year first quarter. 

FINANCIAL SERVICES - First Quarter Financial Results

Financial Services operations reported net income of $49 million, compared to $27 million for the first quarter last year. In the first quarter of 2005, Financial Services in the U.S. closed a $1.4 billion retail asset backed securitization ("ABS") transaction and recorded lower risk costs, as a result of the continuing improvements in receivables portfolio quality.  In the first quarter of 2004, Financial Services in the U.S. completed the funding of an ABS transaction closed in the fourth quarter of 2003.

NET DEBT AND OPERATING CASH FLOW

Equipment Operations net debt  (defined as total debt less cash and cash equivalents, deposits in Fiat affiliates cash management pools and intersegment receivables) was $1.6 billion at March 31, 2005, compared to $1.3 billion on December 31, 2004 and $1.9 billion at March 31, 2004.  Net debt increased in the quarter principally to fund the approximately $257 million cash usage by operating activities.

The cash usage resulted from an increase in working capital (defined as accounts and notes receivable, excluding inter-segment notes receivable, plus inventories less accounts payable), net of currency variations, of approximately $466 million in the quarter.  At incurred currency rates, working capital on March 31, 2005 was $2.8 billion, compared to $3.1 billion on March 31, 2004.  This increase in working capital compares to an increase of about $125 million in the first quarter of 2004, net of currency variations.

Financial Services net debt declined approximately $400 million to $3.2 billion on March 31, 2005 from $3.6 billion on December 31, 2004.

CNH OUTLOOK FOR 2005

CNH believes that for the full year 2005, the agricultural and construction equipment markets will generally remain strong, especially in North America for agricultural equipment and in all major markets for construction equipment.  CNH's estimates of major agricultural and construction equipment industry retail unit sales, by major market area, are included in the supplemental information provided at the end of the release. 

CNH continues to expect that its net sales of equipment for the full year 2005 will increase by about 5%.  Including additional spending for R&D and dealer support, the company continues to expect a year-over-year profit improvement of about 15%, excluding restructuring costs, depending upon market conditions and commodity cost evolution.  Net of tax, restructuring costs for the full year are expected to be approximately $65 million.  Further, the company expects to generate approximately $200 million of cash flow during the year, after including its planned $90 million contribution to its US defined benefit pension plans.  We expect to use that cash to further reduce our Equipment Operations net debt, when compared with year-end 2004 levels.

For the second quarter, the company expects its revenues from net sales of equipment to increase by approximately 7% compared with the second quarter of 2004, including currency, as well as the impact of our April  2005 3-5% price increases.  Including the effects of our increased spending for R&D and dealer support, we expect that net income, excluding restructuring costs, will be approximately the same as the second quarter last year.  Net of tax, restructuring costs for the second quarter are expected to be approximately $10 million.

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Reclassification of certain receivables, Deposits with Fiat and related cash flow

Please refer to Note 1 of the condensed consolidated financial statements for information concerning reclassifications of certain items in our condensed balance sheet and cash flow statements.

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CNH management will hold a conference call later today to review its fourth quarter results. The conference call webcast will begin at approximately 11:00 am U.S. Eastern Time. This call can be accessed through the investor information section of the company's web site at www.cnh.com and is being carried by CCBN.

CNH is the power behind leading agricultural and construction equipment brands of the Case and New Holland brand families. Supported by more than 11,400 dealers in 160 countries, CNH brings together the knowledge and heritage of its brands with the strength and resources of its worldwide commercial, industrial, product support and finance organizations. More information about CNH and its products can be found on line at www.cnh.com.

Forward looking statements.  This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this press release, including statements regarding our competitive strengths, business strategy, future financial position, budgets, projected costs and plans and objectives of management, are forward-looking statements. These statements may include terminology such as "may," "will," "expect," "should," "intend," "estimate," "anticipate," "believe," "outlook," "continue," "remain," "on track," "goal," or similar terminology.

Our outlook is predominantly based on our interpretation of what we consider key economic assumptions and involves risks and uncertainties that could cause actual results to differ. Crop production and commodity prices are strongly affected by weather and can fluctuate significantly. Housing starts and other construction activity are sensitive to interest rates and government spending. Some of the other significant factors for us include general economic and capital market conditions, the cyclical nature of our business, customer buying patterns and preferences, foreign currency exchange rate movements, our hedging practices, our and our customers' access to credit, actions by rating agencies concerning the ratings on our debt and asset backed securities and the ratings of Fiat S.p.A., risks related to our relationship with Fiat S.p.A., political uncertainty and civil unrest or war in various areas of the world, pricing, product initiatives and other actions taken by competitors, disruptions in production capacity, excess inventory levels, the effect of changes in laws and regulations (including government subsidies and international trade regulations), technological difficulties, results of our research and development activities, changes in environmental laws, employee and labor relations, pension and health care costs, energy prices, real estate values, animal diseases, crop pests, harvest yields, government farm programs and consumer confidence, housing starts and construction activity, concerns related to modified organisms and fuel and fertilizer costs. Additionally, our achievement of the anticipated benefits of our profit improvement initiatives depends upon, among other things, industry volumes as well as our ability to effectively rationalize operations and to execute our dual brand strategy. Further information concerning factors that could significantly affect expected results is included in our Form 20-F.

We can give no assurance that the expectations reflected in our forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in these forward-looking statements. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the factors we disclose that could cause our actual results to differ materially from our expectations. We undertake no obligation to update or revise publicly any forward-looking statements.