Cummins Restructures Heavy Truck Business

Cummins has dropped plans to develop a new engine platform and is cutting its workforce. The company announced that "the strategic elements of its market restructuring are in place and the company remains committed to the heavy-duty truck engine market."

The struggling engine maker announced Friday morning that instead of developing a new engine platform, the company instead will build off its existing product platforms -- the ISX and Signature product family. This will save $200 million in additional expenditures that would have been invested in the new engine platform over the next two years.
"Rapid changes in the industry, including global OEM consolidation and the continued trend of customers to seek higher displacement engines for better performance and resale value reduced the overall market opportunity for this future engine platform," said Tim Solso, Cummins' Chairman and CEO. "When these factors were combined with the shorter product life cycle due to more frequent emissions regulation changes, and the current economic conditions, we concluded that we would serve the market most cost effectively with our existing engine platforms going forward."
Cummins will reduce its workforce, throughout the company, by at least 500 people over the year, through terminations, layoffs, retirements and attrition.
The company has been searching for ways to make its truck engine business profitable.
A proposed deal with International to develop a new engine platform fell through last month, and the company has been seeking financial help from the states of Indiana and New York.
Last month, Cummins announced it was changing the way it sells engines, focusing on relationships with truck markers rather than marketing and offering discounts directly to customers. Cummins has previously announced long-term strategic supply agreements with Volvo Trucks North America, Paccar and International. "These collaborative agreements with key truck manufacturers enable Cummins to act more like an internal engine division for its partners," Solso said.
The company indicated that the current economic environment in the United States makes it difficult to predict any significant upturn yet this year in consumer and industrial end markets. Nevertheless, Cummins expects that each of the last three quarters of 2001 will show progressively improved profitability.