Cummins is developing a new strategy in the way it sells engines that will help it cut costs and at the same time result in optimized powertrains from partner truck manufacturers.

Speaking at a reception at Cummins' Columbus, Ind., headquarters, Martha Brooks, Cummins vice president and general manager of automotive business, said the company's aim is to more closely collaborate with partner OEMs to effectively put Cummins on a par with a captive engine division. At the same time, the company will shift emphasis in the way it sells engines to the end user.
"We're changing the structure of how to conduct the transaction in the market," said Brooks. The result will be that Cummins will no longer talk pricing to its end-user customers. Instead, each OEM will set the vehicle price.
Elaborating in a meeting the following day, Ed Pence, vice president of OEM business, said the new program is Cummins' "Go To Market" strategy. He said the cornerstone of the strategy is to cease discounting to dealers and end users. He said the company will "focus all its attention to working with OE partners (Paccar, Volvo and International) to set the pricing for their customers."
The benefits of this approach, he said, includes long-term price stability. In addition, he said the vehicle/engine product integration strategy would improve the overall quality of the powertrain. Reducing proliferation of engine options will result in cost savings and potential greater customer satisfaction, he said.
Refining the powertrain specifications won't necessarily mean any reduction in available ratings or truck engines offered. However, it will reduce the complexity of the options that, till now, have been engineered and provided for each OEM. The company currently provides 2,000-2,500 unique specs for each engine family for each OEM.
Behind the Go To Market strategy is a major effort to make Cummins' heavy truck engine division profitable. The new strategy will let Cummins cut redundant costs in engineering, distribution and marketing. However, while it will also mean a dual channel for parts and service support, Cummins will maintain its strong distribution system through its distributors, with no loss of field sales staff or field service support. Pence said Cummins would maintain both distributor and truck dealer support.
Pence said the company "acknowledges a critical piece of our restructuring is to improve the results of the heavy truck business." Previous reported comments by Chairman Tim Solso noted that Cummins will either restructure this business or get out of it. "This signals very strongly the decision taken to stay in the heavy truck business and positions Cummins very well to take a leadership position in the future," Pence said.