Cummins Inc. reported a second quarter profit of $2 million on sales of $1.46 billion, but $125 million in special charges brought that to an $82 million loss.
In second quarter last year the company posted a $61 million profit on sales of $1.77 billion.
"Our earnings are consistent with our outlook in April that we will show progressively improved profitability in a time of very difficult market conditions in most of our North American end markets," said Chairman and CEO Tim Solso. "Despite the continued economic downturn, the vast majority of the company's business is profitable."
Solso said cost reduction measures taken in the fourth quarter of last year will produce savings of $55 million a year by the end of 2001. The $125 million pre-tax charge is related to the termination of the development of a new heavy-duty engine platform and further cost reduction actions.
"By building on our existing platforms to meet the changing emissions regulations, we can avoid $200 million in additional expenditures and investments over the next two years," said Solso. The restructuring charge also includes provisions for a workforce reduction of approximately 600 people throughout the company. Cummins will achieve the reductions through terminations, layoffs, retirements and attrition.
Revenues for the engine business were $786 million, down 29 percent from the second quarter of 2000. Worldwide heavy-duty truck sales were $235 million, down 41 percent from second quarter 2000. Shipments to the North American heavy truck market were down 57 percent. Unit shipments to other markets were down 36 percent with the reductions primarily in Mexico and Europe.
Sales in the medium-duty truck and bus market were $147 million, down 19 percent from a year ago. North American volumes were down 31%.
Sales to light-duty automotive and recreational vehicle markets were $151 million, down 34 percent from the year-ago quarter, due to reduced engineshipments for recreational vehicles and to DaimlerChrysler for the Dodge Ram pickup truck. Sales of $253 million to agriculture, construction, mining, marine, and other industrial markets were 15 percent lower than the year-ago quarter.
The Engine Business reported a loss before interest and taxes of $24 million. For second quarter last year it reported earnings before interest and taxes of $42 million.
Sales of Filtration Business and other products were $291 million, down slightly compared to the second quarter of 2000. Sales at company-owned distributors in a number of international markets continued to grow during the second quarter. Filtration business revenues were down year-over-year, impacted by the weakness in North American on- and off-highway OEM markets. For the group, earnings before interest and taxes for the quarter were $23 million, compared to the second quarter of last year, when it reported earnings before interest and taxes of $35 million.
The Power Generation Business continued to grow, with sales of $384 million, up $16 million or 4 percent from a year ago.
Solso noted that demand from most end markets in North America appears to have bottomed in the second and third quarter based on all available data. "We are cautiously optimistic that late this year or early next year demand in our end markets will slowly improve," he said.