With demand falling in many key markets, especially for trucks and construction equipment, Cummins Inc. is downgrading its 2008 sales and profit projections.
“Like many other companies, Cummins is experiencing the negative impact of the global economic downturn,” said Tim Solso, Cummins chairman & CEO. “Our engine and components segments are seeing the most significant declines with revenues for the fourth quarter down 15% compared to what we anticipated in our previous guidance at the end of October.”
The company’s heavy-duty and medium-duty truck and construction markets were hardest hit in recent weeks, with drops in demand in both North America and Europe. In addition, truck markets in China, Brazil and India also have weakened, Solso said.
As a result, Cummins now expects 2008 sales to increase by 9% over 2007, compared to its previous guidance of a 12% increase. Earnings before interest and taxes (EBIT) is forecast to be slightly more than 9% of sales, compared to the company’s earlier guidance of 10%.
“We are taking aggressive steps to manage costs and production levels to reflect current economic conditions,” Solso added. That includes reducing its professional workforce worldwide by at least 500 employees by the end of this year – costing Cummins between $30 million and $40 million.
The manufacturer is also initiating temporary plant shutdowns, shortening work weeks and extending traditional holiday closing periods, along with eliminating temporary employees in a number of plant locations, putting in place a hiring freeze, and significantly curtailing discretionary spending, Solso noted.
“These are very challenging times,” he pointed out. “We do not expect market conditions to improve significantly in the immediate future.”