Cummins Making Strategic Change

May 2, 2001
COLUMBUS, Ind. – Cummins Engine Company is planning to make a major strategy shift in the way it sells its engines to the trucking market this month. At the heart of its new business philosophy is the belief that the truck manufacturer must be given the lead in coordinating total vehicle cost and pricing issues. Therefore, Cummins said it will discontinue its practice of giving direct discounts to
COLUMBUS, Ind. – Cummins Engine Company is planning to make a major strategy shift in the way it sells its engines to the trucking market this month.

At the heart of its new business philosophy is the belief that the truck manufacturer must be given the lead in coordinating total vehicle cost and pricing issues. Therefore, Cummins said it will discontinue its practice of giving direct discounts to dealers and end-users, thereby allowing the truck OEMs it partners with to better coordinate such price breaks.

At a meeting with the trucking press, Ed Pence, Cummins vp of sales, said the company is also focusing on several other strategies that will make Cummins act more like the internal engine division of its OEM partners, rather than simply a truck component supplier.

The company’s long-term agreements with Paccar Inc., Volvo Trucks North America and International Truck & Engine Corp. will allow it to offer those OEMs long-term price stability for engines, as well as “collaborative engineering and marketing opportunities” to help reduce costs for both itself and the OEMs, said Pence.

For Cummins, closer collaboration with the OEMs will allow it to eliminate redundant selling and marketing functions. It will also let the company reduce the number of engine options it offers – primarily cutting out unnecessary accessories that few customer ask for, rather than eliminating engine models or ratings.

“It’s going to allow us to step back and say, ‘what are the customer’s needs?’ and ‘what is the true mission of the vehicle?’” added Richard Kleine, executive director for automotive customer engineering at Cummins. “The OEMs said enough is enough – it costs them money to maintain thousands of engine options such as mounting locations, exhaust routings and fuel filter combinations.”

Kleine said that by creating more optimized packages, Cummins can reduce costs for both itself and the OEMs, while giving customers more reliable and higher quality products that better fit their needs.

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Tim Parry

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