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Cummins: High on trucking

March 30, 2011
LOUISVILLE, KY. Top executives of Cummins Engine Business (NYSE: CMI) view the heavy-duty trucking industry and its truck market this year on into next very optimistically, given their business unit’s ongoing sales performance as well as truck production forecasts they’ve developed through contacts with Class 8 OEM customers
Tom Linebarger, president and COO of Cummins Inc.

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LOUISVILLE, KY. Top executives of Cummins Engine Business (NYSE: CMI) view the heavy-duty trucking industry and its truck market this year on into next very optimistically, given their business unit’s ongoing sales performance as well as truck production forecasts they’ve developed through contacts with Class 8 OEM customers. After achieving its best engine sales year ever in 2008, Cummins’ sales “dropped off” in 2009 in North America while remaining “stronger” globally, said Rich Freeland, Cummins vice president & president of Engine Business, at a media briefing held here last night ahead of the 40th annual Mid-America Trucking Show.

“Recovery [in this market] started in 2010,” Freeland asserted, “and we are projecting sales of $16 million for 2011 vs. $13 million in 2010, noting Cummins produced nearly 900,000 engines worldwide last year and 245,000 alone in North America. “As we entered 2011, we were very well positioned with our product [lineup] and the market here appears to be recovering.”

Tom Linebarger, president and COO of Cummins Inc., underscored the importance of this market to the global supplier. “North American trucking is our biggest single market and a critical one for Cummins,” he stated as soon as he took the mic. “This market is a big volume driver for us and also a technical development center. Technology we develop here goes out to other markets… [and the] partnerships we have with truck OEMs here we leverage globally.”

He added that Cummins is in “a stronger position here today than five or seven years ago” and said that was due in no small part to knowing “we have to earn the business we get every day” by how both OEM and end user customers are served.

Freeland stated that Cummins came through the downturn by “cutting costs and sizing the business correctly.” But because it “maintained its fundamental capacity [to quickly ramp production back up] and continued to invest in new product through 2010,” it was “prepared for the [trucking] upturn—and we see it coming this year.”

Jeff Jones, vice president of sales & marketing communications—Engine Business, said OEM order boards year-to-date “seem to be on track” for Class 8 NAFTA truck production to come in between 220,000 and 230,000 units. He allowed that “there are different opinions among OEMs on the build rate for the second half of this year,” but said end users Cummins stays in close touch with “suggest they are ready to replace their four- to five-year-old equipment so we are sticking with our forecast.” As for next year, he said Cummins currently estimates total Class 8 production will be in the 250,000 to 270,000 range.

Jones also noted that over the past year Cummins has made a major investment in customer support by launching its Cummins Care 24/7 customer-support program, which is staffed by trained Cummins employees and was “piloted first with some of our largest fleet customers.” He added that the engine maker has also “improved relations with OEM truck dealers” over the past year to help ensure better service for end users in the field.

Freeland advised that the engine maker is now shifting much of its development focus to stay ahead of the next key market trend in North America.

“The last decade was clearly about emissions, but the next will be about fuel economy and we feel SCR (selective catalytic reduction) emissions technology is the right one [to enable further fuel economy gains].”

Steve Charlton, Cummins vice president & chief technical officer—Engine Business, also stated that SCR is effective for “optimizing diesel engines for fuel economy.” While noting that “diesels are our heritage,” he said Cummins is also very active in both hybrid and natural gas engine development as fuel-efficient power alternatives for trucks.

“We see 2010 [EPA rules] as the conclusion of tough emissions standards and over the next five years all engines will be fitted with onboard diagnostic (OBD) systems,” he continued. Charlton added that Cummins views the upcoming federal greenhouse gas/fuel economy standards for trucks that will impact carbon dioxide levels as a “win-win for the industry and the environment.”

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