Cummins CEO: Bright future ahead

Enginemaker’s revenues drop but restructuring helps fuel company optimism

Cummins Inc.’s chairman and CEO said the company is excited about future opportunities for success, including joint ventures and technological innovation.

That was the message shared by Tom Linebarger to shareholders, company employees and guests Tuesday during Cummins’ annual meeting at Columbus Engine Plant.

“Our earnings in 2016 demonstrate a whole new level of performance for the company in a cyclically weak market,” Linebarger said.

Despite weakness in the North American truck and the global high horsepower markets in particular, Cummins recorded full-year revenues of $17.5 billion and earnings before interest and taxes of $2 billion. Although both figures were down from the previous year, Linebarger said the restructuring of businesses, reductions in material costs and the hard work of employees still made the company profitable and beneficial to shareholders.

After a first quarter this year in which revenues of nearly $4.6 billion represented a 6.9 percent increase from the same period last year, Cummins expects better results for this year. The company adjusted its full-year revenue forecast to a 4 to 7 percent gain over 2016 instead of flat to down 5 percent, and Linebarger said new opportunities bode well for the company’s future.

He highlighted the company’s recent joint venture with Eaton to make automated transmissions for heavy-duty and medium-duty vehicles. Eaton brings transmission experience and Cummins engine experience. With most commercial vehicles moving to automatic transmissions from manual, the joint venture made sense, Linebarger said. The collaboration is expected to result in greater fuel efficiency and smoother ride for customers, he added.

“Fuel is one of the largest cost drivers for our customers, and our ability to provide the most fuel-efficient powertrains will help us win everywhere in the world,” Linebarger said.

Cummins this year started its Electrification Division to anticipate and meet the needs of customers, and seize on opportunities with commercial electric vehicles in urban markets, such as buses and delivery trucks.

“We intend to be a technology and market leader in electrification,” Linebarger told shareholders.

Cummins also is bringing its successful X12 engine from China to the U.S., which will enhance its engine offerings domestically. The 12-liter engine from its ISG line is the leading heavy-duty engine in China, the chairman and CEO said.

Linebarger said the company is choosing to not sit still and wait, but to take advantage of opportunities.

“We’re investing in new technologies in our research and development area. We’re partnering with technology companies outside of Cummins to bring in new capabilities and ideas,” Linebarger said.

Cummins has evaluated 180 proposals in the last 10 months, he said.

During a question-and-answer session, Linebarger was asked specifically if the company expects to add more partnerships in the next year or two. He said adding partnerships was likely.

“We are doing our work to expand our growth platforms and also add new technology capabilities. We are doing that work diligently and urgently. We are working very hard at that. We want to make sure we’re disciplined; we want to make sure we only do things that make sense for the shareholders, and that’s what we’re committed to do,” Linebarger said.

Pull Quote

“Fuel is one of the largest cost drivers for our customers, and our ability to provide the most fuel-efficient powertrains will help us win everywhere in the world.”

Cummins Inc. Chairman and CEO Tom Linebarger

Dividend info

The board of directors of Cummins Inc. on Tuesday declared a quarterly common stock cash dividend of $1.025 per share, payable on June 1 to shareholders of record on May 19.

The amount has remained the same since Cummins increased its dividend from 97.5 cents a share last summer.

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Kirk Johannesen is assistant managing editor of The Republic. He can be reached at johannesen@therepublic.com or (812) 379-5639.