<p>For The Daily Journal</p>
<p>Cummins Inc. has outlined plans for how it is preparing to weather an expected downturn in business next year — including measures to reduce structural costs by $250 million to $300 million while maintaining investments to position the company for future growth.</p>
<p>During a presentation last week at the New York Stock Exchange, Cummins officials told market analysts that they are prepared for weakening truck markets in North America and India in 2020, as well as other markets that they believe have peaked, declined or may weaken next year, including the North America oil and gas market and the China construction market.</p>
<p>“Most of the markets in which we participate have either peaked or are on their way down.” said Tony Satterthwaite, Cummins President and COO, during the presentation.</p>[sc:text-divider text-divider-title="Story continues below gallery" ]
<p>Satterthwaite said the Fortune 200 company has “already initiated a number of actions” that he characterized as a “comprehensive company-wide approach” to reduce structural costs by $250 million to $300 million in 2020 and “improve the overall health of the company and prepare us better for when volumes come back.”</p>
<p>“We have adjusted for reduction to demand at our manufacturing facilities, cutting contingent labor, flexing down overall, reducing shifts, reducing overtime,” Satterthwaite said during the presentation. “We’re flexing all discretionary costs down pretty broadly.”</p>
<p>Currently, it is unclear to what extent, if at all, manufacturing jobs in the United States and central Indiana would be affected, as Cummins has manufacturing facilities in several of its global markets, including India, China and Brazil.</p>
<p>Satterthwaite said he expects the cost-cutting measures to be “substantially complete” by the end of March.</p>
<p>Cummins President and CEO Tom Linebarger acknowledged during the presentation that 2020 would likely be a difficult year for the company, but reiterated that Cummins has gone through similar cyclical downturns in the past and will remain committed to investing in technology — including electrification, fuel cell and hydrogen production technology — through the downturn to strengthen the company’s position when the market kicks back up.</p>
<p>“The thing we will not do during the downturn is we will not cut our investments in the key technologies that are going to help us win in the future, and the reason we don’t have to do that is because our operating and financial positions are strong,” Linebarger said.</p>
<p>Last month, Cummins announced that its third-quarter revenues were nearly $5.8 billion, a decline from the more than $5.9 billion the company generated during the same July-September quarter in 2018.</p>
<p>Lower demand for trucks and construction equipment drove most of the decline. Sales in North America were flat while international revenues fell 8%, Cummins said.</p>
<p>“We are facing a downturn in 2020. Nobody is surprised about that,” Linebarger told analysts. “That’s where we are. Our leadership team is ready. We’ve done it before. …There are lot of tough choices to make. I don’t want to make light of it. I just have confidence in our team to do the right thing.”</p>
