If it's comin' around the mountain, it could have a Cummins' engine powering it. The company makes about half of its revenues from its Engine segment which makes diesel and natural gas powered engines for the heavy and mid-duty truck, RV, automotive, and industrial markets, along with marine, rail, mining, and construction. Its other complementary business segments include Components (filtration products and fuel systems); Power Generation (vehicle and residential generators); and Distribution (product distributors and servicing). Major customers include OEMs Chrysler, Daimler, Ford, Komatsu, PACCAR, and Volvo. About two-thirds of Cummins' sales are from outside the US.
The company's 31 to 3,500 horsepower engines are made under the Cummins brand name. The Components segment manufactures products that are complementary to commercial diesel applications; more than 7,000 filtration products are offered, some branded as Fleetguard. Other products within this segment include turbo technologies for air handling in engines and exhaust after-treatment technology, as well as new, used, and remanufactured fuel systems. Power Generation's standby power products (alternators, transfer switches, and controls) serve commercial and consumer needs, as well as those of the military. Brands include Onan (generator sets) and Stamford (alternators). Cummins' Distribution segment comprises a network of more than 600 company-owned and independent distributors that serve 190 countries worldwide.
Now that the effects of the Great Recession are in Cummins' rear view mirror, the demand for its products has hit the gas pedal. The company experienced sizable growth from 2010 to 2011 as revenues increased 36% from $13.2 billion to $18 billion. Its profits also surged by almost 78% ($1 billion to $1.8 billion) during that same time period. The rise in income was driven mainly by higher volumes in most markets and geographic regions, especially the reemergence of the truck markets within its key North American demographic and higher demand in emerging markets.
The company's fortunes are shaped in large part by the cyclical booms and busts of the on-highway, construction, and industrial markets. Its customers are particularly sensitive to the general economic climate, interest rates, and access to credit, as well as regulatory issues (environmental and emissions standards) and political shifts. In an effort to mitigate a slump in demand in any one market or region, Cummins is continuing to transform itself from a company concentrated in North America to one whose business is seizing up opportunities in developing countries. Following the US, China, Brazil, and India are Cummins' largest markets. Despite the potential for tapping these markets, Cummins has acknowledged the higher risks involved when it comes to foreign currency translations and political, economic, and regulatory shifts.
To increase its market penetration, the company relies on joint ventures that allow it to reduce capital spending, streamline its supply chain management, and boost its technology development. Some of the partnering companies include Dongfeng Automotive and Beijing Foton Motor in China, Tata Motors in India, Japan's Komatsu, Hyundai Heavy Industries in South Korea, Westport Innovations based in Canada, and US-based Mercury Marine. – less