Cummins'Inc.'is a global power leader that designs, manufactures, distributes
and services diesel and natural gas engines, electric power generation systems
and engine-related products, including filtration and emissions solutions, fuel
systems, controls and air handling systems. We were founded in 1919 as one of
the first manufacturers of diesel engines and are headquartered in Columbus, IN.
We sell our products to Original Equipment Manufacturers (OEMs), distributors
and other customers worldwide. We have long-standing relationships with many of
the leading manufacturers in the markets we serve, including DaimlerChryslerAG
(DaimlerChrysler), Volvo AB, PACCAR'Inc., International Truck and Engine Corporation
(Navistar International Corporation), CNH Global N.V., and Scania AB.
Our financial performance depends, in large part, on varying conditions in
the markets we serve, particularly the automotive, construction and general
industrial markets. Demand in these markets tends to fluctuate in response to
overall economic conditions and is particularly sensitive to changes in interest
rate levels and fuel costs. OEM inventory levels, production schedules and work
stoppages also impact our sales. Economic downturns in the markets we serve
generally result in reduced sales, which affect our profits and cash flow.
Competitive Strengths
We believe the following competitive strengths are instrumental to our success:
Leading Brands. Our product portfolio includes products marketed under the
following brands, each of which holds a leading position in its respective market:
Cummins engines, electric power generation systems, components and parts;
Onan generator sets;
Newage products sold under the Stamford, AvK and Markon brands;
Fleetguard filtration systems and components;
Nelson intake and exhaust systems and components;
Kuss automotive in-tank fuel filtration;
Universal Silencer large filtration systems and silencers;
Holset turbochargers
Customers and Partners. To maintain technology leadership and a global presence
in a cost-effective manner, we have established strategic alliances with a number
of our leading customers. These partnerships provide us with a knowledge and
understanding of our customers technology and business needs, and enable us
to develop products and services, which better meet their requirements at lower
costs. For example, we have both customer and supplier arrangements with Komatsu,'
Ltd., including multiple manufacturing joint ventures and a product development
joint venture through which we have partnered in the development of several
engines. We are also the exclusive supplier of engines for Komatsu mining equipment.
In addition, we have been the exclusive diesel engine supplier to DaimlerChrysler
for its Dodge Ram truck since 1988, and in 2003 our exclusivity agreement was
extended beyond model year 2007. We have long-term agreements with Volvo, PACCAR
and International Truck and Engine Corporation for the supply of heavy-duty
truck engines. These agreements afford us long-term price stability and eliminate
certain dealer and end-user discounts as well as offer closer integration on
product development. We also have multiple international joint ventures to manufacture
midrange engines, including partnerships with Tata Engineering and Locomotive
Company, the leading truck manufacturer in India, and Dongfeng Automotive Corporation,
the engine supplier to the second largest truck manufacturer in China.
Global Presence. We have a strong global presence including a world class distribution
system, manufacturing and engineering facilities around the world and a network
of global supply sources. Our worldwide presence has enabled us to take advantage
of growth opportunities in international markets, with our sales outside the
U.S. growing from 39'percent of total sales in 1999 to 47'percent of total sales
in 2003. In the last 45'years, we have developed a distribution and service
network that includes more than 680 company-owned and independent distributor
locations and 5,000 independent dealers located throughout 137 countries and
territories. We also have manufacturing operations and product engineering centers
around the world, with facilities in the United Kingdom (UK), Brazil, Mexico,
Canada, France, Australia, China, India, South Africa and Singapore. In addition,
we have developed a global network of high-quality, low-cost supply sources
to support our manufacturing base.
Leading Technology. We have an established reputation for delivering high-quality,
technologically advanced products. We continuously work with our customers to
develop new products that improve the performance of their vehicles, equipment
or systems at competitive cost levels. We are a leader in developing technologies
to reduce diesel engine emissions, a key concern of our customers and regulators
around the world. We were the first company to develop engines that were certified
to meet new emissions standards governing on-highway heavy-duty diesel engines.
These standards went into effect for Cummins in the U.S. on October'1, 2002.
We also developed low-emission, high-performance natural gas engines as an alternative
fuel option for the on-highway, industrial and power generation markets. Our
technology leadership enables us to develop integrated product solutions for
the power generation and filtration markets, allowing our customers to use a
single high-performance, low-cost system as opposed to multiple components from
different suppliers.
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