Cummins, Inc. Business Report FY ended Dec. 2019

Financial Overview

(in million USD)
  FY ended Dec. 31, 2019 FY ended Dec. 31, 2018 Rate of change (%) Factors
Net Sales 23,571 23,771 (0.8) 1)
Operating Income 2,700 2,786 (3.2) 2)
Sales by Segment
-Engine segment 10,056 10,566 (4.8) 3)
-Components segment 6,914 7,166 (3.5) 4)

1) Net Sales
-The Company’s net sales in the fiscal year ended December 31, 2019 decreased by 0.8% from the previous year to USD 23,571 million. Sales decreased in the Engine, Components and Power Systems segments, contributing to the Company’s overall decrease in sales. Furthermore, negative foreign currency effects decreased sales by 1%. These declining sales were partially offset by increased sales in the Distribution segment.

2) Operating Income
-In the fiscal year ended December 31, 2019, the Company’s operating income was USD 2,700 million, a decrease of 3.2% from the previous year. While the Company’s gross margin had increased by 4% over the previous year, increased selling, general and administrative expenses as well as increased research, development and engineering expenses negatively impacted operating income. The Company’s equity, royalty and interest income from investees decreased from the previous fiscal year, while its restructuring actions added approximately USD 119 million in costs in the fourth quarter of 2019.

3) Engine segment sales
-Sales of the Company’s Engine segment totaled USD 10,056 million in the fiscal year ended December 31, 2019, a decrease of 4.8% from the previous year. Sales decreased across all of the segment’s markets, with off-highway sales declining by USD 250 million due to lower demand in construction markets, medium-duty truck and bus sales decreasing by USD 148 million from a weakening Brazilian market, heavy-duty truck engine sales falling by USD 97 million from lower demand in North America. A decline in light-duty automotive sales and negative foreign currency effects furthered the segment’s decrease in sales.

4) Components segment sales
-In the fiscal year ended December 31, 2019, the Company’s Components segment had sales of USD 6,914 million, a decrease of 3.5% from the previous year. Sales in the turbo technologies business decreased by USD 125 million due to decreased demand in Western Europe and North America. The electronics and fuel systems business had sales decline by USD 79 million from lower demand in North America and India. Sales in the emission solutions business decreased by USD 55 million because of weaker demand in Asia and Europe. Negative currency exchange effects also decreased the segment’s sales. 


-The Company announced that it closed on the previously announced acquisition of fuel cell and hydrogen production technologies provider Hydrogenics Corporation. The acquisition of stock was completed for approximately USD 290 million and follows the approval of Hydrogenics shareholders. Air Liquide will own approximately 19% while the Company owns the remaining 81%. Hydrogenics will report under Cummins’ Electrified Power Business Segment, with operations continuing to be headquartered in Mississauga, Canada. Owning both fuel cell and hydrogen generation from electrolysis capabilities will enable the Company to offer a full, differentiated hydrogen solution, seamlessly integrated for customers. The Company continues to project that it will return 75% of operating cash flow to shareholders this year in the form of dividends and share repurchases. (From a press release on September 9, 2019)

Business Partnership

-On September 27, Hyundai Motor Company and the Company announced that they have entered into a memorandum of understanding to jointly develop and commercialize electric and fuel cell powertrains combining Hyundai fuel cell systems and the Company’s electric powertrain, battery and control technologies. Initial development will be focused on the North American commercial vehicle market, including working with North American OEMs on the integration of these systems into their vehicles. The new collaboration may extend beyond the commercial vehicle market, as the companies will also evaluate the development of fuel cell power generators and investigate other areas of collaboration. (Hyundai press release on September 27, 2019)

-The Company and Isuzu Motors announced another step forward in their partnership by entering into the Isuzu Cummins Powertrain Partnership agreement. The agreement formalizes a business structure for the two companies to evaluate and carry out opportunities to jointly develop and bring new diesel and diesel-based powertrains to global markets. Through this Powertrain Partnership, Isuzu and the Company share the commitment to leverage both companies’ technical strengths to develop market-leading architectures for customers around the world. The Company and Isuzu committed to form an alliance board and to assign a team of dedicated individuals from each company to continue exploration of potential opportunities in product technology development, procurement and manufacturing. (From a press release on May 31, 2019)

Recent Developments

-The Company announced that it is formally reviewing its emissions certification and compliance process for its pickup truck applications. Following conversations with the U.S. EPA and CARB regarding certification for the engines in the 2019 RAM 2500 and 3500 trucks, the Company made the decision to review its certification process and compliance with emissions standards. The review is being conducted with external advisors to ensure the certification process for pickup truck applications is consistent with its internal policies, engineering standards and applicable laws. (From a press release on April 29, 2019)

-The Company is in talks with suppliers from Brazil, India and China to bring more manufacturing operations to Mexico to meet the new regional content criteria of the USMCA trade agreement. The Company revealed to local media that those three countries supply the majority of components that come from outside the North American region. The Company also said that although Canada and the U.S. seek to attract these new investments, Mexico is the most viable option. The Company imports machined forgings, crankshafts, castings, cylinders, and other parts into Mexico from Brazil, while components imported from China and India include steering wheel covers, pistons and rings, among others. (Mexico-Now article on April 1, 2019)


-The Company announced that more than 100 electric school buses, powered by the Company’s fully electric drivetrain, have been ordered to date from Blue Bird Corporation, a school bus manufacturer highly focused on alternative fuel technologies. Blue Bird electric buses, already operating in California, North Dakota and Washington, will be joined by additional buses in California, Colorado, New Jersey, New York and Quebec later in 2019 or in 2020. Blue Bird has been working with electric technology in school buses since 1994, and recently partnered with the Company’s Electrified Power business segment. Over the next three years, the Company will invest USD 500 million in electrification to bring fully electric and hybrid solutions to market across a wide range of applications. The Blue Bird electric buses are capable of up to 120 miles of range and can be recharged in eight hours using a standard SAE J1772 Level 2 charger. Blue Bird manufactures school buses at two facilities in Fort Valley, Georgia. Its Micro Bird joint venture operates a manufacturing facility in Drummondville, Quebec, Canada. (From a press release on August 30, 2019)

-The Company announced that Kalmar, part of Cargotec, selected it to be the electrification solution provider for its electric terminal tractor offering for the European market. Kalmar’s T2 Terminal Tractor is slated to be launched in 2020 equipped with a 107 kWh lithium-ion battery capable of DC fast charge. The Company’s driveline solution eliminates need for a transmission on a terminal tractor, simplifying the overall system and reducing maintenance needs. “In line with our commitment to have a comprehensive electric product portfolio by 2021, we’re delighted to announce that we will be releasing our second electric terminal tractor in 2020 with Cummins as our electrification solution provider,” said Gina Lopez, Kalmar’s Vice President, Terminal Tractors. (From a press release on February 14, 2019)


-The Company expects its consolidated sales to decrease between 8% and 12% in the fiscal year ending December 31, 2020.

R&D Expenditure

(in million USD)
  FY ended Dec. 31, 2019 FY ended Dec. 31, 2018 FY ended Dec. 31, 2017
Overall 1,001 902 754
-Engine segment 337 311 280
-Components segment 300 272 241


R&D Facility

-The Company has more than 20 technical centers located across the world.

-On May 16, 2019, the Company announced plans to construct a new office building to serve as a hub for approximately 500 digital and information technology employees in Greenwood, Indiana. The Company announced that it would invest USD 35 million for the construction of the new building. (From Indiana Economic Development Corp. release on May 16, 2019)

R&D Structure

-The Company has approximately 7,700 engineers working in research and development.

R&D Activities

-The Automotive Research Association of India (ARAI) informed that Cummins India Ltd., the Company’s subsidiary, has received the BS-VI certificate for their engine families B6.7B6AD01 and B5.6B6Ad01. Cummins India is a group of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, air handling, filtration, emission solutions and electrical power generation systems. (From a press release on October 15, 2019)

Capital Expenditure

(in million USD)
  FY ended Dec. 31, 2019 FY ended Dec. 31, 2018 FY ended Dec. 31, 2017
Overall 700 709 506
-Engine segment 240 254 188
-Components segment 191 182 127

-The Company expects to invest between USD 675 million and 700 million in capital expenditures for the fiscal year ending in December 31, 2020. Approximately half of its capital expenditures will be invested outside of the U.S.

Investments in the U.S.

-Having celebrated 100 years of operation in Indiana, the Company announced a USD 33 million investment into its Columbus operation, with a significant portion going towards upgrading and equipping the 1.6 million-square-foot Columbus Engine Plant (CEP), making it the corporate hub and primary North American manufacturing center for the Company’s newest business segment, Electrified Power. Upgrades to CEP began in 2018 and are ongoing, as employees have already begun locating in the facility, with up to 75 new positions being added by the end of 2021. Founded in 2018, the Electrified Power business, with eight locations across four countries, designs and manufactures fully electric and hybrid powertrain systems along with innovative components and subsystems to serve commercial markets as they adopt electrification. In addition to its Columbus expansion, the Company also announced plans to construct a new USD 35 million office building to serve as a hub for approximately 500 digital and information technology employees in Greenwood, Indiana. (From Indiana Economic Development Corp. release on May 16, 2019)

Investments outside the U.S.

-The Company has allocated USD 7 million to improve the infrastructure of its manufacturing and development complex in San Luis Potosi. The investment was focused not on expanding its production capacity, but on improving the conditions of its 4,000 employees in that location. The improvements include a 4,000-square-meter expansion include a 420-person dining room, a training center with seven rooms with a capacity of 45 people each, and a collaborative area with eight work stations, boardrooms, focus rooms and medical service. The campus at San Luis Potosi has corporate offices and a R&D center, as well as a logistics center, which serves several divisions of the company, such as motors, generators, components and electrification. (From Mexico-Now article on January 16, 2019)