Financial Overview

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	Rate of change (%)	Factors
Overall	19,221	17,301	11.1	-
Operating Income	2,365	2,101	12.6	-
Sales by Segment
-Engine segment	10,962	10,013	9.5	1)
-Components segment	5,118	4,342	17.9	2)

Factors
1)
-Engine segment sales in FY ended Dec. 31, 2014 increased by 9.5% year-on-year due to following main reasons;

• Heavy-duty truck engine sales increased due to improved demand in the North America heavy-duty truck market with higher engine shipments of 29%.
• Medium-duty truck and bus sales increased primarily due to market share gains in the North American market.
• Light-duty automotive and RV sales increased primarily due to a 9% increase in units shipped to Chrysler.

2)
-Components segment sales in FY ended Dec. 31, 2014 increased by 17.9% year-on-year due to following main reasons;

• Emission solutions business sales increased primarily due to improved demand in the North American on-highway markets and increased demand in Europe and China to meet new emission requirements.
• Turbo technologies business sales increased as a result of improved on-highway demand in North America and Europe.
• Fuel systems business sales increased due to improved demand in the North American on-highway markets, the new Beijing Foton ISG engine that went into production.

Contracts

-The Company announced that the 2016 Nissan "Titan XD" full-size pickup with the Company's 5.0L V8 Turbo Diesel will be displayed at the 2015 North American International Auto Show in Detroit. The Company's 5.0L V8 Turbo Diesel will be built at the Columbus Engine Plant in Columbus, Indiana, USA. (From a press release issued in January 2015)

-Volvo Trucks will offer the SmartAdvantage Powertrain in all VNL Series models. The SmartAdvantage Powertrain for Volvo combines the Cummins ISX15 engine with SmartTorque2 with Eaton's Fuller Advantage Series Automated Transmission.

-The Company's 6.7L Turbo Diesel is available in the Ram "2500/3500" Heavy Duty pickups and the Ram "3500/4500/5500" Chassis Cabs.  (From a press release on July 7, 2014)

Awards

-The Company was recognized by Chrysler Group as one of the 2013 Supplier of the Year. The Company was recognized in two categories, marking the first time the Company has received two awards in the same year. The Company was recognized as the Powertrain Supplier of the Year and the Technical Cost Reduction Supplier of the Year. (From a press release on July 7, 2014)

Awarding Suppliers

-The Company recognized the top suppliers to its U.S. operations. The winners include: Robert Bosch LLC; NGK Automotive Ceramics USA, Inc.; WABCO Compressor Manufacturing Co.; Eaton; and Teksid Hierro De Mexico S.A. de C.V. (From a press release on May 2, 2014)

R&D Expenditure

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Overall	754	713	728
-Engine segment	438	416	433
-Components segment	230	218	213

R&D Structure

-The Company operates 19 technical centers around the world.

-The Company announced that it will quadruple the size of its technical center in Wuhan, China from current 26,000 square meters to 106,000 square meters. When this expansion project is completed, the center will be the Group's largest technical center outside the U.S., while having the largest capacity in terms of the number of new engine projects. The Company will invest USD 160 million in this expansion. Going forward, the Company plans to increase the center's testing rooms to 60 and increase its headcount to roughly 500 to 1,000. The center will handle the development of all the Company's engines, including large engine series. (From a press release on September 19, 2014)

Co-development

-The Company, Eaton and Peterbilt Motors Co. are partners on the SuperTruck project, which includes the development and demonstration of a highly efficient and clean diesel engine, an advanced waste heat recovery system, an aerodynamic tractor and trailer combination and a lithium-ion auxiliary battery power unit to reduce engine idling. (From a press release on May 15, 2014)

Product Development

SmartAdvantage Powertrain
-The SmartAdvantage Powertrain combines the Cummins ISX15 engine with SmartTorque2 with Eaton's Fuller Advantage Series Automated Transmission. The Powertrain delivers fuel economy improvements between 3 - 6%. This package has been embraced by customers since its launch in 2013.

-SmartAdvantage Powertrain package is being expanded to include applications for the ISX12 diesel engine and ISX15 SmartAdvantage applications up to 110,000 lb gross vehicle weight (GVW). This newest SmartAdvantage powertrain package will be available in the fall of 2014.

-Combination of SmartAdvantage powertrain and Meritor's 14X tandem drive axles with a 2.79 ratio or a 2.85 ratio will improve fuel efficiency for linehaul applications through "downspeeding," a process that maintains vehicle speed at lower engine rpms.

Natural Gas Engine ISX12 G
-Integrated powertrain package of Cummins Westport (JV of Cummins and Westport Innovations) ISX12 G natural gas engine and Eaton UltraShift PLUS automated transmission will provide customers with the first automated transmission to be paired with a spark-ignited natural gas engine in the North American market. (From a press release on March 9, 2014)

6.7L Turbo Diesel Engine meeting the Low-Emission Vehicle III (LEV III) standards
-The Company announced that it has received certification for its 6.7L Turbo Diesel from the California Air Resources Board (CARB), meeting the Low-Emission Vehicle III (LEV III) standards. This new standard applies to all vehicles under 14,000 lb GVWR. The Cummins 6.7L Turbo Diesel powers the Ram Heavy-Duty lineup, and is the first medium-duty diesel engine in the 8,501-14,000 lb GVWR segment to be certified to the new 2015 LEV III standards. (From a press release on August 15, 2014)

Engine and Powertrain enable 80% reduction of CO2 emission
-The Company announced the development of an engine and powertrain that reduce carbon dioxide (CO2) emissions by as much as 80% compared with a baseline gasoline-powered medium-duty truck. The work was jointly funded by the Company in partnership with the California Energy Commission (CEC). More than 1,000 miles and 1,500 hours have been accumulated on the ETHOS 2.8L engine over the past two-and-a-half years, demonstrating that this technology is capable of far exceeding the 50% CO2 emissions reductions outlined in the project's goals. The Company's ETHOS 2.8L is designed specifically to use E-85, a clean-burning blend of 85% ethanol and 15% gasoline. It delivers the power (up to 250 hp) and peak torque (up to 450 lb-ft) of gasoline and diesel engines nearly twice its 2.8-liter displacement. (From a press release on July 14, 2014)

Capital Expenditure

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Overall	743	676	690
-Engine segment	395	372	399
-Components segment	162	141	134

Investment Outside U.S.

<China>
-In November 2014, Wuxi Cummins Turbo Technologies Co., Ltd. announced that it has completed the first phase of construction of its second plant in Wuxi and has opened the new facility. This new plant has expanded Wuxi Cummins' annual turbocharger capacity to 2 million units. The second phase of the construction project is scheduled to begin around 2020, which is expected to increase the company's annual turbocharger capacity further to 3 million units. Currently, Wuxi Cummins can produce over 1 million turbochargers per year. It has produced an aggregate total of 9 million turbochargers since the company was established in 1996. (From news releases issued by multiple sources on November 25, 2014)