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5. Cummins, Inc. Business Report FY ended Dec. 2016

Cummins, Inc. Business Report FY ended Dec. 2016

Factors
1) Net Sales
-The Company’s Net Sales in the fiscal year ended December 31, 2016 decreased by 8.4% from the previous year to USD 17,509 million. The decrease in net sales came from weaker sales in all of the Company’s business segment, as well as negative foreign currency effects.

2) Engine Segment sales
-Sales of the Company’s Engine Segment totaled USD 7,804 million in the fiscal year ended December 31, 2016, a decrease of 10.0% from the previous year. While light-duty automotive sales increased by USD 106 million due to new sales of Nissan’s pickup truck platform, these gains were offsets by declines in other markets. Heavy-duty truck engine sales decreased by USD 673 million because of lower demand in the North American heavy-duty truck market. Medium-duty truck and bus sales decreased USD 235 million due to lower demand globally in the medium-duty truck markets, particularly in North America, Brazil and Mexico. Finally, off-highway sales declined USD 64 million due to decreased engine shipments in North American industrial markets.

3) Components Segment sales
-In the fiscal year ended December 31, 2016, the Company’s Components Segment had sales of USD 4,836 million, a decrease of 6.5% from the previous year. Sales across emissions solutions, turbo technologies and fuel systems decreased by USD 182 million, 105 million, and 49 million, respectively. These decreases were primarily caused by lower demand in the North America on-highway markets and were partially offset by increased demand in China.

Recent Developments

-WABCO Holdings Inc. announced that it has entered into a new long-term agreement with the Company to manufacture and supply high-performance air-compressor technology globally. This major contract expands the scope of WABCO’s existing U.S.-based joint venture with the Company. Located in Charleston, South Carolina, WABCO Compressor Manufacturing is majority-owned by WABCO in partnership with the Company since 1998. WABCO now becomes the exclusive supplier to the Company in North America for air compressors applied in trucks, buses and industrial equipment. The new agreement also significantly expands the volume and variety of demand for WABCO’s air-compression technologies at Company facilities in South America, Europe and India, with incremental opportunities for further growth in Asia. (From a press release on April 28, 2016)

Outlook

-For the fiscal year ending December 31, 2017, the Company expects that its consolidated net sales will be within a decrease of 5% compared to the previous year as a minimum, to the same level as the previous year at the maximum.

R&D Structure

-As of December 31, 2016, the Company has a total of 19 technical centers located in the following countries:

• U.S. (7)
• England (5)
• China (2)
• Mexico (1)
• Japan (1)
• India (1)
• France (1)
• Brazil (1)

R&D Activities

-The Company announced that it will partner with Peterbilt Motors Company, a division of PACCAR, to develop and demonstrate technologies under the U.S. Department of Energy (DOE) SuperTruck II program. For SuperTruck II, the team will focus on breakthrough advances in Class 8 vehicle freight efficiency technologies that are cost-effective enough to be used in everyday real-world applications. Building on the solid foundation of SuperTruck I, the Company will develop and demonstrate a Brake Thermal Efficiency (BTE) of at least 55% at cruising speeds of 65 mph. (From a press release on September 1, 2016)

-The Company announced that it was awarded a USD 4.5 million grant from the U.S. Department of Energy to develop a Class 6 commercial plug-in hybrid electric vehicle that can reduce fuel consumption by at least 50% over conventional Class 6 vehicles. The Company is partnering with PACCAR and representatives from The Ohio State University, National Renewable Energy Laboratory and Argonne National Laboratory on the project. Company researchers will optimize the powertrain by selecting the engine with the best architecture to use as an electric commercial vehicle range extender, using the engine to manage the charge level of the all-electric drive battery pack. (From a press release on April 7, 2016)

Product Development

X15 heavy-duty engine
-The Company rolled out the latest generation heavy-duty engine, the 2017 X15, at its Jamestown Engine Plant in Jamestown, New York, U.S. The next-generation X15 heavy-duty engines exceed U.S. Environmental Protection Agency (EPA) 2017 greenhouse gas and fuel-efficiency standards, with lower fuel consumption, extended service intervals, enhanced performance and the highest quality standards across the 400 to 605 horsepower ratings range. The X15 introduces an innovative approach to duty-cycle optimization, with two configurations, available as the X15 Performance Series and the X15 Efficiency Series. Both configurations are available in limited production through the remainder of 2016 with full production beginning in January 2017. (From a press release on October 5, 2016)

Integrated powertrains for trucks
-Eaton Corporation plc and the Company announced new features to their lineup of integrated powertrain offerings for the commercial trucking industry that will provide customers with additional downspeeding options. In April, available products will include a new 1,850 lb-ft torque rating for the Cummins ISX15 diesel engine that can be specified with an Eaton Fuller Advantage C-Ratio 10-speed transmission, an Eaton UltraShift PLUS MHP 13-speed transmission, or an UltraShift PLUS MXP 18-speed transmission. (From a press release on February 28, 2016)

-For the fiscal year ending December 31, 2017, the Company expects to invest between USD 500 million and USD 530 million in capital expenditures.