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5. Cummins, Inc. Business Report FY ended Dec. 2017

Cummins, Inc. Business Report FY ended Dec. 2017

Factors
1) Net Sales
-The Company’s net sales in the fiscal year ended December 31, 2017 increased by 16.7% from the previous year to USD 20,428 million. The increase in net sales came from improved sales across all of the Company’s business segments, despite negative foreign currency effects.

2) Engine segment sales
-Sales of the Company’s Engine segment totaled USD 8,953 million in the fiscal year ended December 31, 2017, an increase of 14.7% over the previous year. Factors contributing to the sales increase include an increase in heavy-duty truck engine sales by USD 397 million due to higher demand in North America. Off-highway engine sales increased by USD 365 million due to increased demand in global industrial markets. Sales in the medium-duty truck and bus market increased by USD 241 million due to higher demand in North America. Finally, sales in the light-duty automotive market increased by USD 146 million due to increased sales to FCA and of light commercial vehicles.

3) Components segment sales
-In the fiscal year ended December 31, 2017, the Company’s Components segment had sales of USD 5,889 million, an increase of 21.8% from the previous year. Emission solutions sales increased by USD 437 million due to increased product demand in India and increased market demand for trucks in North America and China. Sales of electronics and fuel systems increased by USD 166 million due to increased demand in China, Mexico and India. The consolidation of the Eaton Cummins Automated Transmission Technologies joint venture in the third quarter of 2017 contributed USD 164 million. Sales of both turbo technologies and filtration systems each increased by USD 143 million due to higher demand.

Recent Developments

-The Company announced the start of production of holset heavy duty turbochargers in Brazil for diesel engines, which were previously imported from China and the UK. The Company invested BRL 600,000 for the expansion of its Guarulhos plant in Brazil to produce the new turbochargers. The new production line begins operating in February 2018 and will have an annual capacity of 44,000 units, representing 40% of the capacity of the entire plant. Initial production will be supplied to Scania's DLC5 and DLC6 13-liter engines. The new turbochargers also fit 9-16 liter Volvo and Iveco engines. (Fenabrave press release on September 18, 2017)

Acquisitions

-The Company announced that it is acquiring the assets of Brammo. Through Brammo’s expertise, the Company will advance its electrification business. Founded in 2002, Brammo’s expertise across a broad range of applications includes developing electric energy storage technology for mobile and stationary applications. The acquisition is expected to close by the end of 2017. (From a press release on October 16, 2017)

Outlook

-The Company expects its sales to increase by 4% to 8% in the fiscal year ending December 31, 2018.

R&D Facilities

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

-The Company announced that it has opened a new research and development center adjacent to its manufacturing facility in San Luis Potosi, Mexico. The 25,000-square-foot facility is part of a larger plan to develop technical capability in remanufacturing and create an efficient campus setting in San Luis Potosi for future growth. The center will house capabilities needed for remanufacturing, including core and reverse engineering, robotic and manual methods for additive manufacturing such as laser deposition, thermal spray and welding, and capabilities for non-traditional remanufactured products such as aftertreatment and mechatronics. (From a press release on August 22, 2017)

Technological Alliance

-The Company and GILLIG LLC announced an electrified power partnership. Based in Livermore, California, GILLIG manufactures heavy-duty transit buses in the United States. The technical collaboration will integrate and optimize new battery electric technology from the Company on GILLIG zero-emission transit buses. Product development work will focus on a battery-electric GILLIG bus with a 200-mile range on a single charge. The bus will feature a direct-drive traction motor with peak torque of 3,500 Nm (2,582 lb-ft), and utilize energy recovered from a regenerative braking system. Initial bus deployment will use a plug-in charger. The Company currently powers the GILLIG series of Low Floor, BRT, BRTPlus, Commuter and Trolley buses with a broad portfolio of clean-diesel, near-zero natural gas and diesel-hybrid power. (From a press release on October 9, 2017)

Product Development

Fuel-efficient powertrain package
-Eaton Cummins Automated Transmission Technologies, a 50/50 joint venture between Eaton and the Company, announced that it has introduced a new fuel economy-focused powertrain package specifically designed to exceed the demands of the Mexican commercial trucking industry. The newly configured 18-speed Eaton UltraShift PLUS MXP automated transmission will be paired with a Company ISX15 diesel engine, providing sustained performance and maximum fuel efficiency in Mexico’s unique driving conditions. The new powertrain package will be available as a service release in December, with production availability in the first quarter of 2018. (From a press release on November 15, 2017)

Monitoring system for engines and air, fuel and oil filters
-The Company introduced systems to monitor engines as well as air, fuel, and oil filters at the recent 21st Fenatran truck show in Brazil. For the engine, the system offers a predictive diagnosis of faults and instantly forwards information to the driver and fleet manager, including recommendations for vehicle operation from the manufacturer. The system location service identifies and routes the driver to the nearest Company distributor or contacts a representative to provide guidance. The telemetry system is currently being tested and presented to truck manufacturers in Brazil. The Company’s Filtration Division also showcased its Fleetguard FIT technology, a set of modules and sensors able to monitor the condition of air, fuel and oil filters. (From multiple sources on October 18, 2017)

Electrified powertrain for battery electric vehicles and range-extended electric vehicles
-The Company revealed its electrified power technology for transit bus applications at the APTA public transportation show in Atlanta, Georgia. The Company showcased a new powertrain which incorporated a compact engine-generator, configurable for a battery electric vehicle (BEV) or a range extended electric vehicle (REEV). Enhanced energy storage for both the BEV and REEV systems is achieved using the Company’s high-density battery enclosure, enabling both on-roof and chassis integration. BEV applications use eight standard-size 70-kWh battery enclosures to provide a combined 560 kWh that enables a range of 224 miles on a single charge. The REEV system has a battery pack of three enclosures that provides 210 kWh for a zero-emissions range of 84 miles before the system uses a 150 kW (201 hp) engine-generator to recharge the batteries and continue operations. Both systems incorporate the same traction motor and power electronics to deliver a continuous torque of 1,850 Nm (1,365 lb-ft). (From a press release on October 9, 2017)

Endurant 12-speed automated transmission
-Eaton Cummins Automated Transmission Technologies, a 50/50 joint venture between the Company and Eaton, introduced the new Endurant 12-speed automated transmission at the North American Commercial Vehicle Show in Atlanta, Georgia. The 1,850 lb-ft capable heavy-duty transmission weighs up to 105 pounds less than competitive automated manual transmissions. Endurant is the first automated heavy-duty transmission to be introduced as part of the newly formed joint venture between Eaton and the Company. The new transmission will be paired with the Cummins X15 Efficiency Series engine beginning in October for Peterbilt and Kenworth trucks. (Eaton press release on September 24, 2017)

Power solutions and energy-diverse products
-The Company unveiled its latest power solutions and energy-diverse products, including a fully electric semi-truck, at its technical center in Columbus, Indiana. With the unveiling of the electric Concept Class 7 Urban Hauler Tractor, the Company introduced a state-of-the art battery pack that offers improved range and faster charging through increased energy efficiency and density capabilities. The concept truck design includes an engine-generator option for extended range capabilities with the inclusion of Company B4.5 or B6.7 engines, offering a 50% fuel savings compared to current diesel hybrids with zero emissions. The Company also revealed its latest Near-Zero natural gas engines featuring Agility’s Blue-IQ fuel delivery technology that are currently working toward Class 8 integration. The Company is also developing a high-efficiency spark-ignited technology that can deliver diesel-like performance and durability across a range of liquid fuels including ethanol, methanol, and gasoline. (From a press release on August 29, 2017)

-In the fiscal year ending December 31, 2018, the Company expects to invest between USD 730 million and USD 760 million in capital expenditures, primarily for product launches and facility improvements. Approximately half of the expected capital expenditures in the fiscal year ending December 31, 2018 will be invested outside of the U.S.

Investments outside U.S.

-The Company announced that it is investing USD 44 million in its operations in San Luis Potosi, Mexico to increase production of engines and components in 2018. The investment will support the production of engines between 4 and 10 liters for the Mexican and Latin American markets, as well as high-horsepower engines for the U.S. Ignacio Garcia, Vice President of Cummins Latin America, said that engine production has increased 6% annually over the last five years. (From a Mexico-Now article on November 17, 2017)