Cummins Seeks to Make Market Gains

March 21, 2013
Cummins is aiming to leverage its worldwide manufacturing and engineering scale – plus what its executives call “critical partnerships and joint ventures” – to deliver more efficient engines, especially where fuel economy is concerned

Cummins is aiming to leverage its worldwide manufacturing and engineering scale – plus what its executives call “critical partnerships and joint ventures” – to deliver more efficient engines, especially where fuel economy is concerned.

“If we do it well, our global scale will give us an opportunity to boost fuel economy but do so at a final cost that meets our customer needs,” explained Rich Freeland, president of Cummins’ engine business at a press event held ahead of the Mid America Trucking Show.

“That’s because we believe the battlefield over the next decade [in the global trucking business] will be focused on fuel economy,” he said. “We believe we have a lead where fuel economy is concerned and we want to keep growing it.”

Freeland said that over the last decade, Cummins has boosted its medium-duty truck engine market share from 10% to 52%, while growing its heavy-duty engine share from 20% to 40% – with demand split down the middle, half coming from the on-highway segment and half from the off-highway market.

Steve Charlton, VP and chief technology officer for Cummins’ engine business, noted that the company’s global scale is what in part helped it boost fuel economy by an average of 2% for its 2013 truck engine lineup in part via core technology improvements and the ability to use lighter-weight 10W-30 motor oil.

“Having that global scale allows us to better direct component development four or five years out from a product launch,” he said. “It helps us offer a range of improvements, such as better low-speed performance, which again improves fuel economy.”

For example, Charlton pointed out that Cummins’ heavy-duty truck engines now on average sustain highway cruising speeds between 1200 and 1300 rpms on average versus 1450 to 1500 rpms just three or four years ago – and lower rpms translates into fuel savings for customers.

Charlton also noted that the company’s ongoing work with the “SuperTruck” project sponsored by the U.S. Department of Energy and new research on telematics should also provide further performance improvements for customers in the future.

“That’s why success starts with our global footprint plus partnerships and joint ventures with key suppliers – it allows us to bring technology, emissions compliance, and fuel economy together,” added Freeland, pointing to the recent deal Cummins forged with Eaton Corp. as but one example of how “deep integration” with partnerships can generate further fuel economy gains, which in the case of the Cummins-Eaton partnership range from 3% to 6%.

Cummins also reorganized the leadership of its engine business earlier this year so it could better position itself to take advantage of the growth in engine demand in different areas of the world.

For example, Dave Cromption, VP and GM of Cummins’ engine business, noted that of the 1 million engines the company produced since 2012 – and that includes all engines, truck and otherwise – some 50% of that demand came from outside the U.S.

While Cummins sold 396,000 engines in North America, it also sold 256,000 in China and 158,000 in India, with Europe (52,000) and South America (45,700) in distant fourth and fifth place, respectively, in terms of market size.

“That’s part of why we reorganized our leadership, because corporations are moving from a ‘multinational’ structure to a ‘global’ one,” he said – adding the 14 joint ventures Cummins currently maintains helped drive $2 billion in revenues for 2012, which is why forming more such partnerships is a key part of the company’s strategy going forward.

That includes not just diesel engines, either. Jim Arthurs, president of the Cummins Westport joint venture – which produces spark-ignited natural gas engines ranging from 5.7L to 12L – noted that while sales of natural gas-fired models remained at less than 1% of total truck engine sales in 2012, they are expected to jump to 3% to 4% in 2014 and perhaps to 8% to 10% further out.

To capitalize on that trend, Cummins Westport is planning to ramp up production of the new ISX12 G natural gas model from April through August. “We intend to build a good number of these engines,” Arthurs said.

For the trucking industry in the U.S., such changes are designed to create a more “customer-centric” business model for Cummins versus a “product-centric” one, Cummins’ Crompton explained – one that focuses on delivering not just better products but better customer support services as well.

In terms of U.S. demand, Jeff Jones, VP-North American engine business for Cummins, noted that while demand for Class 8 trucks this year is right now trending lower than 2012 – some 237,000 to 240,000 units versus 250,000 units in 2012 – he believes orders will strengthen in the second half of the year, as opposed to 2012, when they strengthened in the first half.

“We see order backlogs increasing, which means confidence is increasing though it is fragile,” noted Freeland. “The next move we anticipate in terms of production is up.”