Cummins comeback: think of it as a global technology company.

• Author: Kaelble, Steve
• Position: Company Profile - Cover Story

THINK OF CUMMINS as a manufacturer of noisy, soot-belching diesel engines? Think again. Remember the $35 million state bailout loan the company sought in 2001? Forget it.

The Cummins of the 21st century is very much a technology company. Yes, it still builds engines, but they're high-tech, low-emission, quieter and more fuel-efficient. Cummins Inc. also makes a variety of filters and other engine- and auto-related products, along with a wide range of power generators. And though its headquarters, biggest center of R&D and major manufacturing operations remain in Columbus, Cummins is a truly global corporation, with manufacturing facilities in faraway places and the capability of having engineers on multiple continents cooperating on an issue 24 hours a day.

It's a transformed company, and the results of its transformation show clearly in its financials. A company that saw sales and profits shrink as the century began--with a loss of about $100 million in 2001--is enjoying an impressive rebound. Sales through the first nine months of 2004 totaled about $6.1 billion, nearly matching the 12-month total of $6.3 billion in 2003. Profits through the first three quarters totaled $231 million, leaving the $50 million net income from all of 2003 in the dust. Cummins stock has steadily climbed from about $19 per share in October 2002 to about $80 as 2005 began.

"It's amazing," says auto-industry analyst David Healy of the Wall Street firm Burnham Securities. "Over the course of 18 months they've gone from a troubled company to one that's generating huge amounts of cash and record earnings. They've gone from famine to feast."

How did the company turn itself around? "I think we are smarter about running our business," says CEO Tim Solso. For Cummins, smarter has meant cutting costs, reducing overhead, streamlining product development, seeking new markets and, in general, viewing obstacles as opportunities.

WHAT CUMMINS DOES

Cummins was founded in 1919 by Columbus banker W.G. Irwin and an inventor who had earlier been Irwin's driver and auto mechanic, Clessie Lyle Cummins. Clessie Cummins was an early believer in the commercially unproven engine technology invented in the 1890s by Rudolph Diesel.

The first Cummins engines were used for stationary power, sold to farmers through the Sears catalog. In 1929, Clessie Cummins mounted a diesel engine on a Packard limo and took Irwin for a spin in what was the first diesel-power automobile. The durability and fuel economy of diesel engines caught the attention of truckers, and the company moved into the production of heavy-duty engines for trucks and construction equipment.

Today, the company splits its operations into four key business units:

* Engine Business--This remains the company's bread-and-butter, accounting for just over half of total revenues. Cummins engines can be found in a wide variety of trucking applications, including 18-wheelers, medium-duty trucks and school buses. An especially hot piece of this business has been the Dodge Ram pickup truck. Cummins sold some 120,000 turbo-diesel engines to Dodge in 2003 and about 150,000 in 2004, Solso says.

* Power Generation--Cummins' first products were made for generating stationary power, and that's what this business unit sells today, along with such related equipment as alternators. Cummins generators come in diesel and natural-gas variations and range in size from consumer models geared for RVs, homes and boats to the backup generators that serve...