Cummins Northwest changes gears.

• Author: Tyson, Ray
• Position: Cummins Northwest Inc.

Long dependent on the big North Slope oil producers, this company is diversifying by shifting its focus from trucking to power generation.

There was a time when, like other oilfield service companies, Cummins Northwest was firmly grounded in North Slope development. Then things began to unravel in the Alaska oilpatch, and the company had to make some hard decisions.

"We could see it coming," recalls Rick Kenny, Cummins Northwest branch manager in Anchorage. "We heard the rumblings, we heard about the layoffs. Everybody was scared to death."

Back in the heyday, before declining crude production and increasing costs on the slope forced many service companies to either quit or downsize, a hefty 65 percent of Cummins' business was anchored in the Alaska oil industry. Cummins' engines dominated the over-the-road automotive market.

"If you had 10,000 trucks coming up here, 62 percent of them were Cummins," Kenny says. "So there needed to be a focus up here," which is why Seattle-based Cummins Northwest established a branch here in the early 1970s.

With construction of the 800-mile trans-Alaska oil pipeline came the demand for remote power generation units, another product Cummins delivered to the booming construction industry along the pipeline. The orders flowed. Business was great.

But as Alaska entered the 1990s, it became increasingly apparent the state's most important industry was headed for trouble. Not only was North Slope crude production on the wane and costs on the rise, but major oil companies began to leave Alaska for better opportunities abroad. Rumors began to spread of impending budget and employment cuts by the state's two largest field operators, Arco Alaska and BP Exploration (Alaska) Inc.

For Cummins and other service companies that had a large stake in the oilpatch, rumor turned to cold reality in late 1991. Before a room packed with oilfield service representatives, then BP Exploration president Julian Darley announced that BP, the state's largest producer, was going to reduce by half its list of contractors and vendors.

Along with other oilfield service companies, Cummins Northwest got caught in the middle.

Says Kenny, "I mean if there were 100 construction companies, they are down to three or four. And out of those 100 construction companies, they all had Cummins' equipment to some extent. So when 97 companies go, you lose 97 percent of your market in the oilpatch."

Cummins Northwest decided early on the company had to...