INDIANAPOLIS — Cummins Inc.’s efforts in 2017 not only resulted in record sales, but also set new courses for future success, its top executive said at the company’s annual shareholders meeting.
Last year was the first full year of Cummins’ partnership with power management company Eaton, and the resulting Endurant automatic transmission is now in production, Chairman and CEO Tom Linebarger said Tuesday at the meeting in Indianapolis, the Columbus-based power, technology and diesel engine company’s headquarters for its global Distribution Business.
A partnership with Microsoft consists of an advanced energy laboratory in Seattle, where data center conditions can be simulated, Linebarger said, and the launching of ZED Connect, a subsidiary that will make electronic logging devices.
The Electrified Power business segment began operation in January of this year after ramping up last year. Ramping up included buying two battery companies: Johnson Matthey, which specializes in high-voltage batteries, and Brammo, whose focus is low-voltage batteries.
“Possibilities include hybrid systems and electric systems,” said Julie Furber, Electrified Power’s executive director.
Terminal tractors, excavators, mining equipment and medium-duty trucks are all likely applications of the segment’s products, she said.
Last year saw operation of the first Siemens passenger locomotive powered by a Cummins product, Linebarger said.
“We launched four new engines,” he said, which included the X15 performance series and efficiency series.
Growth platforms the company will be focusing on include building on its strength in powertrains, leveraging its global distribution channel, data-enabled services such as telematics and increased participation in attractive markets, the chairman and CEO said.
“We’re a global technology leaders with a broad portfolio of power solutions,” Linebarger said. “All we’re doing is figuring out what the right technology is for any situation anywhere in the world.”
Cummins ended 2017 ended the year with fourth-quarter revenues of nearly $5.5 billion and full-year revenues of slightly more than $20.4 billion, which set company single-quarter and single-year revenue records.
The main damper on the bright picture, the CEO and chairman said, was a set of quality issues that resulted in millions spent to fix problems in engines sold between 2010 and 2015. Since the fourth quarter of 2015, Cummins has spent more than $250 on fixes, including millions last year and a $187 million charge in the first quarter this year.
“It was a good year,” Linebarger said. “It could have been a great year. Unfortunately, quality costs were greater than expected.”
He said that the company has already proactively addressed the problems, launching a company-wide quality initiative.
The company showed guests a video about Cummins Powers Women, its worldwide community initiative involving partnerships with non-profit organizations in various regions to empower females. The company has invested $10 million with eight nonprofits worldwide to achieve the initiative’s goal of overcoming significant barriers to advancement.
Linebarger said the initiative was part of the company’s constant examination of its purpose.
Cummins has modified its mission statement and added caring to its list of values. It has compiled a list of environmental sustainability targets to be achieved by 2020, and identified its global priority areas such as education, the environment and equal opportunity, the chairman and CEO said.
During the question-and-answer session after Linebarger’s remarks, he addressed the recently passed federal-level tax reform package. He said it gives Cummins the ability to repatriate cash flow from overseas.
“We think it’s a good start to 2018,” he said.
Linebarger was also asked about joint ventures with Chinese entities, and how to protect against intellectual property theft. He noted that it was an ongoing challenge, but that international trade is vital to the company’s survival.
He added that continuing to have such advanced ideas that international partners can’t copy and expropriate them was important to surmounting the issue.
“We just have to keep innovating,” Linebarger said.
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The Board of Directors of Cummins Inc. declared Tuesday a quarterly common stock cash dividend of $1.08 per share, payable on June 1 to shareholders of record on May 18.
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