A weakening global economy has prompted Cummins Inc. to lower its sales and earnings expectations for the year. The company late Tuesday also said it would reduce its workforce by 1,000 to 1,500 by the end of the year.
Additional steps the company said it is considering include:
- Workweek reductions.
- Shutdowns at some manufacturing facilities.
Cummins provided no details about where workforce reductions would take place, and a spokeswoman said the Columbus-based engine maker likely would be analyzing the situation through the end of the month. The company in early September employed about 46,200 across the globe, then a record. That included about 7,700 in southern Indiana, the bulk of those in Columbus.
The company made the announcement after stock markets closed Tuesday; shares fell about 4 percent in after-hours trading.
As of 6:41 p.m. Tuesday, shares had fallen to $87.25, down 3.95 percent in after-hours trading. Shares had fallen 1.41 percent before markets closed on Tuesday. Shares of rival heavy equipment makers Caterpillar and Navistar also fell in after-hours trading.
In the announcement, Cummins said it expects to generate sales of about $17 billion this year, down $1 billion, or about 5.5 percent, from its previous projection made in July. The company expects its earnings before interest and taxes for the year to be about 13.5 percent of sales, down from about 14.5 percent.
“We continued to see weak economic data in a number of regions during the third quarter, increasing the level of uncertainty regarding the direction of the global economy,” Chairman and Chief Executive Officer Tom Linebarger said in filings with the Securities and Exchange Commission.
“As a result of the heightened uncertainty, end customers are delaying capital expenditures in a number of markets, lowering demand for our products,” he said.
Linebarger said the company is seeing the most significant declines in China and the North American heavy-duty truck and international power generation and mining market.
Spokeswoman Carole Casto said the company has not yet identified where the workforce reductions will take place.
“We’ll be evaluating that probably through the end of October,” she said.
As the company evaluates its market position, Casto said priorities will be made based on projects that are:
n Strategic and critical to profitability.
n Needed to meet customer demand.
n Related to safety.
After examining all projects and prioritizing them, the company will evaluate where to continue to invest and where to make cuts, Casto said.
“Some of these projects are going to get delayed,” she said.
Tuesday’s news was the latest in a string of announcements from Cummins that have indicated a slowing global economy.
Cummins in July already had announced that its revenues would be lower than it had expected at the beginning of the year. Since then, the company has instituted a hiring freeze and cut workweeks from Brazil to the Columbus Fuel Systems Plant.
Full-year sales of $17 billion would be about $1 billion below last year’s record but still would be the second-highest in company history.
“Responding quickly and strategically during these challenging economic times will pave the way for Cummins to emerge stronger as a company when markets inevitably rebound,” Linebarger said.
By the numbers
1,000 to 1,500
Level of workforce reduction Cummins plans to implement by the end of the year because of a weakening global economy.
Expected full-year revenues, down $1 billion from July projection.
Earnings before interest and taxes as a percentage of sales Cummins expects to generate for this year, down from 14.5 percent previously
Expected third-quarter revenues.
Date on which Cummins will announce third-quarter earnings.
Cummins has made several announcements this year that have indicated a weakening global economy:
Cummins said its sales will be about 9 percent lower this year than it expected because of a weakening North American market and because sales in China, India and Brazil are increasing more slowly than anticipated.
Cummins reports a slight sales decline in the second quarter primarily because of weakness in overseas markets.
Because of slowing demand, Cummins cuts the workweek of about 35 employees at the Fuel Systems Plant to four days.
Cummins institutes a global hiring freeze through at least the end of the year because of continuing global economic uncertainty.
Slowing demand prompts Cummins Inc. to cut the workweek of 350 employees at the Columbus Fuel Systems Plant to four days.