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Union: Cummins cuts will hit home

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A union leader said Wednesday that the local Cummins workforce will be affected by reductions the company announced Tuesday — although how much, as of yet, is unclear.

Cummins reported late Tuesday that a weakening global economy would result in lower-than-expected revenues and profits this year. The Columbus-based engine maker also said it would reduce its workforce by 1,000 to 1,500 by the end of the year.

The company initially 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.

In early September, the company employed about 46,200 across the globe, then a record. That included about 7,700 in southern Indiana, the bulk of those in Columbus.

Upcoming workforce reductions could come from job cuts, layoffs or attrition, when a company decides against replacing retirees or people who leave the company.

Terry Axsom, president of the Diesel Workers Union, said union leaders and company officials are scheduled to meet Monday to discuss the local impact.

“We are going to be impacted,” Axsom said. “To what extent, I’m not sure.”

The union has about 1,500 members in south-central Indiana.

Shares of Cummins stock on Wednesday fell $3.05, or 3.36 percent, closing at $87.79, the lowest close since July 25.

Two local financial analysts said this week’s actions by Cummins did not come as a surprise. They said the reductions reflect global economic uncertainty and will position the company well to take advantage of an economic rebound.

Mark Foster, chief investment officer at Columbus-based Kirr, Marbach & Co., said he expects other companies to announce similar reductions in the next few weeks.

“This is not unique to Cummins. We’re seeing it across the board,” he said.

Analysts have been saying for the past several months that production was outpacing demand, and at some point production has to be reduced if demand does not pick up, Foster said.

The European economy is still struggling, and the Chinese and Brazilian markets have slowed, Foster said. Cummins operates across the globe and has to respond to international economic fluctuations.

Craig Kessler, president and chief investment officer of Columbus-based Kessler Investment Group, said he was struck most by the sharp decline in heavy-duty truck orders in North America in the past month; although, he suspected some of that had to  do with the upcoming presidential election and potential automatic federal spending cuts and tax increases.

At the same time, Kessler said, people should remember that because of its geographic and market diversity, Cummins is in a better position than ever to withstand a sluggish economy.

Kessler, whose company owns Cummins stock, said the company is making cuts because of a weakening economy, not because of poor products or management. The company continues to hold a leadership position in engine and emissions technology and continues to gain market share from competitors, he said.

Both Foster and Kessler said Cummins is taking prudent steps to align production with demand.

Some of the local employees will be affected, and that’s not good, Foster acknowledged, but Cummins is taking these steps to remain profitable for the long term.

Kessler said Cummins will be in a great position to take advantage of pent-up demand once the dust settles after the presidential election and the economic uncertainty dissipates.

“I think it’s going to be shorter-term than people anticipate,” he said.

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