Cummins Inc. has announced that it plans to reduce its global workforce by around 2,000 employees, or 3%, due to declining revenue leading into what company officials believe will be a downturn in business next year.
On Friday, Cummins officials said the company has done “a number of things to reduce spending” — including offering voluntary retirement packages in the United States and United Kingdom and aligning production with demand at manufacturing facilities — but will still need to make reductions in workforce to weather a downturn in 2020.
The job cuts, which are expected to be completed by the end of March, would affect “exempt,” or salary employees, said Jon Mills, Cummins corporate spokesman.
“Unfortunately, we have to reduce headcount by about 2,000 worldwide,” Mills said Friday. “This is difficult. This is something we don’t take lightly. This is something we have to do to navigate the downturn.”
Tony Satterthwaite, Cummins president and COO, told market analysts Thursday during a presentation at the New York Stock Exchange that the company has “already initiated a number of actions” that he characterized as a “comprehensive company-wide approach” to reduce structural costs by $250 million to $300 million in 2020 and to “improve the overall health of the company and prepare us better for when volumes come back.”
“We have adjusted for reduction to demand at our manufacturing facilities, cutting contingent labor, flexing down overall, reducing shifts, reducing overtime,” Satterthwaite said during the presentation. “We’re flexing all discretionary costs down pretty broadly.”
Cummins officials told market analysts on Thursday that they are prepared for weakening truck markets in North America and India in 2020, as well as other markets that they believe have peaked, declined or may weaken next year, including the North America oil and gas market and the China construction market.
“Most of the markets in which we participate have either peaked or are on their way down,” Satterthwaite said during the presentation.
However, the downturn next year could be sharper than some of the previous cyclical downturns the company has gone through, Mills said.
Last month, Cummins announced that its third-quarter revenues were nearly $5.8 billion, a decline from the more than $5.9 billion the company generated during the same July-September quarter in 2018.
Lower demand for trucks and construction equipment drove most of the decline. Sales in North America were flat while international revenues fell 8%, Cummins said.
Cummins President and CEO Tom Linebarger acknowledged during the presentation on Thursday that 2020 would likely be a difficult year for the company, but reiterated that Cummins has gone through similar cyclical downturns in the past and will remain committed to investing in technology — including electrification, fuel cell and hydrogen production technology — through the downturn to strengthen the company’s position when the market kicks back up.
