Cummins Inc. has confirmed it has started the process of cutting jobs worldwide to navigate what company officials project will be a cyclical downturn in business this year.
In November, Cummins announced plans to reduce its global workforce by around 2,000 employees, or 3%, by the end of March due to declining revenue and weakening markets in North America, China, India, among other markets.
Cummins officials, however, wouldn’t say how many jobs are expected to be cut in Columbus.
“The reduction in force has started, and we still anticipate it will be complete by the end of this quarter,” said Katie Zarich, Cummins manager of external communications.
The company’s 2019 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, according to filings with the U.S. Securities and Exchange Commission.
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 officials told market analysts in November that they had initiated a “comprehensive company-wide approach” to reduce structural costs by $250 million to $300 million in 2020 as the company prepares 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.
The company’s 2019 fourth-quarter results are expected to be released Tuesday.
Local analysts say the job cuts are largely a function of weakening markets and a tough year in the trucking industry.
“I think the bottom line is, it’s a cyclical business and if your bread and butter is in a period of weakness, you can’t keep all hands on deck,” said Roger Lee, senior research analyst with Columbus-based Kirr, Marbach & Co.
“As a whole, they knew that the cycle was going to soften up so they’re just doing what a manufacturing company should do,” Lee said.
Craig Kessler, president and chief investment officer with Columbus-based Kessler Investment Group, said Cummins is feeling the effects of tough 2019 in the trucking industry.
Kessler said he does not have information from Cummins on how many cuts the company is planning to make locally, but he said he would expect to see job cuts in Columbus.
“Based on the number of employees in Columbus, it makes sense that (job cuts in Columbus) would be measured in the low hundreds,” Kessler said. “If you’re talking about 2,000 or 3,000 worldwide, it would make sense that Columbus would be hit.”
Kessler emphasized that Cummins has been able to minimize layoffs in past cyclical downturns.
“Cummins has a history of getting ahead of these downturns,” Kessler said. “Management has done a very, very good job historically of minimizing the amount of layoffs, so I would not anticipate that this is the first of many waves to come.”
Jason Hester, president of the Greater Columbus Economic Development Corp., said he and his staff are monitoring the local unemployment rate and other economic indicators as Cummins continues with planned job reductions.
However, Hester said he cannot estimate the potential economic impact of job reductions at Cummins because the company has not shared with him how many local positions would be affected.
“Overall, Columbus and Bartholomew County continue to have record high levels of employment and very low unemployment rates,” Hester said. “As Cummins works through its downsizing of salaried positions through retirements and other separations, we will keep an eye on unemployment rates and other economic indicators. The silver lining of this downsizing is that it could represent an opportunity for other employers in the area to pick up talented individuals.”
