Cummins: Indiana diesel engine company to cut 2000 jobs

The culprit: weakening sales of engines and power generators around the world and no assurances that sales will pick up soon.

An Indiana economist says Cummins’ announcement that it’s laying off 2,000 workers is linked to numerous factors. The cuts will carry one-time costs for severance payouts and other expenses of $70 million to $90 million.

Global layoffs at Cummins could include up to 500 Indiana jobs being eliminated, according to a company spokesman.

The company is citing a slowdown in global markets and dips in its third quarter revenues. Third-quarter sales of Cummins engines for off-highway vehicles, such as construction machinery and farm equipment, fell 20% from a year earlier.

Chief Financial Officer Patrick Ward referred to the “surprising” speed of the sales downturn.

How Cummins is planning for the futureIn response to the poor results, Cummins announced a set of restructuring and cost-cutting measures.

During an hourlong teleconference Tuesday, Chairman and CEO Tom Linebarger talked abou the tough period the company is in. The company also offered a glum glimpse of 2016, noting that it expects “challenging conditions to persist for a few time”.

“We are disappointed with our results in the third quarter, but we are responding quickly to softening demand”, said Rich Freeland, President and Chief Operating Officer.

“Our plants are very flexible and adjusting to this”, he said. Currency negatively impacted sales by four percent compared to past year, primarily due to a stronger USA dollar. The consensus forecast had called for a solid gain to $2.60 per share, and so the extent of Cummins’ earnings miss was both clear and extreme. Previously, the company guided for sales growth of 2% to 4% this year. The company is cutting up to 2,000 jobs worldwide by the end of the year.

Asked by analysts for his economic prognostication, Linebarger wasn’t reassuring. “Where the bottom is, we’re not exactly sure, but it doesn’t look like we’ve reached it”. “So we’re far enough along on that project where we’re going to continue finishing it, and we continue to be maxed out in our office space in Indiana so we’re going to need that facility”. The job cuts at Cummins will have no effect on the new center.

The Company increased its quarterly cash dividend by 25 percent and has returned $1.1 billion to shareholders in the form of dividends and share repurchases throughout the year. Set for opening in late 2016, the tower will stand at the former Market Square Arena site.