Cummins (NYSE: CMI) manufactures diesel and natural gas engines, electric power generation systems, and engine-related components. Slightly more than half of Cummins revenues are from its markets outside the US, including India, China, Europe, Middle East, and Australia, and the company's international presence has helped to offset the slowdown in US sales. However, the global economic downturn has had negative impacts on the company as net revenue decreased by 25% in 2009. The company earned $10.8 billion in revenue and $428 million in net income in 2009.
Since most of Cummins' engines are used in trucks, it has been hurt by high gas prices and the decline in demand for larger vehicles, especially in North America. Cummins supplies Dodge Ram truck engines for Chrysler, the company's largest customer, which accounts for 8% of Cummins' consolidated sales. The company's six largest customers (Chrysler, PACCAR, Volvo Trucks North America, International Truck and Engine, Daimler Trucks and Ford) account for almost one-third of the company's sales.  Cummins sells engine systems to other Original Equipment Manufacturers (OEMs), but also often competes with them. Major competitors include Caterpillar Inc., Detriot Diesel and Navistar International Corporation.
Cummins' Engine Segment manufactures diesel and natural gas engines. Cummins brands and sells supply parts, re-manufactured parts, and services through its distribution channels. This segment competes mainly with OEMs and independent engine manufacturers.
Cummins' Power Generation Segment is a fully-integrated provider of power generation systems, power engine components and services -- designing and manufacturing most of the components used in these systems. This segment caters to customers requiring standby power (for uninterrupted power supply), distributed generation power (less reliable power infrastructure typically for developing countries) and auxiliary power for mobile applications (as a second power source after drive power). It's largest geographic markets outside of North America are the UK, India, Europe and the Middle East. MAK Americas Inc, a Caterpillar subsidiary, is Cummins' biggest competitor.
The Components Segment primarily provides engine-system components, including filtration and emissions solutions, fuel systems, controls, and air handling systems. This segment is also the largest worldwide supplier of turbochargers for commercial applications.
Cummins' Distribution Segment distributes the company's line of engine and power systems, components and services. It includes 15 company-owned and 17 joint-venture distributors in about 300 locations in over 70 countries. However, Cummins' network - including locations and dealers that the company has no direct control over - is more widespread. Their products are marketed by 5,200 dealers and 500 co-owned and independent distributors in 190 countries. Half of the Distribution Segment's revenues come from engine and power generation equipment, while parts and service repairs comprise the rest. Among Cummins' key markets are India, China, Japan, Australia, Europe and the Middle East.
Cummins keeps up with increasingly strict environmental laws by providing environmental-friendly and technologically advanced engine systems. The company has more advanced technology compared to competitors, allowing it to maintain its market position in some engine markets and gain market share in others. In particular, Cummins was able to meet EPA's 2007 on-highway heavy duty requirements, and announced during the year that its technology approach will comply even with 2010 standards.
Having met US environmental regulation provides Cummins with the experience to comply with increasingly strict laws in other countries such as Europe and Japan. International diversification also allows the company to compensate for losses in North American sales because of strict emission standards.
Cummins performance depends largely on the fluctuating economic conditions in its various markets. Its consumer-driven markets, such as the light-duty automotive and RV market, are particularly more subject to risk. Since the start of the economic downturn, gas prices and the housing slump in the US have caused a steep decline in North American demand for pick-ups.
Cummins has countered this risk by diversifying its markets internationally. Aside from increasing market penetration, the company's joint ventures and alliances have reduced the risk of declining sales in North America. Among its joint-ventures are with Dongfeng Motor Company in China, the largest medium-duty truck manufacturer in the country, and with Tata Motors, the largest automotive company in India.
Diesel, a close substitute for gasoline, is an emerging vehicle fuel source in North America.  Twenty years ago, diesel performance, emissions and noise were unacceptable; however, government regulation and consumers demanded fuel efficiency, leading a shift to the use of diesel engines. According to UBS, diesel consumption by passenger cars should increase 11 percent a year until 2015. As a diesel-based engine company, Cummins has seen revenue increases as a result of this increased demand. According to Cummins, demand for high-class motorhomes using diesel is about half.
Cummins' products compete with other OEMs on the basis of price, performance, fuel economy, speed of delivery, and customer support.