Cummins Affirms Commitment to Heavy-Duty Truck Market; Strategic Restructuring Elements in Place

    COLUMBUS, Ind--June 1, 2001--Cummins Inc. today announced that the strategic elements of its market restructuring are in place and the company remains committed to the heavy-duty truck engine market.
    Tim Solso, Cummins' Chairman and CEO, said, " A combination of leveraging our long-term supply agreements to take out costs, aggressive cost reduction actions, the decision to stop an engine development program and the strength of our current product line in meeting both customer requirements and new emissions standards give Cummins the ability to achieve a reasonable profit in this market and, therefore, remain a leader in the heavy-duty truck engine market."
    Cummins has previously announced long-term strategic supply agreements with Volvo Trucks North America, PACCAR, Inc., and International Truck and Engine Corporation. "These collaborative agreements with key truck manufacturers enable Cummins to act more like an internal engine division for its partners. Closer working relationships between the truck manufacturer and Cummins will take cost out of the system through improved reliability, reduced product proliferation, lower engineering expense as well as the redundant selling costs, " said Solso. "Successful collaboration will also result in vehicle and customer support enhancements."

    Restructuring Charge and Outlook

    Cummins said it would leverage the strength of the ISX and Signature product family, the industry leader in fuel economy and performance, and build off existing product platforms to meet its customer's needs. The company said that it would take a special pre-tax charge in the second quarter of $100 million to $120 million relating to the termination of the development of a new engine platform and people reductions.
    "Rapid changes in the industry, including global OEM consolidation and the continued trend of customers to seek higher displacement engines for better performance and resale value reduced the overall market opportunity for this future engine platform," said Solso. "When these factors were combined with the shorter product life cycle due to more frequent emissions regulation changes, and the current economic conditions, we concluded that we would serve the market most cost effectively with our existing engine platforms going forward."
    Solso continued, "By avoiding approximately $200 million in additional expenditures from planned platform investments over the next two years and working with existing platforms to meet the changing emissions regulations, we now have the opportunity to increase the rate of our debt reduction and the flexibility to invest in growth opportunities that are available in our Power Generation and Filtration Businesses as well as other parts of the Engine Business."
    These actions will remove at least $150 million in costs associated with the Engine Business over the next two years. Cummins will reduce its workforce, throughout the company, by at least 500 people over the year, through terminations, layoffs, retirements and attrition.
    The company indicated that the current economic environment in the United States makes it difficult to predict any significant upturn yet this year in consumer and industrial end markets. "We continue to take cost out of all our businesses. The implementation of the restructuring in December 2000, is on schedule and will produce savings of $55 million per year by the end of 2001," said Solso. Cummins indicated that given the market conditions, it is revising its earnings estimate (before the special charge) for the year to a range of $0.20 to $0.35 per share. The company expects that each of the last three quarters of 2001 will show progressively improved profitability in a time of very difficult market conditions in most of its North American end markets.
    The company will hold a conference call to discuss the content of this release at 11:00 a.m. Eastern Daylight Time. The call will be simultaneously webcast and can be accessed through Cummins' website at www.cummins.com. Access the investor information page and connect to the link to the conference call.
    Cummins, headquartered in Columbus, Ind., is the world's largest producer of commercial diesel engines above 50 horsepower. The company provides products and services for customers in markets worldwide for engines, power generation, and filtration. Cummins reported sales of $6.6 billion in 2000. Press releases by fax may be requested by calling News on Demand (toll free) at 888-329-2305. Cummins' home page on the Internet can be found at http://www.cummins.com.
    Information provided and statements made in the teleconference and on the webcast and in this release that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including but not limited to general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility, and other risks detailed from time to time in Cummins' Securities and Exchange Commission filings.