Joint Venture to Produce Cummins ISM Heavy-Duty Engines in China

BEIJING--Sept. 16, 2005--Cummins Inc. and China's Shaanxi Automobile Group Company Ltd. today signed an agreement to form a 50/50 joint venture company, Xi'an Cummins Engine Company (XCEC), to produce the Cummins ISM 11-liter heavy-duty engine in Xi'an, the capital city of western China's Shaanxi Province.

The ISM is one of the flagship engines of Cummins heavy-duty product line. In addition to proven fuel economy and dependability, the ISM meets the toughest emission standards worldwide. The ISM is the ideal power choice for heavy-duty vehicles with gross vehicle weight between 26 and 44 tons -- including trucks, long-distance coaches and double-decker buses.

The agreement was signed by John Watkins, Cummins Vice President and the head of Cummins operations in China, and Wang Hongjie, Vice Chairman of Cummins China Investment Co. Ltd., together with Zhang Yupu, Chairman of Shaanqi Group and Nie Xinyong, Chairman of Shaanxi Heavy-duty Truck Company Ltd., a subsidiary of Shaanqi Group.

The companies initially will invest $24 million in capital into the joint venture company, which will have access to the most advanced Cummins 11-liter, full-electronic ISM engine platform from 305 to 440 horsepower(hp). Construction of the plant could begin as soon as the fourth quarter of 2005 and production could start as early as the third quarter of 2006. The market for heavy-duty trucks with payloads greater than 15 tons is expected to be around 200,000 units by 2010. The joint venture's projected production is 50,000 units by 2010.

Steve Chapman, Cummins Group Vice President - Emerging Markets and Business, thanked the Shaanxi provincial and Xi'an municipal governments for their strong support in remarks at today's signing ceremony.

"The demand in China for high-performance and environmentally sound heavy-duty truck engines is growing quickly, and this agreement should allow Cummins to position itself to compete in this segment of the market," Chapman said. "By combining our technology with a strong local partner, which offers a significant OEM base for our products, Cummins is poised to significantly expand its portfolio of engine products in the important China market."

"Today's signing is an important milestone in Shaanqi's international cooperation since the 1980s. Shaanqi is a leader in China's heavy-duty truck market and Cummins is a leading diesel maker worldwide with a solid footprint and long-term commitment in China," said Chairman Zhang. "Our cooperation is a win-win for both sides. It will no doubt lead to a new chapter in China's trucking industry."

Jim Kelly, President of Cummins Engine Business, added that the Company's position as a technological leader and the proven performance of the ISM will serve Cummins well as it enters this portion of the China market.

"The ISM has consistently proven itself with the most demanding heavy-duty truck customers in the world, and we're excited about the chance to extend the Cummins product line in China," Kelly said. "We look for this partnership to provide heavy-duty customers in China with a top-of-the-line product choice."

Shaanqi Group, headquartered in Xi'an, is the leading producer of heavy-duty trucks (payload above 15 tons) in China. Shaanqi, which has been buying a small number of imported ISM engines from Cummins for several years, will be the largest customer for the engines produced by the joint venture. Cummins East Asia marketing organization will handle non-Shaanqi sales of ISM engine made at the new plant.

Cummins has had a presence in the China market for 30 years, and currently makes medium-duty and high-horsepower engines, as well as filters, alternators, turbochargers and generator sets through a number of joint venture and wholly owned operations throughout the country.

Heavy-duty trucks with payload above 15 tons and engine power above 300 hp are part of China's "Tenth Five-Year Plan." With the world's second-longest highway system, behind only the United States, and robust GDP growth, China's heavy-duty trucking industry has seen rapid development since 1999. The country plans to implement Euro 3 equivalent emission standards that will dramatically push forward the technological advancement of diesel engines.

About Shaanxi Automobile Group Company Limited (Shaanqi Group)

Shaanqi Group is the one of the leading producers of heavy-duty vehicles in China. With 11,000 employees, Shaanqi produced over 20,000 heavy-duty trucks in 2004 - a 76 percent over 2003. Shaanqi reported sales of $600 million and ranks as one of China's Top 500 enterprises. Shaanqi's product line includes off-road vehicle, heavy-duty and medium-duty trucks, and high-end bus chassis.

Shaanqi Group's aftermarket network in China consists of more than 20 regional offices, 200 distributors, 50 quick service stations along major highways and more than 300 service points across the country. Further information can be found in Shaanqi's website at www.sxqc.com.

About Cummins in China

Cummins is the largest foreign investor in the China diesel engine industry. The Company's ties to the country date back to 1975 when then-CEO J. Irwin Miller led the first Cummins delegation to Beijing, making him one of the first American business leaders to seek opportunities in China.

Cummins began licensing its engine technology in China in 1981 and formed its first joint venture in the country in 1995. Today, Cummins operates 20 facilities in China - including six manufacturing sites - with all areas of the Company's business represented in China. Eight of the 14 Cummins engine series have been produced in China. Cummins consolidated and unconsolidated sales in China exceeded $1 billion in 2004, representing nearly 10 percent of Cummins total consolidated and unconsolidated revenue.

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