By Boris Ladwig, The Republic
The recession's speed, severity and scope surprised Cummins Inc.'s leaders, Chairman and Chief Executive Officer Tim Solso said.
"It was very, very steep. It was very, very fast. And it was global," Solso said Friday at Cummins Corporate Office Building in downtown Columbus.
However, he said that unlike in the 2000-01 recession, Cummins' capital position, market share and other factors have enabled the company to respond better to the challenges.
Solso said Cummins is projecting that the recession will last nine quarters and will end with the fourth quarter of 2010.
"I don't ... think we'll see any growth in 2010," Solso said. "We'll see very slow growth in 2011."
Cummins in the last earnings statement projected sales would fall 30 percent this year, from last year's record $14.3 billion.
Solso said that in 2000-01, Cummins had 63 percent debt, negative cash flow, was close to violating loan covenants, had a low stock price, the engine business was losing money, the Dodge Ram business had fallen 50 percent, and the heavy-duty truck engine business had fallen 70 percent.
"If we'd had the recession that we're having now, if we'd had it then, Cummins would not have made it," Solso said.
Today, Cummins has less than 20 percent debt, $2 billion worth of liquidity, is generating positive cash flow, has gained market share in most markets and has a broader global footprint.
"We're in as good a position as you possibly could be," Solso said.
"So, yes, the recession is here, it's worse than we've ever had before, but the company, because of what's happened over the last five or six years, is positioned to, I think, withstand this, and come out even stronger at the end."
Cummins has recorded five consecutive years with record sales and earnings.
For 2008, sales rose 10 percent. Earnings rose 2.2 percent to a record $755 million.
Solso said economic conditions and projections are requiring Cummins, more than ever, to align cost and manufacturing capacity to demand and to invest strategically.
He said Cummins will invest about $350 million this year, primarily targeting products that have to meet upcoming emissions standards.
Chief Operating Officer Tom Linebarger said the global financial crisis prompted company leaders to make sure its business strategy still made sense in a rapidly changing environment.
He said the company's leaders determined that most of the overarching trends will continue, despite the recession:
The world will continue to move toward tougher emissions requirements. That will benefit Cummins, because it produces the technology that will be needed to meet those standards.