Cummins is to axe up to 2,000 staff mostly by the end of this year in a bid to save around US$200m and address what it says is a slowdown in global markets.
The redundancies will cost Cummins between US$70m and US$90m, while the supplier will also adjust manufacturing capacity with a view to seeing if further changes are necessary in the coming weeks and months.
Cummins announced the news at the same time as disappointing third quarter results, which saw revenue decrease 6% to US$4.6bn and net income attributable to the company fall from US$423m to US$380m.
“We are taking difficult but necessary actions to lower costs in the face of weak demand in many of our markets.” said Cummins chairman and CEO, Tom Linebarger. Global off-highway and power generation markets have been weak for some time and are worsening.
“Industry orders in key end markets in Brazil and China are at multi-year lows and showing no signs of improvement in the near-term. Given the uncertainty in the global economy, we expect challenging conditions to persist for some time.
“We have a very experienced leadership team at Cummins that knows how to manage effectively through periods of weak demand and ensure the company emerges stronger, with higher profitability and stronger leadership positions in our largest markets, as it has in prior cycles.”
Revenues in North America increased 4%, while international sales declined by 18%. Within international markets, lower revenues in Brazil, Europe and China were partially offset by growth in India.
Earnings before interest and taxes (EBIT) decreased in the third quarter to US$577m million, or 12.5% of sales, down from US$684m or 14% of sales a year ago.
Based on the current forecast, Cummins expects full year 2015 revenues to be flat to down 2%, compared to the company’s prior guidance of growth between 2% and 4%.
“We are disappointed with our results in the third quarter, but we are responding quickly to softening demand,” said Cummins president and COO, Rich Freeland.
“Through a combination of workforce actions and targeted capacity reduction we will position the company for stronger financial performance when market conditions improve.”