Responding to “a slowdown in global markets,” engine maker Cummins Inc. plans to reduce its professional workforce by up to 2,000 people, with the majority completed by the end of this year, the company said in announcing its third-quarter earnings.
Adjustments to manufacturing capacity are already being made on a facility-by-facility basis and the company will evaluate if more significant restructuring actions are required in the coming weeks and months, the Cummins statement said.
“We are taking difficult but necessary actions to lower costs in the face of weak demand in many of our markets.” said Tom Linebarger, chairman and CEO. “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 that the company emerges stronger, with higher profitability and stronger leadership positions in our largest markets, as it has in prior cycles.”
Third quarter revenue of $4.6 billion decreased six percent from the same quarter in 2014. Currency negatively impacted sales by four percent compared to last year, primarily due to a stronger U.S. dollar. Weaker demand in global off highway and power generation markets was partially offset by distributor acquisitions in North America.
Revenues in North America increased four percent while international sales declined by 18 percent. 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 $577 million, or 12.5 percent of sales, down from $684 million or 14.0 percent of sales a year ago.
Based on the current forecast, Cummins expects full year 2015 revenues to be flat to down two percent, compared to the Company’s prior guidance of growth between two and four percent.