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Diesel engine maker Cummins Inc. incurred a 55% decrease in fourth-quarter net income, citing a sharp drop in demand coupled with a stronger U.S. dollar.
The Columbus, Ind.-based company has implemented several measures to improve efficiencies as it foresees continued weakness this year, particularly in the North American and European truck and construction markets. Steps include a hiring freeze, temporary closing of plants, salary cuts and a 6% reduction in its global work force.
The company reported that fourth-quarter sales fell 6% to $3.29 billion compared to $3.52 billion during the same period in 2007 and net income dropped to $89 million from $198 million.
For the year, sales increased 10% to $14.34 billion from $13.05 billion the year prior while net income rose 8% to $801 million compared to $739 million. Results included a $37 million pre-tax charge to cover the costs associated with job reductions in the fourth quarter that included reducing its professional work force by nearly 650 people.
“Given our record-setting performance during the first nine months of the year, the rapid drop in demand in the fourth quarter as a result of the global recession was a major disappointment,” said Cummins Chairman and CEO Tim Solso. “At the same time, we moved quickly to lower our costs and tightly manage our capital spending, and already have taken further action in early 2009.”
Engine shipments declined in nearly all on-highway markets, including heavy-duty truck (9%); medium-duty truck (9%); Chrysler/light-duty auto (34%); recreational vehicle (72%); and construction (30%). The segment’s performance also was negatively affected by higher material costs, currency effects, increased warranty expense and lower income from its joint ventures.
The company’s power generation segment, which includes RV industry supplier Onan, posted a 6% increase in sales to $887 million compared to $840 million a year ago. Cummins said commercial generator sales improved 14% to $562 million, driven by strength in Western Europe and China, and more than offset a large decline in the company’s consumer generator business as a result of continued weakness in the U.S.