Cummins to cut 2,000 salaried positions in cost-cutting measure

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  • bwframe

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    https://www.ibj.com/articles/cummin...utm_medium=newsletter&utm_campaign=2019-11-25


    ...Columbus-based Cummins Inc. plans to reduce its salaried workforce by about 2,000 employees worldwide by the first quarter of next year in response to a business slowdown, the company confirmed to IBJ on Monday.

    Cummins announced the news to its employees on Thursday, said company spokesman Jon Mills, adding that the company hasn’t yet identified which locations will be affected.

    The engine manufacturer has about 62,600 employees, including about 10,000 in Indiana. The terminated employees make up about 3.2% of the company’s workforce.

    The layoffs are part of a wider cost-cutting plan in which the company expects to reduce its annual expenses by $250 million to $300 million by the first quarter of next year in response to market forces.

    Last month, Cummins lowered its full-year financial guidance after missing quarterly revenue and profit expectations. Its third-quarter revenue of $5.8 billion was down 3% from the same period a year earlier. Profit came in at $622 million, or $3.97 per share, down from $692 million, or $4.28 per share, in the same period a year earlier.

    The company said its full-year 2019 revenue is expected to decline 2 percent, down from the previous guidance of flat revenue. It also said it expects full-year earnings before interest, taxes, depreciation and amortization to be in the range of 15.9% to 16.3% of sales, down from previous guidance of 16.25% to 16.75%.

    “We’ve noticed that demand is deteriorating faster than we expected, and so we took a number of measures to adjust to that,” Mills said.

    In addition to the layoffs, Mills said, Cummins has offered voluntary retirement packages to eligible U.S. and United Kingdom employees...
     

    ccha8778

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    This will be happening a lot more in the near future. The economy is not the in best shape despite what the news is saying, a lot of red flags in the markets and sectors such as manufacturing are slowing a lot. It is calm before the storm right now.

    Many companies I know of in NWI are preparing for an economic downturn, but hopefully it's not a bad one.
     

    MCgrease08

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    The situation with Cummins isn't so much due to an overall economic downtown, but more about the fact that truck orders were at near record highs the last two years. Truck OEMs were playing catch up on back orders at the end of last year and the first half of this one. Now fleets that needed trucks have them and the demand is down.

    The HD market is expected to be flat to down for the next year or so. Medium Duty should stay relatively stable.

    The Asian markets, including China did see pretty big drops this year which were lower than expected. Especially in off-highway where new construction is slowing.

    It's like when gun manufacturing went nuts ahead of the 2016 elections because customers assumed Hillary would win. When she didn't, the market was already flooded.
     

    Dr.Midnight

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    This will be happening a lot more in the near future. The economy is not the in best shape despite what the news is saying, a lot of red flags in the markets and sectors such as manufacturing are slowing a lot. It is calm before the storm right now.

    Many companies I know of in NWI are preparing for an economic downturn, but hopefully it's not a bad one.

    I'm having a hard time seeing a slow-down in the sectors I see daily. Discretionary income plays a huge role in my job, and I have yet to see a noticeable slow down in spending. I'm also remodeling a house right now. All the contractors I've spoken with said they've never seen the economy like this, and that business has never been better. I've waited MONTHS between signing a contract and actual work being started. They're simply covered over.
     

    bwframe

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    The first comment to the article...


    ...November 25, 2019 at 3:14 pm
    Like clockwork. Cummins can’t see beyond its next quarter...
     

    bwframe

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    "The economy" seems to be subject to the politics of the person you ask.

    A few months back, I spoke with a higher placed industry individual who just knew their weaker (automotive industry related) sales and thus the economy was going to crap because of Trump's tariffs. Emphasis was on "Trump's." It was very telling...
     

    churchmouse

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    I'm having a hard time seeing a slow-down in the sectors I see daily. Discretionary income plays a huge role in my job, and I have yet to see a noticeable slow down in spending. I'm also remodeling a house right now. All the contractors I've spoken with said they've never seen the economy like this, and that business has never been better. I've waited MONTHS between signing a contract and actual work being started. They're simply covered over.

    I know a lot of people in the trades and they are flat out right now. They can not respond to folks asking for bids on new work. So here is the slow down.
     

    target64

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    In the overseas automotive market India has laid off over 500,000 workers in their plants. The US off highway market is struggling and are no where close to last years figures.
     

    Indy317

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    I'm having a hard time seeing a slow-down in the sectors I see daily. Discretionary income plays a huge role in my job, and I have yet to see a noticeable slow down in spending. I'm also remodeling a house right now. All the contractors I've spoken with said they've never seen the economy like this, and that business has never been better. I've waited MONTHS between signing a contract and actual work being started. They're simply covered over.

    I know a lot of people in the trades and they are flat out right now. They can not respond to folks asking for bids on new work. So here is the slow down.

    Lots of factors at play.

    Lots of money being passed down from older folks who had it good back in the day. I know of an older person who passed away recently. UAW 30 years, just worked the line. Minimal OT. No kids or wife when he passed. Lots of good stock picks, good pension + social security. His money went to four people, each getting around $150K just like that. Most spent that money on homes or a new(er) vehicle.

    Interest rates are low. A lot of people don't mind being debt slaves for decades. Thirty year mortgage, they don't care. Six to even eight year auto loans, they don't care. Debt is cheap. Plenty of people can easily cash out equity and have a bathroom redone, addition to the home added.

    Stock market up for the last ten years. Lots of people made some good returns in their 401(k)s and IRAs, and some likely in basic brokerage accounts. Trust me, people see $50K in an IRA, maybe even a ton more, and they will have no problems borrowing from it if they want something. I heard one of my co-workers might have took a loan to buy a motorcycle. With the way most loans are, the rates are pretty low and the interest is actually paid back to you.

    Thing is, everything cycles. It is unlikely that someone who spends $5K-$10K on a bathroom remodel has any plans to redo the bathroom within the next fifteen years after completion. I hope those contractors are saving their additional money earned from this rush. I think manufacturing is being hit because with the low interest rates, lots of folks have newer cars from the last five or so years. Most folks will likely keep a purchased car for a while, some for a decade or longer. My relatives work at one of the Japanese auto makers here in the state. Last year, before Christmas, they were given notification on all the mandatory OT Saturdays for 2019. Within a month they were told all mandatory OT was cancelled. This Cummins news is the third news report on job cuts within as many days. Motionware and Stanley Black and Decker cutting a combined 300 jobs. I did read that Lilly is planning an expansion, so that is something positive.

    Higher Ed is also hurting. Lots of the for-profits have already closed. Even the established, smaller private schools are having issues and some of them have closed. We are talking places that have been around for decades, maybe even longer. Notre Dame took steps to up their income by forcing all freshman to have to live in on campus housing for at least six semesters. Higher ed is facing a shortage of customers as there are fewer high school students in the pipeline, more people questioning the "college experience" due to costs, etc..
     
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    ccha8778

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    I'm having a hard time seeing a slow-down in the sectors I see daily. Discretionary income plays a huge role in my job, and I have yet to see a noticeable slow down in spending. I'm also remodeling a house right now. All the contractors I've spoken with said they've never seen the economy like this, and that business has never been better. I've waited MONTHS between signing a contract and actual work being started. They're simply covered over.

    I hope you're right. But when I see the fed pumping money into the economy, lowering rates, and red flags such as an inverted yield curve and rising debt it makes me believe we're holding up the economy with sticks. I'd recommend to my friends and family to be cautious and hedge some bets. Also, if you're not in a vital role in your organization I'd store some funds away for a rainy day.
     

    ATOMonkey

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    Cummins cutting jobs isn't news. They run a cycle every few years where they hire tons of college kids, force rank everyone, and then do cuts.

    Absolutely this. Cummins and Lilly are two VERY cyclic places to work. They don't mind cutting several thousand jobs here or there and then hiring nearly all of them back next quarter. It's their culture and it's one reason why I have never had much interest in working for either.

    It's also a good way to force out employees you don't like, or who refuse to retire, by citing economic slowdown.
     

    Mark-DuCo

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    I know the furniture industry is booming down here in Southern Indiana. My company has more employees than ever right now and we are still working at least 50 hours. It is the same way at other area manufacturers. Our second quarter this year was the best we have had in the companies 98 year history.
     

    amboy49

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    Absolutely this. Cummins and Lilly are two VERY cyclic places to work. They don't mind cutting several thousand jobs here or there and then hiring nearly all of them back next quarter. It's their culture and it's one reason why I have never had much interest in working for either.

    It's also a good way to force out employees you don't like, or who refuse to retire, by citing economic slowdown.

    Not quite sure I follow your logic about letting employees go in this manner is “a good way to force out employees you don’t like. . . . . . .by citing economic slowdown. They don’t need an excuse or to even provide a reason. Indiana is a right to work state which, oddly, means you don’t have a right to work and an employer can fire you at their pleasure. How can an employee that refuses to retire expect to stay employed if the company no longer wants the benefit of his services ? Firing people to then hire them back the next quarter also doesn’t make any economic sense. The administrative costs would be huge.

    I think you’re confusing folks with a contract ( who have specific legal remedies for being terminated early ) with general hired folks who can be terminated at any time for any reason.
     

    amboy49

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    The fact Cummins is laying off people may be symbolic of a bigger issue. Perhaps the economy is truly beginning to show signs of a slowdown. There are many companies historically that have gotten in financial trouble by not reducing personnel and cutting other costs quickly enough and then cease to exist. No one is guaranteed a job forever that works for someone else and is drawing a paycheck.
     

    ATOMonkey

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    Not quite sure I follow your logic about letting employees go in this manner is “a good way to force out employees you don’t like. . . . . . .by citing economic slowdown. They don’t need an excuse or to even provide a reason. Indiana is a right to work state which, oddly, means you don’t have a right to work and an employer can fire you at their pleasure. How can an employee that refuses to retire expect to stay employed if the company no longer wants the benefit of his services ? Firing people to then hire them back the next quarter also doesn’t make any economic sense. The administrative costs would be huge.

    I think you’re confusing folks with a contract ( who have specific legal remedies for being terminated early ) with general hired folks who can be terminated at any time for any reason.

    Even though Indiana is a right to work state, an employer can be sued for discriminatory firings, age being one of them. Additionally, most managers don't have authority to fire an employee without cause.

    Having worked in large corporations all my life, I have seen this happen quite a bit. They will keep on people who are just a pain in the ass to work with, but never do anything worth firing them. Then when the company has a bad quarter, they need to do something to "ensure investor confidence" and they lay off a bunch of people. They use this opportunity to prune the tree so to speak. Also keep in mind, that most HR is outsourced anymore, so a large corporation won't let anyone go unless it shows up on an annual review with the outsourced person who has never met anyone he/she is reviewing. Since rack and stack and forced distribution is all the rage for the last decade, everyone gets rated as "average," so no one ever gets fired...or promoted.

    HR won't fire anyone just because they're difficult to work with, or because they're old. However, if there is a force reduction going on, HR will ask line managers who needs to go.

    The funny part is this. After having one down quarter and firing 5% of your work force, low and behold the corporation wins a big new contract, or releases a new product!! Hurray!!! Only, they are short about 5% staff. So, they put out a bunch requisitions and pretty much fill all the positions they just let go.

    Is it dumb and expensive? Yes. Do upper level managers care? No. They probably just got huge bonuses for cutting cost in the previous quarter.

    Depending on the business, this cycles about every 5 to 10 years. Pharma cycles coincide with patents, trucking typically lags economic growth by a couple of years, Aviation lags on a 10 year cycle, because it takes so long to bring a product to market.

    It happens all the time.
     

    Sigblitz

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    The situation with Cummins isn't so much due to an overall economic downtown, but more about the fact that truck orders were at near record highs the last two years. Truck OEMs were playing catch up on back orders at the end of last year and the first half of this one. Now fleets that needed trucks have them and the demand is down.

    The HD market is expected to be flat to down for the next year or so. Medium Duty should stay relatively stable.

    The Asian markets, including China did see pretty big drops this year which were lower than expected. Especially in off-highway where new construction is slowing.

    It's like when gun manufacturing went nuts ahead of the 2016 elections because customers assumed Hillary would win. When she didn't, the market was already flooded.

    I wasn't understanding this until the last paragraph.:):
     
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