Cummins to cut global professional work force by 500 employees

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Cummins Inc. announced today, Dec. 5, that it will reduce its professional work force worldwide by at least 500 employees – or about 3.5 percent – by the end of 2008 as a result of the continued deterioration in the U.S. economy and many other key markets around the world.

Cummins says the employee reductions will come from all parts of the company. In order to minimize the impact of involuntary employment actions, the company says it has decided to offer a voluntary retirement package to certain active professional employees in the United States based on a clearly defined set of criteria.

Those employees being offered a chance to participate in the program will have until Thursday, Dec. 11, to accept the compensation packages, which include salary and continuation of benefits, including health care, for nine months following their retirements.

The remainder of the reductions will be involuntary, according to Cummins; employees affected by these job actions will, in most cases, be notified by Dec. 18, and the reductions are expected to take effect by Dec. 31. The costs associated with the employee reductions will be recognized in the company’s fourth-quarter earnings.

“Cummins already has taken a number of actions across the company to try to bring costs in line with our reduced current demand and to meet the expected challenges of 2009,” says Tim Solso, chairman and chief executive officer of Columbus, Ind.-based Cummins. “Despite those efforts, we have now reached a point where we will have to take more significant steps to reduce our professional work force around the world.”

Cummins says it has deployed its “rings of defense” approach to reducing costs at manufacturing and logistics locations worldwide. The actions taken so far include:

  • Initiating temporary plant shutdowns, shortened work weeks and extending traditional holiday closing periods;
  • Reducing by several hundred the number of contingent workers in manufacturing and logistics locations around the world;
  • Eliminating overtime in many locations; and
  • Eliminating nearly 100 hourly positions in the company’s fuel systems plant in Juarex, Mexico, and another 85 hourly employees in the midrange engine plant in Darlington, U.K.
  • In addition, Cummins says it has aggressively cut costs and reduced spending in all areas, including:

  • Prioritizing IT and capital spending to focus on the company’s most pressing needs and projects;
  • Severely restricting hiring across most of the company; and
  • Cutting discretionary spending, such as travel and conferences.
  • Cummins says it will continue to use its “rings of defense” strategy to reduce manufacturing and logistics costs in the future, as well as continue looking for other ways to cut costs throughout the company.

    “These are difficult times, but in many ways we are better positioned to weather a downturn than at any time in our history,” Solso says. “Our debt is less than 15 percent of our total capital. We have healthy cash balances, and our business operations continue to generate cash. We also have a $1.1 billion revolving credit line for additional liquidity. We are committed to doing what is necessary to emerge from this downturn a stronger company and resume our recent history of strong growth once our markets begin to improve.”