Components Business Breakout

5/7/2014
Components Business Breakout
May 2nd 2014
Indianapolis, IN
Components Business
1
5/7/2014
Components Organization
Components
Business
Components
Business
in sales
Integrated
businesses
Key technologies for meeting
global emission standards
2
5/7/2014
Components Segment – Overview
5 1 Q4’12 EBIT excludes $6 million in restructuring charges.
Components Segment – Sales Mix
6
3
5/7/2014
Components Business Unit Revenue
Consolidated Sales
Sales of Unconsolidated JV’s
CES Growth Drivers
Nitya Rao – CES Purchasing Leader
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5/7/2014
Global Emission Regulations
2016
9
CES Growth Horizon
Phase 4
Today
Revenue
Phase 3
We are
entering our
next major
growth phase
as a business
Phase 2
Phase 1
Time
2002-2007
2008-14
2015-19
2020 +
Regulatory focus
PM and NOx…
…and GHG, CO2 and low temperature
Objective
“Get it to work”
“Fit and forget” and “”Get cost out”
Geo expansion
NA, EU
+
Brazil, Russia
+ China, India
Product offerings
Retrofit,
Full systems
+
Eng. Comp.
+ Single Module + ???
Segments
On-Hwy
+
Off-Hwy
+ Adjacent
markets
10
+ New emerging markets
+ Non-transportation
(??)
Cummins Confidential
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5/7/2014
Key Business Risks & Opportunities
RISKS
OPPORTUNITIES
1)
Uncertainty on timing of global economic
recovery
1) Emissionization of
emerging markets
2)
Regulatory uncertainty (enforcement,
future cycles)
2) Non-CMI customers
3)
Continued price pressure
4)
Commercialization of disruptive
technology
5)
Natural Gas Penetration (China & NA)
8)
Achieving Cost Reductions to stay
competitive
External
Internal
3) Off-Highway
4) Aftermarket
5) Other SGIs
6) Game-changing new
processes like SBP
7) Platform Architecture
11
Cummins Confidential
Filtration Growth Drivers
Mike Gonsalves
Direct Purchasing Leader, Cummins Incorporated
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5/7/2014
Application Segment Trends
Russia
Mining, Oil & Gas
and Power Generation
are major growth
segments
Europe
Commercial On
Highway segment
stagnating
United States
Government Freight Rail
program to reduce freight
on road
China
Growth in
Agriculture and
Marine segments
and overcapacity
in On Highway
segment continues
though some burn
off urbanization
Panama
Panama Canal
widening drives
additional heavy
transport
Brazil
Down sizing pulls
share from MD but
Mining and Agriculture
boost heavy duty
Africa
Continued development
with focused growth in
Mining, Power
Generation
India
Continued power
deficit underpins
Power Generation
solution focus and
infrastructure
investment doubles
APAC
New vehicle loading
and infrastructure
investment increase
medium and heavy
truck growth
13
Africa
Technology or
Product Impact
Russia
South America
India
APAC
China
Europe
Market Trend
North America
Trends with Technology / Product Implications
Increa s ing i ntroducti on of tougher emis si ons regula tions
Adoption of a l terna tive fuels a nd power s ources
Increa s ed expos ure to va ria tions i n fuel/oil qua li ty & opera ting environment
Continued focus on TCO, initia l purcha s e price a nd opera tiona l cos ts
Alterna te tra ns port i nfra s tructure i nvestment empha si s (intermoda l)
Downsizing in MD & LCV s egment boosted by hub a nd spoke model
I
Increa s e i n OEM vertica l integra ti on
Growing need for rea l time informa tion
Gl oba liza tion, regiona l exporting globa l ly & desire for si ngle globa l products
Technology upgra di ng continues a s loca l OEMs pa rtner with globa l suppl iers
Mobile workforce need from low s upport densi ty a nd product popula ti on
Economic & s egment growth a ttra cting foreign i nvestment in l oca l production
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Global View
Opportunities/
Initiatives
Trends
• Tougher global emission
standards
Technology
Investment
• Adoption of alternative fuels and
power sources
• Advanced media
products
•Advance Media
• Global oil requirements
• Component Integration
•Modular Designs
• High performance CV
solutions
•Integrated Engine Design
• Fuel efficiency mandates
• Increased exposure to variable
operating environments
• Global Growth (China, India,
Brazil)
• Growing need for real time
information & mobile workforce
• Truck OEM vertical integration
• Increased focus on alternate
transport models
• Minimize Impact to
engine space,
performance & reliability
•Smart Filtration (Sensor
and Telematics)
• Integrated Systems to
avoid unintended
reliability impact
• Lower Total Cost of Ownership
• Equipment space premium
Cummins Secret
15
2
3
4
Modular
Designs
Integrated
Engine Design
Sensors and
Telematics
CMI
BenefIts
1
Advanced
Media
Better engine protection
through warranty
Speed to market for a
variety of requirements,
efficient
Engine -> Filtration
package improves
performance, space
and protection
Smart system improves
performance and
protection
User
Product Development Themes
Improved total cost of
ownership
Valuable features to
assure uptime
Assures genuine
engine protection
Performance and
predictive maintenance
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5/7/2014
Cummins Confidential
8
5/7/2014
Fuel Systems Growth Drivers
Prafulla Neema
Purchasing Leader, Cummins Fuel Systems
CFS GROWTH HORIZONS
Sales
($Millions)
2018-2023
Accelerated
Growth
2013-2018
Earn the right to grow
890
439
2008
Growth
Objectives
Key
Customers
2013
Flat Sales
Scania, EBU –
MR/HD and
some sales to
China JVs
2018
Double Sales Profitably (Deliver on
Simulation)
Scania, EBU and JVs for
MR /HD/HHP; Aggressively seek
non-CMI customers
2023
Become strong #2 player in
the Industry
Significant portion of EBU and
JVs for entire product range &
a few non-CMI customers
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5/7/2014
19
Turbo Technologies Growth Drivers
Matthew Horgan
Purchasing Leader, Cummins Turbo Technologies
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5/7/2014
Cummins 5 Growth Accelerators
Developing a growth mindset
Moving from multi-national to global
Supply chain excellence
Customer support excellence
Leadership development and high performance team work
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Cummins Confidential
Building Blocks of SC Strategy
It starts with the customer
“The design and planning of the end-to-end delivery model to maximize the
potential to meet customer demand at the lowest possible cost”
What do we want
A tosupply
chain consists of all parties involved, directly or indirectly, in fulfilling
achieve?
a customer request. The supply chain not only includes the manufacturer and
suppliers, but also transporters, warehouses, retailers, and customers
How do we
themselves.
make it happen?
Vision
Strategy
What do we use to
drive decisions?
Framework
22
Cummins Confidential
How do we measure
progress?
Toolbox
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Why is Supply Chain Management Important?
An essential element to operational efficiency which
directly impacts customer satisfaction and business
success.
– Directly impacts delivery; speed, agility and flexibility
– Improves manufacturing efficiency and effectiveness
– Improves efficiencies from procurement, distribution and logistics
– Increases inventory turns and reduces idle inventory
– Improves process integration and alignment (“winning at the
handoffs”)
– Fosters open communication between partners and builds trust
– Translates to bottom line profitability and improves cash flow
–…
23
Cummins Confidential
CTT Supply Chain Segmentation
A common, consistent and standard approach to describing supply chains
Complex/Unique/ Highly
Customised/Difficult
C
This will determine the attributes needed in our supply base,
will guide selection of the appropriate suppliers
Increaing
Flexibility
(Extent to which product design and/or
delivery requirements are customised)
Customer Delivery/
Demand Requirements
A
Increasing Agility
D
B
Plain/Standard/
Common/Least Complex
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Irregular/
Volatile/ Rapid
Customer Responsiveness
(Stable demand forecast accuracy, firm
order visibility & delivery lead-time)
Regular/
Predictable/
Extended
Cummins Confidential
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5/7/2014
Expectations from supply base
Matt McQueen
Executive Director, Components Global Supply Chain & Manufacturing
What Cummins Needs From Our Suppliers…
Positioned to Grow and Expand With Cummins as our
Customer demand grows Eye on the Future
Come to Work Every Day with a Passion and Energy
Towards Continuous Improvement
Bring Innovation and Creativity in Design Collaboration
With Cummins Be Proactive
Open Communication on Constraints – No Surprises
Drive Efficiency and Productivity Gains To Remain
Competitive Globally
Quality Parts (Suppliers below 50 In-plant PPM),
Delivered On Time World Wide At The Lowest Total
Cost
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5/7/2014
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