Cummins Reopens at Columbus

Columbus, Indiana-based Cummins Inc. (CMI - Analyst Report) is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems, controls and air handling systems.

The company is temporarily resuming production at its MidRange Engine Plant in Columbus with one shift from July 13. The plant makes engines for Dodge Ram pick-up trucks.

The company had shut down the plant in May 2009 after Chrysler abandoned vehicle production during its bankruptcy proceedings. The company is also recalling 400 workers out of the 720 employees it laid off in May. Cummins has eliminated nearly 3,000 workers, mostly in Columbus, since the recession began.

The plant would produce engines for the 2009 Ram Model through mid-August. However, Cummins noted that the facility would again be closed after that, until Chrysler starts building its 2010 truck model in October 2009. Cummins would recall the workers in October 2009.

A softening heavy-duty truck market, which forms over 50% of Cummin’s business, is a matter of concern. The company expects sales to fall across all business segments, with the largest decline expected to come from the Components and the Engine segments in 2009.

Nevertheless, Cummins is likely to benefit from its significant exposure to emerging markets in the event of a global economic recovery. As a result, we rate the shares a Hold and set a target of $32.00.

 

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