Indiana-based Cummins makes another round of job cuts, flattens corporate ladder

Engine-maker Cummins Inc., is doing another round of layoffs after offering employees buyouts last November, with the goal of reducing administrative layers and focusing on core business, according to an internal message and a Cummins spokesperson.

The job cuts come as the demand for trucks has slowed since the first years of the pandemic and as the company shifts its operations to meet increasing regulations for engine emissions.

With headquarters in Indiana, Cummins attributed the job cuts to its effort to reach zero emissions by 2050, a goal the company has branded Destination Zero. Engine-makers and manufacturers across the globe have been under the gun to shift toward clean energy after world leaders committed to reaching zero emission by 2050 under the 2016 Paris Agreement.

"As part of this evolution, some of our employees may experience reporting, responsibility or role changes as well as position eliminations," spokesperson Lauren Daniel said via email. She added that Cummins is "in the process of improving our business and operational efficiencies to better service our customers, improve our work environment and ensure we are best positioned for success now and in the future."

While the company has faced challenges in recent years, including a $2 billion settlement with government officials over allegedly failing to meet emission regulations late last year, Cummins is still regarded by analysts and industry watchers as a top engine maker for the trucking industry and a leader in the shift toward clean energy. In the company's most recent financial report released in May, Cummins emphasized that its financial goals include reducing its debt.

Costs increasing for manufacturers

Company officials did not say if the recent cuts were related to the financial penalty, which the U.S. Department of Justice called the "largest ever for a Clean Air Act violation."

Cummins also did not share how many positions have been cut. But a review of an internal message from CEO Jennifer Rumsey to employees laid out an internal reorganization plan focused on trimming administrative roles to reduce layers in the company reporting structure.

Environmental regulations have added costs for engine-makers like Cummins to develop clean technologies and change production lines to meet new standards, said Juan Bu, a professor at Indiana University Kelley School of Business with expertise in international business and sustainability.

Most recently, companies have been required to disclose climate-related emissions of their production operations.

"There's a huge demand for clean technology and clean products," Bu said. "[Cummins] is targeting global partners."

Cummins' environmental fine

In December, Cummins shared that it would be paying about $1.7 billion, a preliminary figure, to settle a claim that the company installed devices on thousands of engines to prevent emission tracking and control.

Regulators alleged that illegal devices were installed on nearly 1 million RAM 2500 and 3500 trucks, ranging from the 2013 model to the 2023 model.

“The types of devices we allege that Cummins installed in its engines to cheat federal environmental laws have a significant and harmful impact on people’s health and safety," Attorney General Merrick Garland said in a prepared statement at the time. "For example, in this case, our preliminary estimates suggest that defeat devices on some Cummins engines have caused them to produce thousands of tons of excess emissions of nitrogen oxides. The cascading effect of those pollutants can, over long-term exposure, lead to breathing issues like asthma and respiratory infections."

Cummins said in its news release regarding the settlement that the company does not admit wrongdoing and has been working to resolve the issues raised.

"Cummins has been working with regulators and other entities for more than five years to resolve this matter and we are pleased that we are moving forward," a spokesperson for Cummins told the IndyStar.

Engine business in flux

The engine-making industry is in flux as climate concerns lead to increasing emissions regulations. The key for Cummins, industry watchers say, will be to adapt to shifting standards and beat out competitors trying to do the same.

Cummins could expand its business as it shifts to engine products that reduce emissions, especially if other engine-making companies leave the business, according to an analysis by the Chicago-based investment research firm Morningstar. However, the trucking industry could embrace electric products, which would hurt Cummins' business.

Despite some uncertainty and recent challenges, Cummins is expected to grow its revenue, the firm projected.

"This is largely due to increasing emissions regulation, which allows Cummins to sell more of its emissions solutions, namely its aftertreatment systems that convert pollutants into harmless emissions," Morningstar Senior Equity Analyst Matthew Young wrote in a June 18 report.

The report also noted that the $2 billion settlement with regulators, which initially rattled confidence in Cummins' ability to keep up with regulations, will not likely change the trajectory of Cummins in the long term.

Binghui Huang can be reached at 317-385-1595 and bhuang@gannett.com

This article originally appeared on Indianapolis Star: Indiana-based Cummins makes another round of job cuts, flattens corporate ladder