Cummins finally joins trucking’s production suspensions

Salaried impact

On Friday, Cummins said CEO Tom Linebarger would take a 50% reduction in his $1,575,000 base salary through June 30. Directors would take a 25% reduction and U.S. salaried employees would receive 10% to 25% less salary and reduced working hours.

The company said it would take similar actions outside the U.S. based on local regulations and collective bargaining obligations. 

“These are difficult but necessary actions and I know they will have a real impact on the lives of our employees and their families,” Linebarger said in a statement posted to the company’s website on Friday.

Several major industrial companies earlier made similar moves. On March 25, component supplier Meritor, Inc. (NYSE: MTOR) idled production, laid off hourly staff and cut salaried employee pay by half. General Motors said March 26 it would defer pay for about 69,000 global salaried employees by 20% but said it will repay the money with interest by March 2021.

Earlier layoffs

Before COVID-19 became a health crisis, Cummins cut 2,000 jobs worldwide in the first quarter because of softening demand in several of its segments.

The job cuts followed voluntary buyouts and other cost-saving moves. The furloughs are part of $250 million to $300 million in structural cost savings that Cummins told analysts in November 2019 were a response to the softening truck market.

Plant idlings

Cummins said Saturday it is shutting down all southern Indiana manufacturing plants on a staggered schedule beginning Monday. Truck manufacturers Navistar International Corp, Volvo Group, PACCAR Inc. (NASDAQ: PCAR), and Daimler Trucks North America, all of which buy engines from Cummins, have idled their plants through most of April.

The shutdown includes the Columbus (Indiana) Engine Plant, the Fuel Systems Plant, the Seymour Engine Plant and the MidRange Engine Plant south of Columbus, which was idled March 20.

The Walesboro plant has about 900 employees. It supplies a facility in Mexico with the Dodge Ram engine, Mills said. Fiat Chrysler Automobiles, the maker of the Dodge Ram, had temporarily halted production in North America due to the COVID-19 pandemic. 

“If FCA were to open its plant on April 13, the MidRange Engine Plant would go back to work prior to that,” Mills said. “At this point, it looks like May 4.”