As the Trump administration continues to navigate the future of U.S. foreign trade policy, including imposing tariffs and renegotiating international agreements, Cummins Inc.’s top executive said foreign markets are vital to the health of the Columbus-based company.
The ability for Cummins to export goods to countries such as China, India and Mexico is a big reason it is doing well in sales, Chairman and CEO Tom Linebarger said. Cummins set quarterly sales records each of the past two quarters: $5.476 billion in the fourth quarter of 2017 and $5.570 billion for the first quarter of 2018.
Sales to international markets have fueled Cummins’ growth from a diesel engine maker into a global power and technology company, he said.
“For Cummins, trade has been the biggest and most important economic trend for the last couple of decades. I don’t mean to be overly dramatic, but we just wouldn’t be here if it weren’t for the fact that international trade got going in industrial goods in a big way,” Linebarger said in a Monday interview, in advance of Tuesday’s annual shareholders meeting.
Developing markets such as China and India have been huge for Cummins, and 95 percent of customers for industrial companies are outside of the United States, he said.
“Yes, the U.S. is a great market and is still our biggest by far, but we want to serve all those people. We think we have a good product, and we’ve been helping the Indian economy, the Chinese economy, the Mexican economy by making sure that they get technology at affordable cost that helps emissions,” he said.
Foreign trade has helped Cummins survive and thrive and has preserved opportunities for workers in southern Indiana, Linebarger said. It’s the reason the company built the Seymour Engine Plant, he said, because the company could efficiently manufacture, transport and export engines there.
Seymour is where the QSK95, the company’s largest and most powerful high-speed engine with 4,000 horsepower, is built. Cummins exports 70 percent of engines built in Seymour out of the United States, Linebarger said.
“Losing export lanes would be a disaster,” he said.
Linebarger said he has been vocal about the importance of foreign trade in communications with Congress and the White House.
“Nobody is unclear about what we think about that,” Linebarger said.
Cummins’ top executive said he understands there are realistic challenges in trade. Every country wants advantages for itself, and the United States must have policies it can enforce if other countries don’t play fair, he said.
For example, China used to be an emerging economy, but now, it’s a big economy, and it should remove some of its trade restrictions, Linebarger said.
What’s important, Linebarger said, is that as trade deals are negotiated and rules enforced that they don’t move the country backward. The solution shouldn’t be an isolationist policy, which would shrink the economy, and jobs competitiveness would be lost, he said.
The North America Free Trade Agreement has been a boon for Cummins and its employees in southern Indiana, Linebarger said.
He has shared that message not only with political leaders in Washington, D.C., but also local union leadership and workers. That’s because Linebarger said he is certain that some Cummins employees are unsure whether NAFTA or other free-trade deals benefit the company and lead to job growth in the company’s plants.
“It’s really important for people to know,” Linebarger said. “I think they’re being tricked. I think they’re being told a story that somehow we can go back to the old days where there is no competition and somehow we’ll bring back the old jobs making televisions or something. This is just not reality,” he said.
It’s important for Cummins to have new jobs that make the most sophisticated products, make the most energy efficient powertrains, that pay well and employees can live on and expect growth in future, Linebarger said.
“I’m 100 percent convinced that more free-trade agreements mean more growth for employees here at home,” the chairman and CEO said.
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Columbus-based Cummins Inc.’s ties to international countries was evident Monday with its participation in the U.S. Department of State’s Experience America program. The company hosted more than 30 foreign ambassadors, representing four continents, for a manufacturing tour in the afternoon of its Cummins Midrange Engine Plant to highlight advanced manufacturing and automation. In the evening, Cummins hosted a reception for the ambassadors at its Distribution Business headquarters in Indianapolis.