cmi_050926

A New CumminsA New Cummins

Tim SolsoChairman and Chief Executive Officer

Disclosure Regarding Forward-Looking Statements & non-GAAP Financial MeasuresDisclosure Regarding Forward-Looking Statements & non-GAAP Financial Measures

This presentation contains certain forward-looking information. Any forward-looking statement involves risk and uncertainty. The Company’s future results may be affected by changes in general economic conditions and by the actions of customers and competitors. Actual outcomes may differ materially from what is expressed in any forward-looking statement. A more complete disclosure about forward-looking statements begins on page 59 of our 2004 Form 10-K, and it applies to this presentation.

This presentation contains certain non-GAAP financial measures such as earnings before interest and taxes (EBIT). Please refer to our website (www.cummins.com) for the reconciliation of EBIT to GAAPfinancial measures.

Cummins Management TeamCummins Management TeamExecutive Committee• Joe Loughrey President & Chief Operating Officer• Jean Blackwell Executive Vice President & Chief Financial Officer• John Wall Vice President & Chief Technical Officer• Tom Linebarger Executive Vice President & President – Power Generation• Mark Gerstle Vice President – Corporate Quality & Chief Risk Officer

Engines• Jim Kelly Vice President & President – Engine Business• Ed Pence Vice President & General Manager – Heavy-duty Engine• Dave Crompton Vice President & General Manager – MidRange Engine• Mark Levett Vice President & General Manager – HHP Engine• Christine Vujovich Vice President – Marketing & Environmental Policy

Power Generation• Tony Satterthwaite Vice President – Worldwide Commercial Gensets

Cummins Management TeamCummins Management TeamComponents• Rick Mills Vice President & President – Components Group• Pamela Carter Vice President & President – Fleetguard/Nelson• Ray Amlung General Manager – Fuel Systems Business• Paul Ibbotson Vice President & Managing Director – Holset Turbochargers• Mike Cross Vice President & General Manager – Emission Solutions Business

Distribution• Rich Freeland Vice President & President – Worldwide Distribution

Emerging Markets• Steve Chapman Group Vice President - Emerging Markets and Businesses• Anant Talaulicar Vice President & Managing Director – Cummins India Ltd. • John Watkins Vice President & Managing Director – Cummins East Asia ABO

Corporate• Richard Harris Vice President – Treasurer • Marsha Hunt Vice President – Corporate Controller

Delivering on CommitmentsDelivering on Commitments

Revenue Growth 8% -10%EBIT Margin 6% - 9%Cap Ex < D&ADebt to Capital Ratio 35% - 45%Investment Grade 2005

ROE 15%

Target 2005LTM

9.5%7.7%67% of D&A43%S&P BBB-Moody Ba126%


50

100

150

200

250

300

350

400

Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05

Sto

ck P

ric

e In

dex

Average Total Shareholder

Return for 2003/04

77.4%

CMI S&P 500 Peer Avg.


• Six Sigma

• Market share gains

• Best products

• Recognition

• Leverage Complementary Businesses

• Create Shareholder Value

• Low-Cost Producer

• Grow in Related Markets

• Performance Ethic

• Increase Profitability and Cash Flow

• Reduce Debt and Invest in Growth

• Create Shareholder Value

Key Strategic Principles

P/E Valuation – Opportunity P/E Valuation – Opportunity

10

14

9

13

1815

0

5

10

15

20

1999 2004 2005

P/E

Mul

tiplie

r

CMI Peer Group

Investment CommunityInvestment Community

• Cyclicality

• Cash management

• OEM vertical integration

• ’07 emission impact

• Volatility in performance

Growing Stable Diversified EarningsGrowing Stable Diversified Earnings

Cyclical EBIT Stable & Diversified EBIT

$543M$316M

* Excludes restructuring charges

1999 EBIT* 2004 EBIT

Growing International SalesConsolidated Net SalesGrowing International SalesConsolidated Net Sales

1999

9%

US

EuropeAsia

Canada

Mexico / Latin America

Africa / Middle East

Australia

2004

14%

US

EuropeAsia

Canada

Mexico / Latin America

Africa / Middle East

Australia

Growing International SalesConsolidated & Unconsolidated Net SalesGrowing International SalesConsolidated & Unconsolidated Net Sales

1999 2004

11%

20%

Emerging MarketsEmerging Markets

Consolidated Net Sales

Unconsolidated JV Net Sales

14% CAGR

35% CAGR

China

0

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004

US$

Mill

ions

India

0

100

200

300

400

500

600

700

2000 2001 2002 2003 2004

N. America Heavy-duty TruckTotal RevenueN. America Heavy-duty TruckTotal Revenue

NA HD Truck Original Equipment Sales

Sales to All Other Markets

1999

81%

19%

2004

86%

14%

Growth in Chrysler ShipmentsGrowth in Chrysler Shipments

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1988 1990 1992 1994 1996 1998 2000 2002 2004

24% CAGR

Distribution Ownership – 1999 Distribution Ownership – 1999

Company-owned

Joint Venture

Independent

Distribution Ownership – TodayDistribution Ownership – Today

Company-owned

Joint Venture

Independent

Profitable Joint Venture GrowthProfitable Joint Venture Growth

Number of JV's

0

5

10

15

20

25

30

35

40

1999 2004

Earnings from JV's

-40

-20

0

20

40

60

80

100

120

1999 2004


Creating Shareholder ValueCreating Shareholder Value

Jean BlackwellChief Financial Officer


5.1%2.0%PAT %

$ 130m$ (27m)JV Income

$10.10 - $10.30*$ 3.41EPS

26%10%ROE

24%11%ROANA

$ 715m$ 260mEBIT

$ 9,241m$ 6,639mSales

2005 LTM1999

*2005 Guidance ($9.60 EPS LTM)

Financial PlatformFinancial Platform

Focused Cash Management

ReducingCyclicality

EarningsGrowth

Creating Shareholder

Value



Value


ReducingCyclicality

EarningsGrowth

Turning Sales into Higher EarningsTurning Sales into Higher Earnings

Total Sales

LTM

$6,639 $6,597$5,681 $5,853 $6,296

$8,438$9,241

($4,000)

($2,000)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

1999 2000 2001 2002 2003 2004 2005

Total Sales

Total Sales and Net Earnings

Turning Sales into Higher EarningsTurning Sales into Higher Earnings

LTM

$6,639 $6,597$5,681 $5,853 $6,296

$8,438$9,241

($4,000)

($2,000)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

1999 2000 2001 2002 2003 2004 2005($240)($160)($80)$0$80$160$240$320$400$480$560

Total Sales Net Earnings

21.0%

19.2%17.8% 17.9% 17.8%

19.9%20.7%

10.0%

15.0%

20.0%

25.0%

1999 2000 2001 2002 2003 2004 2005

Growing MarginGrowing Margin

Gross Margin

LTM

15.7% 15.4%

16.6%16.0%

16.4%

14.9% 14.6%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1999 2000 2001 2002 2003 2004 2005

Controlling ExpensesControlling Expenses

Selling, Administrative and R&D Expense

LTM

($27)

$7 $10$22

$70

$111

$130

($40)

($20)

$0

$20

$40

$60

$80

$100

$120

$140

1999 2000 2001 2002 2003 2004 2005

Mill

ions

USD

Generating More from JVsGenerating More from JVs

Income from Joint Ventures

LTM

3.9%

1.4%

-0.8%

2.4%2.9%

6.4%

7.7%

-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

1999 2000 2001 2002 2003 2004 2005

EBIT as % of Sales Target EBIT as % of Sales

Growing EBITGrowing EBIT

Earnings Before Interest and Income Tax

LTM

$3.41

$0.35

($2.70)

$2.13$1.27

$7.39

$10.10 - $ 10.30

($4.00)

($2.00)

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

1999 2000 2001 2002 2003 2004 2005

Increasing Earnings per ShareIncreasing Earnings per Share

Guidance for 2005

10.00%

1.10%

-8.60%

6.90%3.80%

21.30%25.80%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

1999 2000 2001 2002 2003 2004 2005

Return on Equity Target Return on Equity

Improving Return on EquityImproving Return on Equity

LTM

Setting New TargetsSetting New Targets

Cummins

Sales Growth

EBIT

ROANA

8 % - 10 %

6 % - 9 %

18 %

ROE 15 %

Debt to Capital 35 % - 45%

7 % - 10 %

22 %

18 %

30 % - 40%

8 % - 10 %

Looking for the FutureLooking for the Future

Sales$ 13.5 - $ 15 B

EBIT

With those targets, here is the view of Cummins in 2010….

$ 950 - $ 1,500 M

$ 9.2 B

$ 715 M

2005 LTM 2010



Value


ReducingCyclicality

EarningsGrowth

Balancing Revenue and Income SourcesBalancing Revenue and Income Sources

• All businesses are profitable

• Less cyclical businesses growing faster

Heavy Duty Engine BusinessHeavy Duty Engine Business

Revenue $1.18B $2.3B

EBIT From loss to significant contribution

NA Market Share 21% 26%

Build Rate 135/day 405/day

PED 8.6 3.8

Inventory Turns 30.2 37.0

Consolidation Savings > $30M annually

Low Point 2005LTM

Heavy Duty Engine BusinessHeavy Duty Engine Business

Revenue $1.18B $2.3B

EBIT From loss to significant contribution

NA Market Share 21% 26%

Build Rate 135/day 405/day

PED 8.6 3.8

Inventory Turns 30.2 37.0

Consolidation Savings > $30M annually

Break Even

Low Point 2005LTM

Reducedmore than 50%

Increasing Global PresenceIncreasing Global Presence

Total Sales

LTM

61% 57%54% 55% 53%

52% 50%

39% 43%

46% 45%47%

48%50%

$0$1,000$2,000$3,000$4,000$5,000$6,000

$7,000$8,000

$9,000$10,000

1999 2000 2001 2002 2003 2004 2005

Mill

ions

USD

United States International



Value


ReducingCyclicality

EarningsGrowth

$307

$472

$152$193

$158

$614

$517

$0

$100

$200

$300

$400

$500

$600

$700

1999 2000 2001 2002 2003 2004 2005

Mill

ions

US

DGenerating More Cashfrom OperationsGenerating More Cashfrom Operations

Operating Cash Flow

LTM

$75 $64$94

$298

$195

$673

$457

$0

$100

$200

$300

$400

$500

$600

$700

$800

1999 2000 2001 2002 2003 2004 2005

Mill

ions

US

DCreating a Strong Cash PositionCreating a Strong Cash Position

Cash and Marketable Securities

*Balance as of June’05

*

Cash PrioritiesCash Priorities

• Operational:

– Reducing debt

– Investing in the business

– Funding our liabilities

$1,215 $1,197

$945

$1,137

$1,429

$1,626

$1,368

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

1999 2000 2001 2002 2003 2004 2005

Deb

t in

mill

ions

USD

0%

10%

20%

30%

40%

50%

60%

70%

80%

Debt

to C

apita

l Rat

io

Reducing Debt LevelsReducing Debt Levels

Total Debt- 2005

* As of June’05

*

$223

$304

$405

$271

$215 $228$206

$90$111

$151

$192

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Mill

ions

US

DUsing Capital WiselyUsing Capital Wisely

Capital Expenditures

LTM

156%

204%

256%

92% 95% 90%

41% 50% 56%67%

136%

0%

50%

100%

150%

200%

250%

300%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Using Capital WiselyUsing Capital Wisely

CAPEX as % of Depreciation & Amortization

LTM

4.3%

5.8%

7.2%

3.2% 3.5% 3.6%

1.8% 1.8% 2.1%

1.5%

4.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Using Capital WiselyUsing Capital Wisely

CAPEX as % of Sales

LTM

11.1%

19.7%

24.3%

4.1% 7.8%

-2.1%

6.5%

-5%

0%

5%

10%

15%

20%

25%

1999 2000 2001 2002 2003 2004 2005

Effective Balance Sheet ManagementEffective Balance Sheet Management

Return on Average Net Assets

LTM

Funding LiabilitiesFunding Liabilities

Pensions

• Exceeded statutory contributionsfor past 5 years

• Changed retirement plan structure beginning in 1997

$20

$137 $127

$113

$62

$81 $81

$0

$20

$40

$60

$80

$100

$120

$140

$160

1999 2000 2001 2002 2003 2004 2005

Mill

ions

US

D

Funding Pension ObligationsFunding Pension Obligations

LTM

Actual Funding

Funding LiabilitiesFunding Liabilities

OPEB

• Capped future liabilities in 1991

• $80 million liability reduction expected from Medicare Bill in 2006

• Operational– Reducing debt

– Investing in the business

– Funding our liabilities

• Returning value to shareholders– Dividends

– Share repurchase

Cash PrioritiesCash Priorities

$250m debt reduction ‘06

$100m repurchase



Value


ReducingCyclicality

EarningsGrowth


50

100

150

200

250

300

350

400

Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05

Sto

ck P

rice

Inde

x Average Total Shareholder

Return for 2003/04

77.4%

CMI S&P 500 Peer Avg.



Value


ReducingCyclicality

EarningsGrowth


The Right TechnologyThe Right Technology

Dr. John WallVice President and

Chief Technical OfficerSeptember 26, 2005

Cummins Technology TodayCummins Technology Today

Innovation + Productivity


Innovation– Emission technology best in world – Invested in right technologies– Stable architecture– System integration– Global presence – Best products for each market


Productivity– Six Sigma– Analysis Led Design– Global access

– R&E: 5% 3% sales

Our Products Must Meet Customer Requirements

Low Initial Cost

Low Maintenance

ElectronicIntegration

Low Emissions

Reliable and Durable

High Performance

Fuel Efficient

Diversity – Vehicles& Applications

Product Architecture forThe Right Technology

• Develop broad range of modular technical building blocks– Analytical models– Product hardware and software

• Create integrated products tailored to meet customer needs– Low cost High feature content– On-highway Off-highway– North America India

Power Generation System Architecture

SystemMaster Control

ControlsControls

Alternator

Networking Software

Load Transfer Switch

System Integration

Modular Noise Attenuation Enclosures

Emissions After Treatment

Builds on Cummins Synergies

OptiAir

Patente

d Des

ign

Twist Loc

k

Patente

d Design

Modula

r Des

ign

Option

s

Aftermarket

Small Engine / Rec Vehicles

Heavy Duty / Off Road

Product Line Architecture in Filtration

The Right Technology … for Emissions Control

• Integrating critical subsystems

– Combustion



– Combustion– Air handling



– Combustion– Air handling– Fuel systems



– Combustion– Air handling– Fuel systems– Electronic

controls– Aftertreatment


… to deliver best customervalue at low emissions


– Combustion– Air handling– Fuel systems– Electronic controls– Aftertreatment

Fleetguard Emission Solutions• System platforms

– Mobile Selective Catalytic Reduction (SCR)

– Particulate Filtration– Euro 4 and EPA 07

• Current product sales– Over 1,500,000 MD/HD Diesel Oxidation

Catalysts– Over 10,000 Particulate Filters – No.1 in US retrofit market– Plants in US, UK, South Africa

2002 HD Emission ControlFoundation for the Future

Charge Air Cooler

Variable GeometryTurbocharger

EGR

-Coo

ler

2007 HD Emission Control

Charge Air Cooler


ExhaustFilter

EGR

-Coo

ler

EGR and CGI

Charge Air Cooler


EGR

-Coo

ler

ExhaustFilter

EGR-Cooler

VariableValve

Mechanism

Charge Air Cooler

Charge A

ir Cooler

“CGI”

2007 HD Emission Control

Charge Air Cooler


ExhaustFilter

EGR

-Coo

ler

Cummins EGR•Simple•Reliable•Cummins subsystems•Stable architecture

beyond 2010

Summer 2004

Winter 2004-5

The Right Technology… for Industrial and Power Generation Engines

• Tier 3 : No EGR, No aftertreatment– Lowest cost engine

– Lowest cost installation

• Stable Architecture

=Tier 2 Tier 3

The Right Technology … for Technical ProductivityThe Right Technology … for Technical Productivity

• Six Sigma

• Analysis Led Design

Product Design

Process Improvement

Six Sigma Tools and Methodology

TDFSS

Technology Development

Six Sigma Tools for DevelopingThe Right Technology

DFSSProcess

Six Sigma

2000

1900

1800

1700

1600

1500

1400

1300

1200

1100

1000

900

800

700

600

500

400

300

200

100

0

Design For Six Sigma TrainingD

esig

n f

or

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

L-1 22 L-2 23

L-3 20

L-3B 13

L-4 23

L-5 28

L- 6 25

V-LDA 17

Fltg -1 21

CCR 8

L-7 18

L-8 27

L- 9 29

L-10 26

CWI - 1 20

UK-1 25

PGG-1

Fltg -2 15

TDFSS-1

26

27

India -1 20

Brazil -1 18

Supply 51

Apr-04 32

Aug-04 30

Nov-04 44

TDFSS-2 33

CWI-2 10

UK-2

CRTI-1 10

26

Jan-05 30

Mar-05 33

CHS-05 25

Jul-05 31

Sep-05 31

Nov-05 32

CRTI-2

India-2 30

11

Brazil-2

PGG-2 23

16

UK-May

China-1 19

22

First Supplier Launch

Jan-06

PGG-Jan

Feb-06

May-06

Col-Jul

Col-Aug

Col-Sep

Col-Nov

CIL-Nov

Brazil-3

UK-Feb

Mar-06

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

China-2

CRTI-3

TDFSS-3• International• US

• International• US 892 Trained

Analysis-Led Design …Analysis-Led Design …

• Computer analysis and simulation• Virtual product build• Eliminate expensive prototypes• More designs evaluated in shorter time

• Engineering Standard WorkAdded 2500 hours analysisEliminated 5500 hours testing / prototypes

Better Designs Faster at Lower Cost

Analysis-Led Design …Analysis-Led Design …Better Designs Faster at Lower Cost• Combustion Analysis

12 months 5 months per design10 1000 designs evaluated

Diffusion flame betweenhot soot and air

Rich premixedreaction zone

Rapid conversion ofprecursors to soot

Soot growth region

Entrainment ofhot products

Entrainmentof air

Combustion Modeling in Analysis Led DesignCombustion Modeling in Analysis Led Design

Injector Cylinder wall

Diffusion flame betweenhot soot and air

Rich premixedreaction zone

Rapid conversion ofprecursors to soot

Soot growth region

Entrainment ofhot products

Entrainmentof air

3-D Fluid dynamics code with improved

spray model

FlameletModel

Combustion Modeling in Analysis Led DesignCombustion Modeling in Analysis Led Design

Injector Cylinder wall

Soot Model

Temperature (K)500100015002000

HRR (MW/gm fuel)

0

50

100

150

Detailed Kinetics

1100+ equations

Diesel Combustion Analysis

LiquidFuel

FuelRich

PM

NOx

Analysis-Led Design …Analysis-Led Design …

• Combustion Analysis12 months 5 months per design10 1000 designs evaluated

• Filter 35 months 21 months design-to-production5 50 designs evaluated60% fewer prototypes

• Generator Set Structure75 days 28 days per design60% fewer prototypes

Better Designs Faster at Lower Cost

System Level Results:

• 2007 Heavy Duty Engine Program 100% more analysis hours

20% lower total program cost

• 2007 Midrange Engine Programs 200% analysis hours

29% lower total program cost

Analysis-Led Design …Analysis-Led Design …Better Designs Faster at Lower Cost

FranceQuimper

DarlingtonDaventryRamsgateStamfordHuddersfield

UK

IndiaPuneIndore

ChinaChongqingXiangfanWuhanBeijingWuxi

BrazilSao Paulo

MexicoSan Luis Potosi

USARocky MountJamestownCookevilleStoughtonFridleyCharleston Columbus

Japan

Oyama

Global Presence / Global AccessGlobal Presence / Global Access

FranceQuimper

DarlingtonDaventryRamsgateStamfordHuddersfield

UK

IndiaPuneIndore

ChinaChongqingXiangfanWuhanBeijingWuxi

BrazilSao Paulo

MexicoSan Luis Potosi

USARocky MountJamestownCookevilleStoughtonFridleyCharleston Columbus

Japan

Oyama

Global Presence / Global AccessGlobal Presence / Global Access

Cummins Research & Technology India Cummins Research & Technology India

750 km

270 km

700 km

1100 km

Beijing (CCI)Xiangfan (DCEC)Xi’an (Shaanxi)Chongqing (CCEC)Shanghai FleetguardWuxi Holset & NewageWuhan (EAR&D)Hong Kong

660 km

940 km

Global Presence / Global AccessEast Asia R&DGlobal Presence / Global AccessEast Asia R&D

The Right Technology for…

A New Cummins

The Right Technology for…

A New Cummins

Joe LoughreyPresident and Chief Operating Officer


Summary -What you have heard so farSummary -What you have heard so far

• Diversified by markets, products, customers and regions

• Well positioned in emerging markets

• Generating higher returns and setting new targets

• Focused on cash management

• Invested in the right technologies

What’s Different Across the CompanyWhat’s Different Across the Company

• Converting sales into profits

Converting Increased Sales into Higher ProfitsConverting Increased Sales into Higher Profits

8%

34%10%

30%

200%

32%

0%

50%

100%

150%

200%

250%

2002-03 2003-04 2004-05

Revenue Growth EBIT Growth

LTM

Incremental EBIT%Incremental EBIT%

9%

17%

21%

0%

5%

10%

15%

20%

25%

2002-03 2003-04 2004 - 2005 LTM



• Leaner cost structure

LeanerCost

Structure

Global SourcingGlobal

Sourcing

RationalizedManufacturing

Capacity

RationalizedManufacturing

Capacity

Six SigmaCulture

Six SigmaCulture

TechnicalProductivityTechnical

Productivity

Increasing Gross Margins Leveraging SARIncreasing Gross Margins Leveraging SAR

SAR %

GM %

Gross Margin % SAR %

13%

15%

17%

19%

21%

23%

Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05




• Strong global truck business

Significant Global Player In TrucksSignificant Global Player In Trucks

• North America• Europe• India• China• Mexico• Brazil

• Engines• Filters• Emission Solutions• Turbochargers• Fuel Systems




• Strong global truck business

• Partnerships working

Partnerships WorkingPartnerships Working

• New common rail fuel system JV

• Tata Cummins grew by 2.5 times• Tata Holset grew fourfold

•Manufacturing JVs are booming•Successful joint development •B3.3 and QSK78 are success stories

• CMD at 20% CAGR

K P I T • 25% of all IT work• Electronic controls partner


• Converting sales into profits• Leaner cost structure• Strong global truck business• Partnerships working• Leveraging complementary businesses

Leveraging Complementary BusinessesLeveraging Complementary Businesses

• Technology

• Cross selling• Excellence in customer support

• Shared services

• Common operating system


• Converting sales into profits• Leaner cost structure• Strong global truck business• Partnerships working• Leveraging complementary businesses• Major profitable growth opportunities

Major Profitable Growth OpportunitiesMajor Profitable Growth Opportunities

• Share growth

• New products

• After-market sales

• Emerging markets

What’s Different by BusinessWhat’s Different by Business

• Profitable NA HD truck business

• PowerGen turnaround successful

• Distribution business growing profitably

• Emission Solutions successfully launched

BreakBreak

Joe LoughreyPresident and Chief Operating Officer

Business UpdateBusiness Update

AgendaAgenda

• Focused on profitable growth– Engine– Power Generation– Components– Distribution

• Well positioned in emerging markets– China– India

• Summary

AgendaAgenda



• Summary

Engine Business Engine Business

Products Markets

2004 Revenue

MR

HD

HHP

PartsConst/Ag

Mining/Marine

HD Truck

MD Truck/BusLDA

PowerGen

Parts

Other

$M

Engines – Historical Performance$M

Segment EBITSales

$3,121$3,435 $3,582

$5,424

$6,070

0

1000

2000

3000

4000

5000

6000

7000

2001 2002 2003 2004 2005-$95

$37$62

$328

$469

-100

0

100

200

300

400

500

2001 2002 2003 2004 2005LTM

LTM

Strong Global Presence2004 Global Production > 700,000 Engines

South America59,000

Japan 42,000

China136,000

India75,000

North America348,000

Europe43,000

Ready For 2007Emissions ChangeReady For 2007Emissions Change

• Limited pre-buy

• Best product in ‘07

• End user field testing underway

Living With Vertical IntegrationLiving With Vertical Integration

• Cost

• Brand

• Global presence

• Technology

Profitable Growth OpportunitiesProfitable Growth Opportunities

• Emissions driven share gain

• High horsepower

– Oil & Gas

– Marine

– Power Generation

• Parts sales

• Emerging markets

• Below 8500 lbs

AgendaAgenda



• Summary

Power GenerationSix Lines of BusinessPower GenerationSix Lines of Business

2004 Sales: $1.8 Billion Lines of Business

• Commercial• Consumer• Alternators• Power Electronics• Energy Solutions• Rental

Commercial

Alternators

Rental

Consumer

Power ElectronicsEnergy

Solutions

Power GenerationThree Major MarketsPower GenerationThree Major Markets

2004 Sales: $1.8 Billion

Distributed Standby

Mobile

• Standby Power

• Mobile Power

• Distributed Generation

$M

Segment EBIT

Power Generation –Historical Performance

Sales

$M

$1,422

$1,226$1,329

$1,842$1,933

0

400

800

1200

1600

2000

2001 2002 2003 2004 2005

$82

-$25-$19

$60

$87

-50

-30

-10

10

30

50

70

90

110

2001 2002 2003 2004 2005

LTM

LTM

Turnaround Demonstrating ResultsTurnaround Demonstrating Results

• New Management Team

• Global Organization

• Cost Reduction

• Pricing Improvement

• Collaborative Effort with Engine Business

•Significant Profitability Improvement

• Increased Market Penetration

• Global Growth

Actions Results

Well Positioned forProfitable GrowthWell Positioned forProfitable Growth

• Most markets still strengthening• Expanding market share

– New products– Improving distribution network

• Consumer growth– Portables

• Growing project business capability

AgendaAgenda



• Summary

Components Segment –Four BusinessesComponents Segment –Four Businesses

• Four businesses within the segment– Fleetguard– Emission Solutions– Holset– Fuel Systems

Components – Historical Performance

Segment EBITSales

$M $889 $951

$1,292

$1,783$1,907

0

400

800

1200

1600

2000

2001 2002 2003 2004 2005

$M

$60

$94

$86 $84$80

0

20

40

60

80

100

2001 2002 2003 2004 2005LTM LTM

Components Segment StrategyComponents Segment Strategy

• Improve profitability

• Grow share of business

• Introduce new products

Improve Profitability - FleetguardImprove Profitability - Fleetguard

• Price increases in 2005

• Eliminate low margin products

• New low cost products in 2006

• Global sourcing

• Positioned for growth in China and India

Grow Share - HolsetGrow Share - Holset

• Commercial diesel market leader• OEMs moving to single source• VG turbo is technology leader• Supports OEMs globally• Additional capacity

– Charleston, SC– Wuxi, China– Indore, India

• Started with retrofit business

• Leveraged existing relationships

• Low cost plant in South Africa

Emission Solutions Business Successfully LaunchedEmission Solutions Business Successfully Launched

New Fuel SystemNew Fuel System

• Common rail ‘XPI’• Applied on 8 to 16 litre engines• Introduced in Q3, 2006• Partnership with Scania

– Jointly developed– Manufacturing locations

• Columbus, IN• Juarez, Mexico

AgendaAgenda



• Summary

Distribution SegmentDistribution Segment

• Strengthen the network

• Capture more profitability

• Outstanding customer support

Distribution FootprintDistribution Footprint

Company-owned

Joint Venture

Independent

Distribution FootprintDistribution Footprint

Company owned• 17 Owned • 9 JVs• 89 countries• 220 Locations • 4000+ employees

75 Independent• 11 - US/Canada• 27 - Latin America• 12 - Europe• 11 - Middle East• 8 - Africa• 6 - Asia

Distribution – Historical Performance

Segment EBITSales

$M

$562 $574

$669

$973

$1,099

0

200

400

600

800

1000

1200

2001 2002 2003 2004 2005

$M

$27$33

$51

$79

$94

0

20

40

60

80

100

2001 2002 2003 2004 2005

Positioned for Profitable GrowthPositioned for Profitable Growth

• Broadening product offering

• Expanding internationally

• Increasing equity ownership

• Excelling in customer support

AgendaAgenda



• Summary

0

1

2

3

4

5

6

7

8

1980 1984 1988 1992 1996 2000 2004

China’s GDP Growth Outpaced the USChina’s GDP Growth Outpaced the US

Cumulative Real GDP Growth 1980-2004

Source: International Monetary Fund

China USA

GD

P M

ultip

le (1

980

= 1)

CAGR = 8.6%

CAGR = 2.6%

All Four Business Segmentsin ChinaAll Four Business Segmentsin China

• Entered China in 1975

• Largest foreign investor

• Strong market positions

WuxiShanghai

XiangfanChongqing

Chongqing Cummins Engine Company Ltd.

Dongfeng CumminsEngine Co., Ltd.

Cummins Engine (Beijing) Co., Ltd.

Wuxi Newage Alternators Co.,Ltd.

Wuxi Holset Engineering Co., Ltd.

Shanghai Fleetguard Filter Co., Ltd.

Beijing

EA Tech Center

Solid Foundation in ChinaSolid Foundation in China

Wuhan

Xi’an

Xi’an CumminsEngine Co., Ltd.

CMI China Market Position in 2004CMI China Market Position in 2004

Engine shipment > 150,000 engines

Installed population > 850,000 engines

Largest Cummins bus OEM King Long

Largest Cummins NG bus fleet Beijing

Large Cummins truck OEM Dongfeng

2004 Market Share

Commercial trucks 20%Buses 17%Excavators 33%Mine trucks 85%Track equipment 73%

Gensets 26%Alternators 33%

Turbochargers 32%

Source: Company estimates

China Sales Have Been StrongChina Sales Have Been Strong

CMI Consolidated and Unconsolidated Sales

35% CAGR

Consolidated Net Sales Unconsolidated JV Net Sales

0

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004

US$

Mill

ions

2010 China Market Size $11-13 BOver 600K Trucks By 20102010 China Market Size $11-13 BOver 600K Trucks By 2010

Key Drivers

• Road construction

• Economic growth

• Government policies

Bus &Coach

Mining

PowerGen

Diesel Rail

Oil &Gas

Truck

Marine

LCV

Construction

Well Positionedfor Future GrowthWell Positionedfor Future Growth

• East Asia R&D Center

• Medium duty electronic products

• Heavy duty entry

• Expanded component manufacturing

AgendaAgenda



• Summary

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

1980 1984 1988 1992 1996 2000 2004

India’s GDP Growth also Outpaced the USIndia’s GDP Growth also Outpaced the USG

DP

Mul

tiple

(198

0 =

1.00

)

Cumulative Real GDP Growth 1980-2004

Source: International Monetary Fund

India USA

CAGR = 5.7%

CAGR = 2.6%

All Four Business Segmentsin IndiaAll Four Business Segmentsin India

• Started in 1962• Strong market positions

Valvoline CumminsNew Delhi

Tata Holset LtdDewas

Nelson Engine Systems (I) Ltd.Daman

Cummins India Ltd.Cummins Diesel Sales & Service Ltd.KPIT Cummins Infosystems Ltd.

International Purchasing OfficeFleetguard Filters Ltd.Cummins Research & Technology IndiaPune

Tata CumminsJamshedpur

Newage Electrical India Ltd.Ahmednagar

Solid Foundation In India

CMI India Market Position in 2004CMI India Market Position in 2004

Engine shipment > 75,000 engines

Installed population > 350,000 engines

Large Cummins NG bus fleet Delhi

Large Cummins truck OEM Tata

2004 Market Share

Trucks 40%Mining 40%Compressors 55%Pumps 30%Rail 50%Commercial Marine 25%Construction 18%

Gensets 55%Alternators 65%

Turbochargers 45%

Filtration 22%Source: Company estimates

14% CAGR

India Sales Have Been StrongIndia Sales Have Been Strong

CMI Consolidated and Unconsolidated Sales

Consolidated Net Sales Unconsolidated JV Net Sales

0

100

200

300

400

500

600

700

2000 2001 2002 2003 2004

US$

Mill

ions

Leveraging Strong Base Leveraging Strong Base

Low Cost Manufacturing• Global Source

– V28– K38 and K50 Power Generation Engines– Components supply base

Services & Solutions• Valvoline Cummins 30% CAGR• KPIT Cummins 60% CAGR• CRTI - R&D worldwide

Well Positioned for Future GrowthWell Positioned for Future Growth

• Increased exports • Local electronic products• Major capacity increases

– Turbochargers 46%– KV Engines 70%– Valvoline 50%

China / India - SummaryChina / India - Summary

• Long operating experience

• All businesses strong

• Healthy partnerships

• Leveraging assets

• Synergies growing

• Many growth opportunities

AgendaAgenda



• Summary

Profitable Power-Gen Business

Profitable Power-Gen Business

RestructuredEngine Business

RestructuredEngine Business

Strong Footprint inEmerging MarketsStrong Footprint inEmerging Markets

Growing Components

and Distribution

Growing Components

and Distribution

This is the New CumminsThis is the New Cummins

11.1%

19.7%

24.3%

4.1% 7.8%

-2.1%

6.5%

-5%

0%

5%

10%

15%

20%

25%

1999 2000 2001 2002 2003 2004 2005

Focused On ExecutionFocused On Execution

Return on Average Net Assets

LTM


Non-GAAP Reconciliation – EBITNon-GAAP Reconciliation – EBIT

$ 473

(29)(100)(113)

$ 715-

$ 715

6/30/05LTM

$ 350$ 132Net Earnings

(26)(6)Minority Interests in earnings of unconsolidated subsidiaries

(56)(47)Provision for income taxes(111)(75)Interest Expense

$ 543$ 260Earnings before interest, income taxes and minority interest

-(56)Restructuring, asset impairment and other$ 543$ 316

Earnings before interest, income taxes, minority interest and restructuring charges

12/31/0412/31/99Year ended$ Millions

EBIT = Earnings before interest, taxes, and minority interests.

We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. The table above reconciles EBIT, a non-GAAP financial measure, to our consolidated net earnings, for each of the applicable periods.

Additional DisclosuresAdditional DisclosuresAs previously announced, effective May 2, 2005, CMI made certain leadership changes within its management team and subsequently on July 21, 2005 in Form 8-K, restated operating segment data for the periods of 2003 to the present.

Operating segment data used in these presentations for the periods of 1999 through 2002 has not been adjusted for the changes in segment reporting.

The segment EBIT used in these presentations excludes restructuring, asset impairment and other charges, minority interest and preferred dividends.

cmi_050926

Economy & Finance

gaap financial

0 consolidation

3b ebitfrom

company converting

capital wisely

turning sales

strongcmi

asset impairment