Cummins Inc. in 2023 - Toward Destination Zero. The Massive Energy Transition

For the exclusive use of G. Saint-Louis, 2024.
CASE: SM-366
DATE: 06/05/23
REVISED: 08/11/23
CUMMINS INC. IN 2023: TOWARD DESTINATION ZERO.

THE MASSIVE ENERGY TRANSITION
Our Destination Zero1 strategy is a growth opportunity for Cummins and our entire business
plays a role in that strategy. By executing our strategy and demonstrating our values, we can have
tremendous impact for all of our stakeholders and society.
—Jennifer Rumsey, Cummins Inc. CEO2
PROLOGUE
The first practical internal combustion engine was reportedly developed in 1860 by Etienne
Lenoir, a Belgian engineer.3 Little did he know then that the internal combustion engine would
go on to become one of the great innovations of the industrial age. And, perhaps, one day
become the victim of its own success. By early 1900s, the internal combustion engine was
powering automobiles and had given rise to the great American auto industry. Clessie Cummins,
a passionate engineer, had worked for several engine companies around that time and he
envisioned dramatic growth in the engine business for commercial applications. He launched the
Cummins Engine Company in 1919.4
1
At the time of publication of this case, Cummins' registration of the trademark "Destination Zero" was pending.
2
Jennifer Rumsey, “A snapshot of my first 90 days as Cummins’ CEO,” Cummins Newsroom, November 15, 2022,
https://www.cummins.com/news/2022/11/15/snapshot-my-first-90-days-cummins-ceo (June 15, 2023).
3
Wikipedia: History of the internal combustion engine,
https://en.wikipedia.org/wiki/History_of_the_internal_combustion_engine (June 15, 2023).
4
Cummins historical timeline, 1919-2019 History: 100 Years and Counting, Cummins Inc.,
https://www.cummins.com/timeline (June 15, 2023).
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This document is authorized for use only by Gamal Saint-Louis in MBA summer 24 taught by MORTEZA SARDARI, Concordia University - Canada from May 2024 to Nov 2024.
Cummins Inc. in 2023: Toward Destination Zero SM-366 p. 2
INTRODUCTION
Fast forward 104 years to 2023. Cummins Inc. had evolved to become a leading designer,
manufacturer, and distributor of internal combustion engines, power generation systems, and
related parts and technologies. The company operated through five business units: Engine,
Power Systems, Components, Accelera, and Distribution. Its products were widely used for a
variety of on-highway applications such as light-duty trucks, medium-duty trucks, heavy-duty
trucks and buses; as well as off-highway applications in industries such as construction, mining,
marine, and oil & gas. Some of its major customers included original equipment manufacturers
(OEMs) such as Daimler Benz, Navistar, Volvo, Paccar, and Tata. Interestingly, many of their
OEM customers were also competitors because some of them built their own engines. The
company ranked amongst the Fortune 200, operated in 190 countries, and had over 73,000
employees globally. In fiscal year 2022, Cummins had record revenue of $28 billion and market
cap of $35 billion.5 By any measure, the company had performed quite well over the years and
built a strong position amongst its customers, investors, communities, and employees.
From 2017 through early 2022, the company took several strategic steps to address the twin
challenges of climate change and the world’s insatiable need for power. First, it invested in
several important acquisitions to build its capabilities in new technologies within the zero-
emissions space. In 2019, company leadership announced Planet 2050, a new campaign to
advocate for and work towards a zero-emissions future while continuing to provide the power its
customers needed. Soon thereafter, the company renamed a new technologies-focused unit it
had launched in 2018 and called it the New Power Business Unit with the charter to manage and
oversee the development of its zero-emissions products. And in January 2022, the company
formalized its commitment to reaching zero emissions while enabling a growth outcome for the
company through the launch of its Destination Zero strategy.6 This strategy outlined the
company’s plan to evolve its product portfolio by building zero-emissions solutions such as
battery systems, fuel cells, ePowertrain systems, and electrolyzers. And for its core engine
products, the company committed to advancing the path to zero emissions by continuously
improving these products.
Jennifer Rumsey became the CEO of Cummins in August 2022. She was the company’s seventh
CEO and the first woman to lead the company since it was founded.7 She set out to strengthen
and extend the company’s next-generation environmental sustainability strategy to look out all
the way to 2050. And she set quantifiable goals for 2030 along with visionary longer-term
aspirations to 2050. On March 8, 2023, Rumsey announced the launch of Accelera as the new
brand for its New Power business unit and positioned Accelera as an energy technology leader
5
“Cummins reports strong fourth quarter and full year 2022 results,” Cummins Inc., February 6, 2023,
https://investor.cummins.com/news/detail/592/cummins-reports-strong-fourth-quarter-and-full-year-2022
(June 15, 2023). For details on other Cummins developments, see https://investor.cummins.com/news.
6
“Destination Zero, powered by Cummins,” Cummins Inc.,
https://www.cummins.com/company/esg/environment/destination-zero (June 15, 2023).
7
“Jennifer Rumsey promoted to president and CEO of Cummins; Tom Linebarger to serve as chairman of the board
and executive chairman,” Cummins Newsroom, July 14, 2022,
https://www.cummins.com/news/releases/2022/07/14/jennifer-rumsey-promoted-president-and-ceo-cummins-tom-
linebarger-serve (June 15, 2023).
on a mission to transition the industries that keep the world running to zero-emissions power.8
She commented on the road ahead:
We must grow the company by meeting the needs of our customers while
reducing environmental impact on the world. To achieve this, we will continue to
advance engine based decarbonization solutions and build and accelerate new
power solutions that will get us all the way to zero emissions. We set up the
Accelera business unit with a start-up mindset because the technologies powering
its products are less mature. We need to be more agile than a normal $35 billion,
103-year company would be in introducing new products, learning from deployed
solutions and adapting.
It is important for both our traditional engine-based business and Accelera

business to advance their products, meet customer needs, innovate and grow. We
serve markets such as school buses, urban buses, medium-duty trucks, long-haul
trucks, agriculture, construction, and marine segments across regions, globally.
There isn’t one solution that will work for this diverse set of customer segments.
To serve these different markets, we need a wide portfolio of solutions. And each
of these solutions have their own unique infrastructure needs. It is critical for the
Accelera business unit to innovate and accelerate deployment of its solutions to
early adopters that will enable us to build scale, build technology leadership,
evolve the business and move into new markets over time.9
The core engine product of Cummins had played a key role within the broader ecosystem to
influence the growth and success of Cummins’ customers and, by extension, the global economy.
Arguably, every player within the ecosystem—such as Cummins, the OEMs, the end-customers,
regulators, investors, various governments, infrastructure operators, and employees—played an
important role to maintain balance in the ecosystem and drive its growth and success. With the
gradual emergence of the strong external force of climate change, the path to zero emissions by
2050 would be complex and difficult—and full of tradeoffs. Achieving this goal undoubtedly
would require a transformation of the overall ecosystem, leading to the great energy transition.
The Back Story
In 2010, Cummins had revenues of over $13 billion, served customers globally, and had
established itself as the largest independent diesel engine manufacturer in the industry.
Cummins enjoyed a strong presence in the market and had every right to feel confident about the
future. But some winds of change were blowing that would require the Cummins leadership to
make some bold, strategic choices to guide and sustain the growth and future of the company.
8
“Cummins launches Accelera by Cummins to advance the transition to a zero-emissions future, March 8, 2023,
Cummins Newsroom, https://www.cummins.com/news/releases/2023/03/08/cummins-launches-accelera-cummins-
advance-transition-zero-emissions-future (June 15, 2023).
9
Interview with Jennifer Rumsey, February 22, 2023. Subsequent unattributed quotations are from authors’
interviews, unless otherwise noted.
Since the early 2000s, the global community had become increasingly aware that climate change
posed a real challenge, and one that had to be proactively addressed. There seemed to be a
general acceptance in the private sector and governments about the need to build and promote
sustainable clean energy solutions. In many ways, the historic 2015 Paris Agreement under the
auspices of the 21st Conference of the Parties (COP21) to the United Nations Framework
Convention on Climate Change (UNFCCC) was a clear indicator of global resolve amongst 197
countries to reduce greenhouse gas emissions.10
Looking back, it was easy to see that the existential climate change issue was on a collision
course with the fossil fuel-powered energy and transportation industries. And, while it was
likely to take a long time for both of these forces to come to some sort of equilibrium, massive
change was inevitable and inescapable.
Tom Linebarger became CEO of Cummins in January of 2012. He had joined the company in
1995 and played several leadership roles before taking on the helm of the company.11 He
reflected on that time as a period of strategic change:
In previous years, we had put in place our policies on climate change and
accelerated our focus on reducing the climate impact of our products. But by
2012, it started to become clear to me that the effects of decarbonization would
have a much more dramatic effect on our industry. We had to turn the
decarbonization challenge into a business necessity. Without clear regulation or a
price on carbon emissions, the best way to make decarbonization essential was to
make it a growth opportunity for Cummins. We put together a strategy office to
seek ideas, both internally and externally, to address the decarbonization issue and
seed growth areas. We started making some acquisitions and funded technology
development within the company on fuel cells, batteries, controls, and other areas
relevant to decarbonization in a commercial and industrial setting.12
By 2017, Cummins had grown to $20 billion in revenue and the company was attracting the
attention of analysts who were running long-term financial models on the growth prospects of
the company (see Exhibits 1 and 2). To create valuation models, analysts typically used the
discounted cash flow model and the dividend discount model. One of the key variables in these
models was the terminal value of the company. If the terminal value was deemed to be zero over
a reasonable timeframe, then the valuation typically suffered a material drop. As Linebarger
started getting end-of-life questions from investors, he realized Cummins had to go public with
their strategic thinking on the road ahead. He noted:
10
“What is the Paris Agreement?” United Nations Climate Change, https://unfccc.int/process-and-meetings/the-
paris-agreement (June 15, 2023).
11
“UPDATE 1- Cummins CEO Solso retires; COO to take over,” Reuters, July 12, 2011,
https://www.reuters.com/article/cummins/update-1-cummins-ceo-solso-retires-coo-to-take-over-
idUSL3E7IC3KL20110712 (June 15, 2023).
12
Interview with Tom Linebarger, February 7, 2023. Subsequent unattributed quotations are from authors’
We had to convince the analysts that the terminal value of the company was not
zero. We began discussing our technology and business development plans more
publicly and even shared our confidential 30-year simulation of how technologies
and products would transform our industry. This allowed us to make a clearer
case for the acquisitions we were making in batteries and fuel cells. Eventually,
analysts and investors started to buy into the argument that we had a chance to
compete in these new technology areas as a long-term incumbent. But providing
specific details to the analysts about margins, cash flows and market share for the
zero-emissions solutions was tricky and speculative at best. The debate, however,
with the analysts on our road ahead had begun and our strategy of investing in
new zero carbon technologies became a key part of our planning for the future of
the company.
Launch of New Power Business Unit
Starting in 2017, the company made several acquisitions in new technologies but felt the need to
provide a proper structure and charter to grow this new line of business. The strategy function
had initially managed the acquisitions but it had too many things on its plate and there was a real
need to speed things up. So, in 2020, Cummins refocused its efforts by branding this line of
business as the New Power Business Unit (NPBU) and empowered NPBU to plan and build a
business powered by new zero-emissions technologies. At that time, Linebarger commented,
“Our forecast that climate change was going to impact our business in a serious way was
completely on-point. And we wanted to move from a neutral stance to a forward stance to say
not only was our forecast true but we were going to advocate for regulation and infrastructure to
ensure that we made the transition to a decarbonized industry.”
NPBU was viewed as a start-up within Cummins and, for it to succeed, it was critical to create
the perfect mix of leadership, employees, products, innovation, culture, sense of urgency, and
passion to not only create a new business but to be an important catalyst in enabling the massive
energy transition. In early 2019, valuation of comparable start-ups was at attractive levels so the
leadership and the board of Cummins debated the question of capital—should they fund NPBU
internally or go external for capital? The degree of operating independence for NPBU also got a
fair amount of attention from the leadership. On one hand, there was a lot of knowledge inside
the company that would benefit NPBU and most start-up competitors did not have this
knowledge. On the other hand, start-ups typically were more agile and could pivot more quickly.
However, the value of sharing knowledge of customers, applications, and plant operations
outweighed the value of separating into a true stand-alone start-up. It was clear to Linebarger
and Rumsey that selecting a leader for NPBU with the right mindset and skills was going to be
crucial (see Exhibit 3 for information on Cummins Inc. leadership). Linebarger noted:
We wanted someone who would think differently as the leader of NPBU;

someone who is independently minded but also knew the industry and could
operate successfully inside of Cummins. We both knew that it is often hard to
find these characteristics in one leader. Fortunately, we had someone in
Cummins, Amy Davis, with exactly this mindset and experience. Amy believes
in Cummins’ values, had worked in the industry for a long time, and had
successfully navigated the organization into important leadership roles. But Amy
also has a significant distaste for bureaucracy and believed in her ability to find
her own path to success. She had the ability to strike a balance in a way that was
ideal for this assignment.
When she was offered the job to lead NPBU as its president,13 reporting to the CEO, Davis
recalled being excited with the opportunity:
I joined Cummins in 1995 and played several different roles in the company and
also got some experience outside the company. My last role at Cummins was to
run the Filtration business with the intent to capture value differently either via a
separation or sale. NPBU is more about a roadmap, learning new technologies,
talking to investors, selling to customers, and making strategic tradeoffs. It is all
about vision, strategy, engaging with the board, and selling to the investors. But it
is also about execution. Execution in NPBU has been even harder because we did
not have the backbone of systems and processes in the business unit that we did in
Cummins.14
NPBU’s mandate was to drive progress in clean energy technologies and build a business by
supporting its customers in transitioning their fleets, grids, construction sites, ports, factories, and
plants to zero-emissions power. Its initial focus was on battery systems, fuel cell, and
electrolyzer technologies, and ePowertrain systems in commercial and industrial markets (see
Exhibit 4 for Cummins product portfolio). Upon launch, Davis set out to organize the business
unit and look for the right people to join the unit both from within Cummins and from the
outside. She commented:
We looked at how the business needed to grow and put an integration leader for
each technology and a common engineering leader across all technologies to
make sure we were driving a common platform and design framework. Product
planning was a key role in the early days. Then we examined where we needed
outside talent and where we needed inside talent. We found that technical talent
within start-ups tended to be more like scientists and not like engineers. Scientists
do not do well when you want to do product launches and go to market. And
early on, we were not a popular opportunity within Cummins because success in
Cummins was measured by the number of people reporting into you and whether
you managed a P&L.
At NPBU, these expectations were unrealistic. We had some initial missteps with
internal hires but those have since been corrected and as time has gone by, NPBU
has become an attractive place within Cummins. Competing with start-ups for
recruits is still a challenge. Start-ups have the allure of swinging for the fences
and they can offer attractive stock option plans. We are working hard to change
13
“Cummins names Amy Davis vice president and president – New Power Segment,” June 15, 2020, Cummins
Newsroom, https://www.cummins.com/news/releases/2020/06/15/cummins-names-amy-davis-vice-president-and-
president-new-power-segment (June 15, 2023).
14
Interview with Amy Davis, February 20, 2023. Subsequent unattributed quotations are from authors’ interviews,
unless otherwise noted.
compensation structure and also build the right culture so people feel this is the
right environment for them. We are working consciously on the culture, our
image and our identity; and encourage risk taking and speed. But this is very
hard. Building the right culture is one of our biggest challenges.
View from the Core Business
Srikanth Padmanabhan, VP and president of the Engine business, was leading a global team that
was responsible for an output of nearly 1.5 million engines globally in 2021. But since Cummins
had outlined aspirations to achieve zero emissions by 2050, the company had to invest in both
new and existing technologies because of their scale and reach. Continuous improvement of
existing technologies was necessary, rather than waiting for a perfect solution. Cummins had
been on the forefront of sustainability long before it was a trend, which was reflected in their
sustainability report that has been in place for over 20 years. The carbon emissions of 68 trucks
in 2022, for instance, was equal to the carbon emissions of one truck 30 years earlier.
Padmanabhan suggested that one axis for evaluating transportation and mobility was
horsepower, which varied depending on the geography and application. Commercial mobility
and transportation proved challenging due to the many different applications and users. He
outlined the three-phase philosophy of prototype attempts, messy middle, and robust solutions
that would pave the way for a greener infrastructure. Padmanabhan saw the industry as being in
a prototype phase, with most applications still relying on diesel and natural gas, and highlighted
the importance of green infrastructure to ensure sustainability. He mentioned that the 2030s to
2040s would be the messy middle, where certain technologies would bubble up, leading to better
infrastructure and a reduced carbon footprint. He also emphasized the importance of taking
action early and advancing new power solutions while improving the efficiency of existing
applications. For example, Cummins intended to reduce emissions by 25 percent by 2030 and
use drop-in fuels like renewable natural gas to reduce their carbon footprint.15
As Cummins was looking to achieve zero emissions by 2050, Linebarger observed that the
challenge of the zero metric was that the cost to get to zero from 1 percent could be high:
My view is that our Engine business is going to compete on the calculation that
you can get a long way down the decarbonization curve for a fraction of the cost
to a place where it is no longer economically viable and of limited environmental
benefit to go further. New Power will compete on the other curve—that zero-
emissions technologies will not only offer environmental benefits but will also be
able to meet or beat the cost of combustion engines once they are produced at
scale.
He also pointed out that this prospect motivated people within the core business:
… to say ‘I am not riding a dying horse into the desert such that I have no place to
go when I am 45 years old.’ Attracting and retaining talent is a major issue for all
businesses but especially for carbon-intensive businesses. How do I hire a 25-
15
“Power with purpose,” Cummins Inc., https://www.cummins.com/company/power-with-purpose (June 15, 2023).
year-old chemical engineer into the oil drilling business if they think that oil
drilling might not be needed in the future? So, we are trying to create enthusiasm
about the future of the engine business and the truth is there are enough
technologies emerging there that they might actually win.
The Evolving Product Portfolio
Given the company strategy to win in both the core engine business and the Accelera business,
when Accelera business would exceed the traditional engine business was a critical question for
the business unit and, more broadly, for Cummins. The answer to this question would not only
influence investments into the product portfolio but also drive interaction and messaging with the
ecosystem players. However, the time dimension for the transition would vary for different
regions and technologies. Jonathan Wood, VP and chief technical officer for Cummins,
characterized the timing of the transition as one of the most important strategic questions facing
the company. He also provided some insight on how the medium-duty truck market in North
America, with 250,000 trucks sold annually (see Exhibit 5), was likely to evolve in the near term.
Wood commented:
In our core market of engine-powered medium-duty trucks, we have a very high

market share in North America; we have started to see the transition to a battery-
driven powertrain for this market. This market is moving faster than markets such
as heavy-duty long-haul commercial trucks, mining, and other heavy industrial
markets because of the application usage profile and it is drawing on battery
chemistry technology already adopted in passenger cars. Over the next 7 to 10
years, we will see a larger percentage of this market adopting zero-emissions
battery solutions. But this growth will significantly depend on infrastructure
buildout, availability of raw materials for the key technologies, and the pace of
reduction in cost per KW hour for batteries and electrified powertrain solutions.
This will determine how fast the adoption will occur in the commercial vehicles
market.16
Over the years, Cummins and the OEMs had invested in their products to drive carbon emission
reductions based on increasingly tighter emission regulations both in the United States and in
Europe. Wood reflected on this investment cycle:
For our core diesel engine technologies, our investments in the past have been
driven by emissions regulation. We will have additional future rounds of new
regulation impact the engine platform and that will require continued investment.
These will likely be the last major new investments on the diesel combustion
engine. After this we will likely pivot heavily towards zero-emissions products,
which will include alternative fueled internal combustion technology as part of
the portfolio.
16
Interview with Jonathan Wood, February 21, 2023. Subsequent unattributed quotations are from authors’
Cummins was investing in multiple New Power technologies such as fuel cells, batteries, and
electric powertrains for the on-highway market. Wood added:
We want to provide our OEM customers with fully electrified powertrains that
could take either a battery or a fuel cell but still have the same e-Axle. We are
also looking at what elements of the powertrains are common. We are working
on building a common architecture and have a modular approach to bringing new
power technologies to market. We expect mid-range trucks and heavy-duty
trucks to eventually be powered by battery systems or fuel cells depending on the
application. In the short-term, batteries seem to be more viable and cost
competitive; fuel cells will likely be a long-term play. It’s all about placing
appropriate bets in terms of investment at the appropriate time.
The electrolyzer product of Accelera received strong interest from the market. Fundamentally,
the electrolyzer was a system that used electrolysis to break down water into hydrogen and
oxygen and create hydrogen gas. “Given the strong demand in the market for green hydrogen,
the electrolyzer has become the fastest-growing new power technology today and has helped
open up new markets in the industrial and agriculture segments compared to transportation,”
Wood said.
Unquestionably, Cummins would have to balance multiple factors through 2030 and beyond to
invest in and influence growth of both the traditional core engine products and the Accelera
products. Principal factors would likely include product reliability, electricity costs per KW
hour, infrastructure availability, and serviceability. Other factors that would impact the success
and timing of the Cummins product strategy included regulations, government investments,
OEM strategies, and end-customer expectations. Government investments in clean energy
infrastructure were also likely to have a significant impact on the path to zero emissions.
While Europe appeared to have made more progress in investing in clean energy infrastructure,
the 2022 Inflation Reduction Act (IRA) was expected to help the United States reaffirm its
leadership in clean energy technology, manufacturing, and innovation. The IRA’s $370 billion
in investments were designed to accelerate investment in clean energy solutions in every sector
of the economy. The tax credits included in the IRA for battery charging and hydrogen fueling
infrastructure, hydrogen production and zero-emissions vehicle deployment, and batteries as well
as other clean manufacturing development provided much-needed government support
throughout the entire value chain needed for decarbonization.17 On the matter, Rumsey stated,
“The U.S. has finally made some important strides in the positive direction. This was a
competitive risk for the U.S. The IRA is an important step and will go a long way in supporting
American manufacturers and U.S. competitiveness in the global economy. The details will
matter because our industry needs clarity, consistency, and lead time.”
17
“Building a clean energy economy: a guidebook to the Inflation Reduction Act’s investments in clean energy and
climate action,” The White House, January 2023, https://www.whitehouse.gov/wp-
content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf (June 15, 2023).
Bridge Technologies
Cummins had always believed that the company could drive growth while reducing emissions,
and therefore embraced the need to reduce the environmental impact of its products. But
adoption of zero-emissions products would be influenced heavily by infrastructure availability,
reliability, and product economics. Based on the state of these technologies and current levels of
investments into infrastructure, adoption was likely to take time. Rumsey commented on the
situation:
There is a business imperative to drive additional innovations within our core

engine products to continue to reduce emissions—we call it our bridge
technologies that will extend the life of the engine while consciously reducing
emissions. The reliability, cost effectiveness, and capabilities of the combustion
engine matters because our customers count on Cummins and the world runs on
our customers’ products. That is why bridge technologies are an important part of
our strategy.
Cummins was using its strength and scale in the internal combustion engine to build compatible
bridge technologies. By extending the life of the engine while reducing emissions, Cummins
also bought time for developing Accelera technologies. Jeff Wiltrout, VP of strategy, explained:
The investment case for bridge technologies plays to our strengths because we
have scale, investment capability, and deep knowledge of the applications. These
bridge technologies will remain in play until the new power technologies become
mainstream and deliver the same level of reliability and performance and
economic viability equal to or better than the diesel engine.18
In addition to extending the life of the core engine product, bridge technologies also provided a
certain incentive to compete, and motivation to the people in Cummins who kept the engines
running (no pun intended). In a way, bridge technologies extended the life of the employee base
as well as the long tail of business in parts and services. Linebarger drew a parallel to the oil &
gas industry, stating, “A number of oil companies are also trying to be in that game to use their
existing infrastructure to make other fuels. There is some excitement for a bunch of people with
existing infrastructure who would love to find that magic solution.”
But there was no symbiosis between bridge technologies and Accelera products because
fundamentally the Accelera business unit was focused on building zero-emissions products. Its
goal was to bring the future forward and make new power technologies functionally and
economically viable sooner for its customers. One could argue that bridging technologies made
good business sense for now and were good for society to have, up to a certain point.
18
Interview with Jeff Wiltrout, February 13, 2023. Subsequent unattributed quotations are from authors’ interviews,
The Big Picture
Cummins had stated its intention of winning in both its base business with the diesel engine at its
core and the Accelera (formerly New Power) business. At its Analyst Day Conference in
February 2022, Cummins announced forward-looking financial metrics that put clear focus on
the strategies it would take to deliver on these metrics:
• Base business revenue in 2030: $33 billion to $35 billion

• Accelera business revenue in 2030: $6 billion to $13 billion
• Accelera business: at breakeven status in 2027 while incurring $1.3 billion cash outflow
from operations through 2027
• Cummins revenue in 2030: $41 billion to $46 billion19
Wiltrout had a specific perspective on company strategy in support of the financial targets set for
2030.
Our strategy to 2030 includes two clear planks. We will diligently optimize our
position in the internal combustion engine industry by continuing to extend the
life of the diesel engine through cleaner, technologically differentiated bridge
technologies. And we will drive cost efficiency in the business. By doing so, we
will win more than our fair share of the maturing market of our OEM customers
who are also our competitors. And we will drive cost efficiency and generate
strong, growing cashflow in our core business.
The second plank involves investing in the zero-emissions technologies of the

future that will drive sustainable long-term revenue and earnings growth. We
plan to replicate the success of our engine business by building a technology
focused differentiation at the center with technologies such as batteries, fuel cells
and electrolyzers while exploring different adjacencies and alternatives. We
believe this strategy is going to be net positive for us economically and position
Cummins for sustained success through the great energy transition.
At its fiscal year 2022 earnings release on February 6, 2023, the company presented record
results. Revenues for the full year were $28.1 billion, up 17 percent from 2021, and net income
attributable to Cummins for the full year was $2.2 billion, flat from 2021. Rumsey reported, “We
delivered strong profitability in the fourth quarter and achieved record full year revenues,
EBITDA and EPS last year. I want to thank all our employees for helping us navigate a difficult
supply chain environment and making 2022 a successful year.” The financial results for 2022
also showed revenue for Accelera/NPBU at $179 million, up 60+ percent from 2021. And the
leadership provided 100 percent+ revenue growth guidance for Accelera in 2023.20
19
“Cummins Analyst Day,” p. 28, Cummins Inc., February 23, 2022 (June 15, 2023).
20
Q4 2022 Cummins Inc Earnings Conference Call, Cummins Inc., February 6, 2023,
https://investor.cummins.com/events-presentations/ir-calendar/detail/7371/q4-2022-cummins-inc-earnings-
conference-call (June 15, 2023).
Mark Smith, VP – CFO of Cummins, provided the following big-picture perspective on the
company’s financial position:
Our current business focused on combustion engines is doing quite well in the
market. This business is generating strong margins and cash flow which gives the
company a significant advantage in our sector. It also generates the financial fuel
that we use to invest in new power technologies. Our metrics are viewed
favorably by the investors. We have earned a strong financial position in the last
20 years. Our pensions are fully funded. We have the highest credit rating and
enjoy unprecedented financial strength. Another major competitive advantage for
the company is our massive scale. In our industry, if you don’t have scale, it is
difficult to deliver attractive returns and hard to build deep relationships with
customers because they come to depend on you as long as you can support them
across the value chain.21
At the big-picture level, the market cap of Cummins had appreciated from about $22 billion in
January 2019 to approximately $36 billion in January 2023 (see Exhibit 2). This would suggest
the investors liked what they had seen and had not discounted the company’s two-pronged
strategy. Smith added, “We have an ‘and’ and not an ‘either or’ strategy. We are not talking just
about a transition story; we are talking about transition and new business. We believe our
strategy and internal capabilities have given us the right to win. If are able to build scale in our
New Power business, the probability of winning will go up substantially.”
The advent of the environmental social governance (ESG) investment philosophy created an
interesting dynamic for both investors and corporations. Some financial institutions felt the
pressure to support clean energy investments and advancement of societal desires around
sustainable energy. Also, as more investors looked to put money into companies with strong
ESG performance, larger pools of capital were available to the companies with a strong
sustainability agenda.22 Smith said, “The increasing impact of ESG-centric investors will help
Cummins along its journey. Our long-term strategy of enabling the great energy transition will
attract investors over the short term and keep them over the long term.”
Accelera – Strategy Reflections
The Destination Zero aspirations for 2030 for Accelera and, eventually, the outcome for 2050 for
Cummins seemed clear, at the big-picture level. Linebarger and Rumsey, along with the
Cummins board of directors, set financial targets for 2030 and boldly and publicly outlined zero
emissions as the aspiration for 2050. To achieve this, the entire ecosystem would have to
transform, leading to the great energy transition. Davis described the challenge for Accelera:
For 2023, it’s a lot about execution of the products we are launching. We need to
execute our product rollout plans before working on our plan for the next iteration
21
Interview with Mark Smith, February 17, 2023. Subsequent unattributed quotations are from authors’ interviews,
22
George Serafeim, “Social-Impact Efforts That Create Real Value,” Harvard Business Review, September-October
2020, https://hbr.org/2020/09/social-impact-efforts-that-create-real-value (June 15, 2023).
of the products. This is immature technology and the sales volumes are low. So,
any mistakes in launching new technology products, which can be unpredictable,
can be very costly. Containing risk of unpredictable technology launches and
making the right tradeoffs with regards to functionality and costs while keeping
future releases on track is our biggest challenge in 2023.
Investing in and landing the next generation product is also very important. There
is no shortage of new ideas related to our product launches; and quite often these
new ideas and new variations will force you to make changes which are not easy.
But we have to make decisions now about product launches for 2024 and make
them stick. To make these decisions, we consider a broad set of parameters such
as customer expectations in terms of features and cost, technology building
blocks, company capabilities, competitive offerings, differing points of view from
engineers and scientists, and the business case. Eventually, the more complicated
product decisions come to me.
Cummins had targeted 2027 to be the breakeven year for Accelera. Davis commented on the
strategy for the next five years:
We need to build strategic partnerships for 2027 and beyond. Selecting the right
partners for this journey will be critical. Do we have line of sight to them? Are
we securing joint development agreements? Are we securing these partners and
cutting out the competition? Customer acquisition is equally critical. We need to
close deals and build our customer order backlog. We need to measure the
quality of the backlog we are building and determine our cost trajectory to support
the order backlog.
Another crucial determinant of current and future success is gross margin. We

must control and deliver on gross margin expectations. If we don’t get planned
gross margin then we cannot invest in new product. Do we have the right mix of
products to get us to 2027? Have we secured enough customers and partners who
will still be around in 2027? And we must manage the P&L because financials
matter.
Looking forward, she observed:
The single biggest struggle the company has is around product strategy. When do
you stop on bridge technologies? There is so much innovation to be had
everywhere. The company can keep finding ways to innovate and give our
customers better cost solutions for their combustion engine applications. But if
you really say 2050 is the deadline—it is the end of the cliff—then when and how
do you decide that you must stop innovating in one space and completely pivot to
the other? This is a big question for the company.
Signposts
Cummins had published big-picture financial metrics for Accelera through 2030, and making
incremental progress towards these metrics would provide a financial view of progress. But it
was the operational and qualitative metrics that would provide a better view on progress with the
products and the market. Linebarger commented on the difficulty of identifying and measuring
the right indicators:
While financial metrics like P&L and breakeven numbers matter, what is more
important is to look for indicators that will give us insight on specific parameters
such as cost of fuel cells and at what levels does the cost curve become
affordable. What factors will allow you to go from selling 4 units to 40 units to
40,000 units? Getting this type of visibility has not been easy because the
technology curve is only smooth in retrospect. The curve is uncertain and very
bumpy when you are on it.
Wiltrout concurred:
Getting a few practical, meaningful signposts that are indicative of future demand
are not easy to get, and cost and margin metrics can give you a false sense of
progress. Practical business case markers will allow Accelera and Cummins to
track progress across technologies, customers, and regions while acknowledging
that things could change much faster than they do for the traditional engine
business. We will need to select the right set of key performance indicators
(KPIs) so we know there is rigor and consistency in execution but not strangle the
business because the world in the future is going to be much more dynamic than
what we have seen in the last 20 to 30 years. And we will have to balance the
economic reality of what we believe is true with the operational experience of
how the equipment will be used in the field to understand the speed of adoption
and learn how fast this is going to come at us.
Smith pointed at scale of the Accelera business as being a key indicator of progress:
Scale allows the business to bring down the cost curve and make the product more
affordable which in turn will boost usage and demand. Another important
indicator of progress is gross margins; generating positive gross margins as the
business grows will build confidence that our longer-term returns can meet or
exceed those of our current business—and that confidence allows the company to
continue to invest in the business and sustain the enthusiasm of investors.
Ecosystem Vignettes
While the great energy transition seemed inevitable, the path clearly would be complex, and
replete with strong dependencies amongst the players of the ecosystem. The following examples
provide a sense of the interconnectedness within the ecosystem, highlighting the hurdles the
players would have to address and overcome.
• A large customer of Cummins wanted to deploy battery-driven vehicles to support a

contract that required deployment of zero-emissions technology to 200+ freight-moving
trucks. They approached the local utility and asked for charging capacity for 200+ trucks
and were told that the utility company could only support 13 trucks. They would need a
new sub-station to support 200 to 300 trucks. And that would need millions of dollars of
investment. It would probably take four years to get approvals and build the sub-station.
As a reference point, 250,000 medium-duty trucks were sold in the U.S. each year.
Buying power from the grid would seem a poor choice. The better choice may be a vast
solar field and storage mechanism. Multiplying this type of need many times over could
illustrate the needs of the broader ecosystem—and raise questions on how to get started.
The government would have to have a different approach to invest in infrastructure for
zero-emissions power, and meet increasingly challenging emission standards all the way
to 2050.
• Cummins made a total-cost-of-ownership based case for natural gas engines in North
America in the 2007 to 2009 timeframe. Natural gas engines were better for the customer
in terms of economics. They were cleaner for the environment. This was also applicable
to heavy-duty engines. When customers were advised that this was a great option, it
worked, it was economically viable, and it was cleaner for the environment, they asked,
“OK, where am I getting my natural gas?” Literally 15 years later only 3 percent of the
North America heavy-duty truck market ran natural gas engines, which generated zero
emissions. The adoption was disappointingly low because of the lack of adequate
infrastructure. The infrastructure part of the ecosystem proved to be a massive issue
requiring significant investment.
• Was Cummins developing capability to counter new competitors such as Tesla, who
might make the leap from the passenger car industry segment to compete with Cummins?
One of the most significant ecosystem changes that Tesla CEO Elon Musk drove was to
disintermediate the passenger car dealer networks, which incumbents such as GM and
Ford had nurtured for 100 years. By doing so, Tesla was able to capture a 30 percent
gain in its margin stack. But could Tesla or another company fundamentally disrupt
Cummins through a combination of semi-autonomous functionality and digital
optimization capability? Tesla had demonstrated asset optimization capabilities and
impacted the passenger car segment. In the trucking industry, Cummins, the OEMs, and
the fleets were all tangled up with who owns what between them. As implausible as it
might sound, no one was optimizing across the value chain for the end customer, thereby
leaving the door open for someone to come into the market with a whole new digital asset
optimization model and fundamentally change the economic profile of the industry.
• Cummins was investing in fuel-agnostic powertrains via bridge technologies. For the
OEMs, the physical dimensions of the powertrains mattered because 80 percent of the
engine would remain unchanged, whether it ran on diesel, natural gas, or hydrogen. And
the big movers of packages in North America (the fleets) did not want to take economic
risk on the new technologies. If there were incentives, they might try new tech but they
were not rushing to deploy new tech. They were very diligent on measuring efficiency
metrics, fuel economy, and reliability. Their enthusiasm for new low-carbon technologies
was high, but adoption rates were slow.
CONCLUSION
While one could argue the great energy transition began a few years ago, the long journey to
2050 was accelerating. Along the way, Cummins would face some important strategic decisions
that would shape the path and evolve its relationship with its OEMs, end customers,
communities, investors, and employees. Rumsey weighed in on this interaction:
There’s a lot of education that we have needed to do and continue to do for most
of our stakeholders. For our employees, it is the understanding that the innovation
and work to decarbonize and meet our customers’ needs goes across our business,
not just for Accelera. For our investors, while we have made progress with them,
we need to do more to reinforce the notion that we are more than just a diesel
engine company. Our key questions are: can Cummins be successful in these new
technologies; how much money will they make; and what’s really the pace of
transition?
We are continuing to do a lot to demonstrate our commitment to our strategy!

That’s why in our analysts’ day meeting last year we actually set targets out to
2030; something we would never have done before to try to portray the story of
actually how our base business and Accelera business will grow throughout that
whole timeframe.
Exhibit 1
Cummins P&L from 2015 through 2022
Source: www.macrotrends.net.
Exhibit 2
Cummins Market Capitalization from 2018 through 2022
Source: www.macrotrends.net.
Exhibit 3
Cummins Inc. Leadership Bios
Jennifer Rumsey is the Chief Executive Officer (CEO), and a member of the Board of
Cummins Inc. She oversees the strategic direction, growth initiatives and global operations for
the +100-year-old, Indiana-based company. She is the co-architect of Destination Zero,
Cummins’ strategy to go further, and faster to reduce Green House Gas and air quality impacts
of its products and reach zero emissions by 2050. Since joining Cummins in 2000, Rumsey has
served in senior leadership positions in Cummins including leading the Components division,
Chief Technical Officer and most recently as its Chief Operating Officer. As COO, she
successfully and strategically navigated the company’s global operations during unprecedented
supply chain constraints, delivering record revenues and dramatically improving product quality
and Cummins’ market position. Rumsey holds a Bachelor of Science in mechanical engineering
from Purdue University and a Master of Science in mechanical engineering from Massachusetts
Institute of Technology.
Tom Linebarger is the Executive Chairman of the Board of Cummins Inc. Tom joined
Cummins in 1993 served as Chairman and Chief Executive Officer (CEO) between 2012 and
2022 and before that, he was its President and Chief Operating Officer from 2008 to 2011,
Executive Vice President and President, Power Generation Business from 2003 to 2008, and
Vice President and Chief Financial Officer from 2000 to 2003. Tom is also a Board member at
Harley Davidson and is a Co-Chairman of the Global Hydrogen Council. Tom also served as
Chair of the U.S.-China Business Council from 2020 to 2022. Tom received joint undergraduate
degrees in management engineering from Claremont McKenna College and mechanical
engineering from Stanford University. He also has a master’s degree in manufacturing and MBA
from Stanford University.
Amy Davis is President of New Power Business Unit at Cummins Inc. Amy joined Cummins in
1994 and has extensive leadership experiences across all of Cummins’ business segments. Prior
to her current role, Amy was the Vice President and General Manager of Cummins Filtration, a
division of Components Business Unit. Amy has led various Cummins initiatives to support
corporate responsibility, diversity and inclusion and is especially passionate about encouraging
and growing female leaders in the workplace. Amy is a graduate of Northwestern University and
attended the University of Chicago Booth Executive program for Market Strategy.
Jeff Wiltrout is the Vice President of Corporate Strategy at Cummins. He oversees cross-
functional efforts to define and develop the company’s strategic direction globally, including
business development, partnerships, mergers, acquisitions, and divestitures. Jeff joined Cummins
in 2009 and has experience in strategy roles supporting Power Systems and Cummins Generator
Technologies. He earned his bachelor’s degree from the University of Notre Dame and his MBA
from the Kelley School of Business at Indiana University. Prior to Cummins, Jeff worked at
National City Bank in Indianapolis.
Source: Compiled by authors, using information from Cummins Inc.
Exhibit 3, continued
Cummins Inc. Leadership Bios
Jonathan Wood is the Chief Technical Officer (CTO) at Cummins. Wood joined Cummins in
1994 and has held various leadership roles in engineering and emissions solutions. Wood is
based in the UK, has a master’s degree in mechanical engineering from the University of
Sheffield, and is a Chartered Engineer with the Institute of Mechanical Engineers and a Fellow
of the Royal Society for the Arts, Manufacturing and Commerce.
Srikanth Padmanabhan is the President of Cummins’ Engine Business with over 30 years of
experience at Cummins. He has led several businesses across the company, including Vice
President of heavy duty, midrange and light duty markets, President of Cummins Emission
Solutions, and Managing Director of Cummins Generator Technologies. Srikanth holds a
bachelor’s degree in mechanical engineering and a PhD in mechanical engineering and is a
graduate of the Advanced Management Program from Harvard Business School. He serves on
several boards, including Leggett & Platt Inc. and the American Transportation Research
Institute. Additionally, he is a member of the Board of Advisors for Indiana University – Purdue
University Columbus.
Mark Smith is Vice President and Chief Financial Officer at Cummins. He also leads Investor
Relations, Business Planning and Analysis, and Capital Management functions at Cummins.
Mark has been with Cummins for over 20 years, serving in various leadership positions. He
earned a Bachelor of Arts in economics from the University of Kent and a Master of Business
Administration from the Kellogg School of Management at Northwestern University. Mark is a
qualified member of the Institute of Chartered Accountants in England and Wales.
Source: Compiled by authors, using information from Cummins Inc.
Exhibit 4
Cummins Inc. Product Portfolio
Cummins Inc., a global power leader, is a corporation of complementary business segments that
design, manufacture, distribute, and service a broad portfolio of power solutions. The company’s
products range from diesel, natural gas, electric and hybrid powertrains and powertrain-related
components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air
handling systems, automated transmissions, axles, drivelines, brakes, suspension systems,
electric power generation systems, batteries, electrified power systems, electric powertrains,
hydrogen production, and fuel cell products.
Engines
Engines are the core business of Cummins and include products for on- and off-highway
applications. The main fuels used are diesel and natural gas. Some of the prominent engine
platforms are F3.8, B6.7, X (12 and 15), and QSK (60 and 95); the number following the letter
signifies the volume of the engine in units of liters. Below are brief descriptions of the
applications within each platform:
• F3.8 (Stage V): Used in agriculture, construction and mining.

• B6.7 (For medium-duty truck): Used for transportation: school buses and transit buses.
Cummins 5.0L V8, 6.7L V6 Turbo engines are used in pickup trucks.
• X12 Series: Used in motor homes, RVs, fire and emergency trucks. The X12N natural
gas version is used for heavy-duty regional-haul truck, vocational, refuse applications,
and motorcoaches.
• X15 Efficiency Series: Used in heavy-duty trucks, truck equipment manufacturers, and
body builders.
• QSK 60: Used as rail and mining engines.
• QSK95: Used as marine as well as rail and mining engines.
As part of its product strategy to reduce greenhouse gas emissions and reach zero emissions by
2050, Cummins plans to launch a series of engine versions derived from a common base engine
as part of their fuel-agnostic platform. These engine versions will be optimized for different fuel
types such as hydrogen and low-carbon diesel, and will be applied across the company’s B, L,
and X-Series engine portfolios. Each engine version will operate using a single type of fuel but
will share common architectures and have a high degree of parts commonality below the head
gasket. Above the head gasket, each engine version will have different components for different
fuel types. These technologies, also referred to as bridge technologies, are designed to lower the
carbon footprint of the transportation industry while leveraging the benefits of a common
product design and infrastructure.
Source: Cummins Inc.
Generators and Power Systems:

These include home stand-by generators, RV generators, and commercial systems such as
transfer switches, paralleling controls, and switchgear.
Components:
Within this category, Cummins sells turbochargers and air handling equipment, after treatment
products, and parts for electronic, fuel, and filtration systems.
New Power
In the New Power category, on March 8 2023, Cummins grouped all its zero-emissions products
under the brand name “Accelera,” which will include a diverse portfolio of solutions including
battery systems, fuel cells, ePowertrain systems, and electrolyzers.
Battery Systems:
Battery packs, modules, and systems are designed to be rechargeable, renewable, and produce no
emissions at the tailpipe. The company uses a multi-chemistry portfolio in both high and low
voltage battery packs. Its Nickel Manganese Cobalt (NMC) high voltage battery packs charge
from zero to 80 percent in under an hour and have integrated battery system management for
real-time monitoring and management. Its Lithium Iron Phosphate (LFP) battery packs can be
safely charged to 100 percent without causing accelerated battery degradation.
Fuel Cells:
Fuel cell systems generate electricity through a chemical reaction. When hydrogen fuel mixes
with atmospheric oxygen as it passes through a fuel cell, it produces zero-emissions electricity to
power a motor. Water and heat are the only by-product of hydrogen fuel cell power. Fuel cells
are at the heart of a fuel cell power module. They are the individual cells that convert fuel into
electricity without combustion. They are typically contained in a larger system that includes fuel,
water and air management, coolant control, hardware and software.
Accelera’s fuel cell portfolio includes:
• Proton Exchange Membrane Fuel Cells (PEMFCs) for both mobility and stationary
applications
• Solid Oxide Fuel Cells (SOFCs) for stationary power supply
ePowertrain:
Successful powertrain solutions need to integrate easily with the existing fleet’s chassis to keep
maintenance costs low. Accelera’s electric powertrain systems include electric motors, axle
systems, and inverters. They deploy modular flexible architecture that maintains existing
mounting locations for easy integration. The powertrains have two- and three-speed capability
and have optimized brakes and gearing for regenerative braking. Accelera’s e-powertrain
portfolio includes:
• eAxles: 12Xe, 14Xe and 17Xe are designed for different duty cycles and applications.
• Remote Mount electric motors and inverters:
• 2016 and 2022 NextGen electric motors
• Heavy-duty inverters provide accurate traction system performance with optional
integrated drive control, energy management, and voltage protection functions
Electrolyzer:
Electrolyzer devices use electricity to split water (H2O) or other solutions into hydrogen gas (H2)
and oxygen gas (O2) through a process called electrolysis. Electrolyzers are an important
technology for the production of hydrogen, which is a clean and renewable fuel that can be used
for transportation, heating, and power generation. Electrolyzers can also be used for other
applications, such as the production of chlorine gas and other chemicals.
In September 2019, Cummins acquired Hydrogenics, a Canadian company that had been
developing its hydrogen electrolyzer technology, HyLYZER® PEM (Proton Exchange
Membrane), for over two decades. Through Hydrogenics, Cummins also acquired the HySTAT®
alkaline electrolyzer technology.
Exhibit 5
Sales of Class 4 through Class 7 Medium Size Trucks in North America
Figure reproduced with permission from ACT Research Co.

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CUMMINS INC. IN 2023: TOWARD DESTINATION ZERO.

It is important for both our traditional engine-based business and Accelera

The Back Story

Launch of New Power Business Unit

We wanted someone who would think differently as the leader of NPBU;

View from the Core Business

The Evolving Product Portfolio

In our core market of engine-powered medium-duty trucks, we have a very high

There is a business imperative to drive additional innovations within our core

The Big Picture

• Base business revenue in 2030: $33 billion to $35 billion

The second plank involves investing in the zero-emissions technologies of the

Accelera – Strategy Reflections

Another crucial determinant of current and future success is gross margin. We

Looking forward, she observed:

• A large customer of Cummins wanted to deploy battery-driven vehicles to support a

We are continuing to do a lot to demonstrate our commitment to our strategy!

Source: Compiled by authors, using information from Cummins Inc.

Source: Compiled by authors, using information from Cummins Inc.

• F3.8 (Stage V): Used in agriculture, construction and mining.

Generators and Power Systems:

Source: Cummins Inc.

Source: Cummins Inc.

Figure reproduced with permission from ACT Research Co.

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