Cummins Inc.

Company Overview

Business Model: Cummins Inc. is a global power leader that designs, manufactures, sells, and services a broad portfolio of power solutions. Its offerings include advanced diesel, electric, and hybrid powertrains; integrated power generation systems; critical components such as aftertreatment, turbochargers, fuel systems, controls, transmissions, axles, and brakes; and zero emissions technologies like battery and electric powertrain systems. The company serves original equipment manufacturers (OEMs), distributors, dealers, and other customers worldwide through an extensive service network across approximately 190 countries and territories. Cummins Inc. is committed to supporting customers through the energy transition with its Destination Zero strategy.

Market Position: Cummins Inc. maintains a global leadership position in power solutions, leveraging deep technical expertise and an extensive service network. The company competes on the basis of performance, price, total cost of ownership, fuel economy, emissions compliance, speed of delivery, quality, and customer support. PACCAR Inc. is the largest customer, accounting for 13% of consolidated net sales in 2025. Collectively, sales to PACCAR Inc., Traton Group, Daimler Trucks AG, and Stellantis N.V. represented 31% of consolidated net sales in 2025. The company faces competition from independent engine manufacturers, truck OEMs producing their own engines, and specialized component and power generation system manufacturers globally.

Recent Strategic Developments:

• Divestiture of Atmus Filtration Technologies Inc.: On March 18, 2024, Cummins Inc. completed the divestiture of its remaining 80.5% ownership of Atmus Filtration Technologies Inc. through a tax-free split-off. This resulted in a reduction of 5.6 million shares of Cummins Inc. common stock outstanding and a gain of approximately $1.3 billion.
• Accelera Segment Restructuring: In 2025, due to rapid deterioration in electrolyzer and overall hydrogen markets, along with uncertainty in alternative power markets from reduced government incentives, Cummins Inc. fully impaired all goodwill for its electrolyzer business and wrote off certain inventory, totaling $240 million. A further strategic review in Q4 2025 led to the decision to stop new commercial activity in the electrolyzer space, while fulfilling existing commitments. This resulted in additional charges of $218 million in Q4 2025, bringing total Accelera actions charges to $458 million for the year. In Q4 2024, Accelera underwent a strategic reorganization, resulting in $312 million in charges related to inventory write-downs, intangible and fixed asset impairments, and joint venture impairments.
• Amplify Cell Technologies LLC Joint Venture: Formed in May 2024, this joint venture with Accelera, Daimler Truck and US Holding LLC, PACCAR Inc., and EVE Energy will manufacture battery cells for electric commercial vehicles and industrial applications. Cummins Inc. has contributed $412 million as of December 31, 2025, with a maximum remaining required contribution of $418 million. Production is expected to begin in 2028.
• Settlement Agreements: In April 2024, agreements with the U.S. Environmental Protection Agency (EPA), California Air Resources Board (CARB), U.S. Department of Justice (DOJ), and the California Attorney General’s Office became final, resolving regulatory civil claims regarding emissions certification and compliance for certain pick-up truck engines. Cummins Inc. made $1.9 billion in payments in Q2 2024 related to these agreements.

Geographic Footprint: Cummins Inc. operates globally, with sales to customers in approximately 190 countries and territories. In 2025, 60% of total net sales were generated in the United States and Canada, with 40% from international markets. Key international markets include China, India, Europe, Asia Pacific, Latin America, and Africa and Middle East. The company maintains manufacturing facilities in the U.S. (Indiana, New York, North Carolina, Minnesota, New Mexico, Wisconsin), Brazil, India, Mexico, U.K., Belgium, Canada, China, Germany, and Spain.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 25.3% (2025) vs. 24.7% (2024)
• Operating Margin: 12.0% (2025) vs. 11.0% (2024)
• Net Margin: 8.4% (2025) vs. 11.6% (2024)

Investment in Growth:

• R&D Expenditure: $1.4 billion (4.1% of revenue) in 2025, compared to $1.5 billion (4.3% of revenue) in 2024.
• Capital Expenditures: $1.2 billion in 2025, compared to $1.2 billion in 2024.
• Strategic Investments:
  • Contribution of $412 million to Amplify Cell Technologies LLC joint venture as of December 31, 2025.
  • Accelera actions in 2025 resulted in $458 million in charges, primarily non-cash impairments and write-downs, reflecting a strategic shift in the electrolyzer business.

Business Segment Analysis

Engine Segment

Financial Performance:

• Revenue: $10.9 billion (-7.0% YoY)
• Operating Margin (EBITDA % of sales): 12.7% (2025) vs. 14.1% (2024)
• Key Growth Drivers: Lower demand in North American heavy-duty and medium-duty truck markets, increased product coverage costs, and higher material costs, partially offset by favorable pricing, particularly from updated engine products in light-duty automotive markets. Off-highway sales increased due to higher international construction demand, especially in China.

Product Portfolio:

• Manufactures and markets a broad range of diesel, natural gas, and gasoline-powered engines (2.8 to 15 liters, 48 to 715 horsepower).
• Offers new and remanufactured parts and engines.
• Serves heavy-duty truck, medium-duty truck and bus, light-duty automotive (pick-up and light commercial vehicle), and off-highway (industrial engines for construction, agriculture, mining, marine, rail, oil and gas, defense, and power generation) markets.

Market Dynamics:

• Principal customers include PACCAR Inc., Traton Group, Daimler Trucks AG, Stellantis N.V., Anhui Jianghuai Automobile Group Co., Ltd., Volkswagen Caminhões e Ônibus, China National Heavy Duty Truck Group, Hyundai Heavy Industries, Komatsu Ltd., J.C. Bamford Excavators Ltd., Zoomlion Heavy Industry Science & Technology Co., Ltd, Xuzhou Construction Machinery Group, Guangxi LiuGong Machinery Co., Ltd, JLG Industries, Inc., and SANY Heavy Industry Co., Ltd.
• Competitors include independent engine manufacturers (e.g., Weichai Power Co., Ltd., Yuchai, Deutz AG) and truck OEMs producing their own engines (e.g., Daimler, PACCAR Inc., Traton Group, Volvo Powertrain, Ford Motor Company, China First Auto Works, Dongfeng Motor Corporation, CNH Industrial, Isuzu).

Components Segment

Financial Performance:

• Revenue: $10.1 billion (-13.0% YoY)
• Operating Margin (EBITDA % of sales): 13.8% (2025) vs. 13.6% (2024)
• Key Growth Drivers: Decreased due to lower volumes, particularly in North American heavy-duty and medium-duty truck markets, and the divestiture of Atmus Filtration Technologies Inc. in Q1 2024. Partially offset by decreased compensation expenses, lower product coverage costs, and reduced material costs.

Product Portfolio:

• Designs, manufactures, and supplies drivetrain and braking systems (axles, drivelines, brakes, suspension systems), aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions, and electronics.
• Products are designed to meet stringent emission and fuel economy standards.

Market Dynamics:

• Customers include the Engine, Distribution, Power Systems, and Accelera segments, joint ventures (e.g., Tata Cummins Ltd., Dongfeng Cummins Engine Co., Ltd., Beijing Foton Cummins Engine Co., Ltd.), truck manufacturers, and other OEMs (e.g., PACCAR Inc., Daimler Trucks AG, AB Volvo, Traton Group, Stellantis N.V.).
• Competitors include manufacturers of aftertreatment systems, turbochargers, fuel systems, drivetrain systems, and transmissions (e.g., Robert Bosch GmbH, Garrett Motion, Inc., Borg-Warner Inc., Tenneco Inc., Eberspacher Holding GmbH & Co. KG, Allison Transmission, Knorr-Bremse AG, ZF Friedrichshafen AG).

Sub-segment Breakdown:

• Drivetrain and braking systems: $4.1 billion revenue (-15.4% YoY), primarily due to lower demand in North America and changes in the business model in India.
• Emission solutions: $3.5 billion revenue (-4.0% YoY).
• Components and software: $2.3 billion revenue (-5.0% YoY).
• Automated transmissions: $0.4 billion revenue (-28.1% YoY).
• Atmus: $0 revenue (-100% YoY) due to divestiture in Q1 2024.

Distribution Segment

Financial Performance:

• Revenue: $12.4 billion (+9.0% YoY)
• Operating Margin (EBITDA % of sales): 14.6% (2025) vs. 12.1% (2024)
• Key Growth Drivers: Primarily driven by increased power generation volumes in North America, especially in data center and commercial markets. Also benefited from improved mix, favorable pricing, decreased compensation expenses, lower material costs, and improved operational leverage.

Product Portfolio:

• Primary sales, service, and support channel for a wide range of products and services.
• Includes power generation systems, high-horsepower engines, heavy-duty and medium-duty engines, application engineering services, custom-designed assemblies, retail and wholesale aftermarket parts, and in-shop and field-based repair services.
• Provides selected sales and aftermarket support for the Accelera business.

Market Dynamics:

• Serves customers and certified dealers through a worldwide network of approximately 640 wholly-owned, joint venture, and independent distribution locations and more than 13,000 Cummins Inc. certified dealer locations.
• Organized into seven geographic regions: North America, Europe, Asia Pacific, China, India, Latin America, and Africa and Middle East.
• Competes with distributors or dealers offering similar products, often affiliated with competitors of other Cummins Inc. segments.

Geographic Revenue Distribution:

• North America: $8.1 billion (+14.1% YoY)
• Europe: $1.2 billion (+0.2% YoY)
• Asia Pacific: $1.2 billion (-7.5% YoY)
• China: $0.5 billion (+7.5% YoY)
• India: $0.4 billion (+15.1% YoY)
• Latin America: $0.3 billion (+9.0% YoY)
• Africa and Middle East: $0.3 billion (0.0% YoY)

Power Systems Segment

Financial Performance:

• Revenue: $7.5 billion (+16.0% YoY)
• Operating Margin (EBITDA % of sales): 22.7% (2025) vs. 18.4% (2024)
• Key Growth Drivers: Primarily due to higher power generation sales, especially from improved demand in North America and China. Also benefited from favorable pricing and higher volumes, partially offset by net tariff costs.

Product Portfolio:

• Global OEM offering standby and prime power generators (2 kilowatts to 3.5 megawatts), controls, paralleling systems, and transfer switches.
• Provides turnkey solutions for distributed generation and energy management using diesel, natural gas, battery energy storage systems, and alternative sustainable fuels.
• Designs, manufactures, sells, and supports diesel and natural gas high-speed, high-horsepower engines (up to 4,400 horsepower) for mining, oil and gas, marine, rail, and defense.
• Designs, manufactures, sells, and supports A/C generator/alternator products (Stamford and AVK brands, 7.5 kVA to 11,200 kVA).

Market Dynamics:

• Highly diversified customer base across data center, consumer, commercial, industrial, health care, prime rental fleet, and defense applications.
• Largest geographic markets outside North America include China, India, Europe, Asia Pacific, Latin America, the Middle East, and Africa.
• Competitors include Caterpillar, Inc., MTU (Rolls Royce Power Systems Group), Kohler/SDMO (Kohler Group), INNIO, Generac, Mitsubishi Heavy Industries, and numerous regional generator set assemblers. Alternator business competes with Leroy Somer, Marathon Electric, and Meccalte.

Accelera Segment

Financial Performance:

• Revenue: $0.5 billion (+11.0% YoY)
• Operating Margin (EBITDA % of sales): -194.8% (2025) vs. -184.5% (2024)
• Key Growth Drivers: Improved sales of electrified powertrains. However, the segment incurred significant charges totaling $458 million in 2025 (vs. $312 million in 2024) due to goodwill impairment, inventory write-downs, intangible and fixed asset impairments, lease impairments, contract terminations, and severance, primarily related to the electrolyzer business.

Product Portfolio:

• Designs, manufactures, sells, and supports electrified power systems with innovative components and subsystems, including battery and electric powertrain technologies.
• Currently in early stages of commercializing these technologies.

Market Dynamics:

• Anticipates a highly diversified customer base across multiple end markets adopting electric solutions.
• Competitors include battery companies, powertrain component manufacturers, and vertically integrated OEMs (e.g., Daimler, PACCAR Inc., Traton Group, BYD Company Limited, Dana Incorporated, BorgWarner Inc.).
• The electrolyzer market has experienced rapid deterioration and significant uncertainty due to reductions in government incentives, leading to a strategic decision to stop new commercial activity in this area.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: No common stock repurchases were made in 2025, 2024, or 2023.
• Dividend Payments: $1.1 billion in 2025, $1.0 billion in 2024, and $0.9 billion in 2023.
• Dividend Increase: In July 2025, the Board authorized a 10% increase in the quarterly dividend from $1.82 per share to $2.00 per share.
• Future Capital Return Commitments: $2.2 billion remains available under authorized share repurchase plans as of December 31, 2025.

Balance Sheet Position:

• Cash and Equivalents: $2.8 billion as of December 31, 2025.
• Total Debt: $7.6 billion as of December 31, 2025.
• Net Cash Position: -$3.9 billion (Net Debt) as of December 31, 2025 (Cash and marketable securities of $3.6 billion minus Total Debt of $7.6 billion).
• Credit Rating: Standard & Poor’s Rating Services: A (Senior Debt), A1 (Debt Rating), Stable (Outlook). Moody’s Investors Service, Inc.: A2 (Senior Debt), P1 (Debt Rating), Stable (Outlook).
• Debt Maturity Profile: Required annual long-term debt principal payments range from $94 million to $863 million over the next five years. In May 2025, Cummins Inc. issued $2.0 billion in senior unsecured notes due in 2028, 2031, and 2035. In September 2025, $500 million of 0.75% senior notes due in 2025 were repaid using cash on hand.

Cash Flow Generation:

• Operating Cash Flow: $3.6 billion in 2025, a significant increase from $1.5 billion in 2024, primarily due to the absence of $1.9 billion in payments related to the Settlement Agreements made in 2024.
• Free Cash Flow: Approximately $2.4 billion in 2025 (Operating Cash Flow of $3.6 billion minus Capital Expenditures of $1.2 billion).
• Cash Conversion Metrics: Days' sales in receivables was 60 days in 2025 (vs. 58 in 2024). Inventory turnover was 4.2 in 2025 (vs. 4.4 in 2024). Days' payable outstanding was 58 days in 2025 (vs. 60 in 2024).

Operational Excellence

Production & Service Model: Cummins Inc. manufactures and markets a diverse portfolio of power solutions, including engines, components, power generation systems, and electrified powertrains. The company's operational philosophy emphasizes delivering dependable, cutting-edge solutions tailored to customer needs, supported by deep technical expertise and an extensive global service network.

Supply Chain Architecture:

• Cummins Inc. employs proactive and reactive methodologies to understand and manage supply base risks, guided by a Category Strategy Framework.
• Strategies include broadening dual and multi-sourcing where applicable, selecting and managing suppliers to comply with the Supplier Code of Conduct, and assuring compliance with prohibited and restricted materials policy.
• Key suppliers are managed through long-term supply agreements to secure capacity, delivery, quality, and cost requirements.
• The company designs and/or manufactures strategic components internally.

Key Suppliers & Partners:

• Manufacturing Partners: Joint ventures such as Chongqing Cummins Engine Company, Ltd., Dongfeng Cummins Engine Company, Ltd., Beijing Foton Cummins Engine Co., Ltd., and Tata Cummins, Ltd.
• Technology Partners: Eaton Cummins Automated Transmission Technologies (a consolidated 50/50 joint venture with Eaton Corporation plc.) for automated transmissions. Amplify Cell Technologies LLC (joint venture with Accelera, Daimler Truck and US Holding LLC, PACCAR Inc., EVE Energy) for battery cell manufacturing.

Facility Network:

• Manufacturing: Principal facilities in Columbus, Indiana; Lakewood, New York; Whitakers, North Carolina; Sao Paulo, Brazil; Phaltan, India; San Luis Potosi, Mexico; Darlington, U.K.; Fletcher, North Carolina; Laurinburg, North Carolina; Charleston, South Carolina; York, South Carolina; Mineral Point, Wisconsin; Ciudad Juarez, Mexico; Monterrey, Mexico; Roermond, Netherlands; Lindesberg, Sweden; Huddersfield, U.K.; Elkhart, Indiana; Seymour, Indiana; Fridley, Minnesota; Clovis, New Mexico; Kenosha, Wisconsin; Wuhan, China; Wuxi, China; Ahmednagar, India; Pune, India; Ranjangaon, India; Craiova, Romania; Daventry, U.K.; Oevel, Belgium; Mississauga, Canada; Tianjin, China; Herten, Germany; Guadalajara, Spain.
• Research & Development: Operates numerous research and development facilities globally, with a focus on product improvements, extensions, innovations, and cost reductions, particularly for future emission standards, fuel economy, and electrified power systems.
• Distribution: Principal facilities in Avondale, Arizona; Henderson, Colorado; Florence, Kentucky; Kearny, New Jersey; West Valley City, Utah; Wellingborough, U.K.; Mackay, Australia; Perth, Australia; Fort McMurray, Canada; Sparwood, Canada; Beijing, China; Pune, India; Johannesburg, South Africa.

Operational Metrics:

• Capacity utilization and efficiency measures are managed by adjusting manufacturing workforce, capital expenditures, and supplier purchases in response to cyclical market demand.

Market Access & Customer Relationships

Go-to-Market Strategy:

• Cummins Inc. utilizes a multi-channel approach to reach its diverse customer base.
• Direct Sales: Engages directly with OEMs and large enterprise customers.
• Channel Partners: Leverages a global network of approximately 640 wholly-owned, joint venture, and independent distributor locations, and over 13,000 Cummins Inc. certified dealer locations.
• Digital Platforms: Implements online sales channels and e-commerce initiatives where applicable.

Customer Portfolio:

• Enterprise Customers: Has long-standing business relationships with many leading manufacturers.
• Tier 1 Clients: PACCAR Inc. is the largest customer, accounting for 13% of consolidated net sales in 2025.
• Strategic Partnerships: Key supply agreements with PACCAR Inc., Traton Group, Daimler Trucks AG, and Stellantis N.V. for heavy-duty and medium-duty engines, aftertreatment, driveline, and brake systems. Collectively, these four customers accounted for 31% of consolidated net sales in 2025.
• Customer Concentration: PACCAR Inc. is the only customer accounting for more than 10% of net sales in 2025. Excluding PACCAR Inc., no single customer accounted for more than 7% of consolidated net sales in 2025.

Geographic Revenue Distribution:

• United States and Canada: 60% of total revenue in 2025.
• International: 40% of total revenue in 2025.
  • China: $3.3 billion in 2025.
  • India: $1.7 billion in 2025.
  • Other international: $9.7 billion in 2025.
• Growth Markets: Actively invests in and serves emerging markets such as China, Brazil, India, and Mexico.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The markets Cummins Inc. operates in are highly competitive and cyclical, with demand fluctuating in response to overall economic conditions, OEM inventory levels, production schedules, and supply chain challenges. The industry is undergoing a significant energy transition away from fossil fuels, driving demand for lower-emissions technologies and new power solutions. Regulatory requirements for emissions and fuel economy are continuously becoming more stringent and fragmented globally.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Engine Segment: Weichai Power Co., Ltd., Yuchai, Deutz AG. Truck OEMs that produce their own engines include Daimler, PACCAR Inc., Traton Group, Volvo Powertrain, Ford Motor Company, China First Auto Works, Dongfeng Motor Corporation, CNH Industrial, and Isuzu.
• Components Segment: Robert Bosch GmbH, Garrett Motion, Inc., Borg-Warner Inc., Tenneco Inc., Eberspacher Holding GmbH & Co. KG, Allison Transmission, Knorr-Bremse AG, and ZF Friedrichshafen AG.
• Power Systems Segment: Caterpillar, Inc., MTU (Rolls Royce Power Systems Group), Kohler/SDMO (Kohler Group), INNIO, Generac, and Mitsubishi Heavy Industries. Alternator business competes with Leroy Somer, Marathon Electric, and Meccalte.
• Accelera Segment: Battery companies, powertrain component manufacturers, and vertically integrated OEMs such as Daimler, PACCAR Inc., Traton Group, BYD Company Limited, Dana Incorporated, and BorgWarner Inc.

Emerging Competitive Threats: New technologies (e.g., hydrogen, electrification) and new entrants in these expanding technology areas pose competitive threats. Competitors may develop segment-leading electrified powertrains or other advanced technologies more quickly or successfully.

Competitive Response Strategy: Cummins Inc. is investing significantly in new products and technologies, including electrified power systems, to meet evolving regulatory requirements and customer demands for lower emissions. The Destination Zero strategy aims to navigate the energy transition while growing the business. The company focuses on product improvements, extensions, innovations, and cost reductions, supported by R&D and strategic partnerships like the Amplify Cell Technologies LLC joint venture.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Demand Volatility: Markets are cyclical, and demand fluctuates with overall economic conditions, OEM inventory levels, production schedules, and supply chain challenges. Economic downturns can reduce sales and lead to price reductions.
• Technology Disruption: The development of new technologies (e.g., electrification, hydrogen) may reduce demand for current diesel and natural gas products. Failure to successfully develop new technologies for the energy transition could impact future market acceptance and investment returns.
• Customer Concentration: PACCAR Inc. is the largest customer (13% of 2025 net sales). A significant reduction in outsourcing by truck manufacturers or financial distress of large OEM customers could materially impact results.
• Climate Change Legislation: Evolving environmental and climate change legislation and regulatory initiatives (e.g., carbon content, GHG emissions) may increase costs, impact the competitive landscape, and negatively affect demand for products. Future bans or limitations on diesel-powered products could have a material adverse impact over the long term.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Vulnerability to raw material, transportation, and labor price fluctuations and supply shortages. Single-sourcing for critical parts and raw materials creates disruption risk.
• Geographic Concentration: Operations in numerous countries expose the company to political, economic, and social uncertainties, including international conflicts, trade protection measures, and public health crises.
• Capacity Constraints: Challenges in accurately aligning manufacturing capacity with fluctuating demand, leading to under-utilized capacity or inability to meet customer demand.

Financial & Regulatory Risks

Market & Financial Risks:

• Interest Rate Fluctuations: Rising interest rates could dampen economic activity, reduce customer demand, increase borrowing costs, and potentially lead to non-cash impairment charges on goodwill.
• Foreign Exchange: Exposure to foreign currency exchange rate risks due to global operations, impacting revenues, costs, and financial statements.
• Pension Plan Performance: Significant declines in financial and stock market conditions could diminish pension plan asset performance, increasing pension costs and required contributions.

Regulatory & Compliance Risks:

• Emission Standards: Products are subject to extensive and evolving statutory and regulatory requirements governing emissions and noise. Increased scrutiny and unpredictability in enforcement can lead to substantial compliance costs and potential adverse consequences from non-compliance (e.g., Settlement Agreements, potential stipulated penalties).
• Trade Laws & Tariffs: Changes in international, national, and regional trade laws, tariffs, embargoes, sanctions, and export controls (especially with China) could adversely impact production costs, customer demand, and competitive position.
• Taxation: Unanticipated changes in effective tax rates, adoption of new tax legislation (e.g., One Big Beautiful Bill Act), or exposure to additional income tax liabilities could adversely affect profitability.
• Environmental Credits: Potential non-cash expense of up to $127 million if regulatory changes (e.g., by NHTSA and EPA) eliminate the value of existing emission compliance credits.

Geopolitical & External Risks

Geopolitical Exposure:

• Global Operations: Inherent risks from operating in numerous countries, including political and economic instability, international conflicts, trade protection measures, and difficulty enforcing agreements in foreign legal systems.
• Trade Relations: Significant uncertainty in U.S.-China relations, including trade policies, treaties, government regulations, and tariffs, could impact competitive position, results, and cash flows.
• Sanctions & Export Controls: Embargoes, sanctions, and export controls imposed by governments could limit sales, affect ability to collect receivables, and impact reputation.

Innovation & Technology Leadership

Research & Development Focus: Cummins Inc.'s research, development, and engineering (RD&E) programs are focused on continuous product improvements, product extensions, innovations, and cost reductions for customers. A key strategic focus is the development of new products and technologies to meet future global emission standards and improve fuel economy for diesel and natural gas-powered engines and related components. Significant investment is also directed towards developing electrified power systems with innovative components and systems, including battery and electric power technologies, as part of the Destination Zero strategy.

Core Technology Areas:

• Advanced Powertrains: Diesel, natural gas, electric, and hybrid powertrains.
• Integrated Power Generation Systems: Standby and prime power generators, controls, paralleling systems, and transfer switches.
• Critical Components: Aftertreatment, turbochargers, fuel systems, controls, transmissions, axles, and brakes.
• Zero Emissions Technologies: Battery and electric powertrain systems.

Innovation Pipeline: The Accelera segment is in the early stages of commercializing electrified power systems and related components. The Amplify Cell Technologies LLC joint venture, formed in May 2024, is expected to begin battery cell production for electric commercial vehicles and industrial applications in 2028.

Intellectual Property Portfolio: Cummins Inc. owns or controls a significant number of patents and trademarks, which are considered beneficial to its operations. The company's leading brand house trademarks are particularly significant to its business.

Technology Partnerships:

• Strategic Alliances: Eaton Cummins Automated Transmission Technologies (a 50/50 joint venture with Eaton Corporation plc.) for automated transmissions.
• Research Collaborations: Amplify Cell Technologies LLC, a joint venture with Accelera, Daimler Truck and US Holding LLC, PACCAR Inc., and EVE Energy, to manufacture battery cells.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Board of Directors oversees human capital development, with a committed Talent Management Compensation Committee. The company focuses on creating a leadership culture that encourages employee development and connection to the company's mission and strategy.

Board Composition: The Board of Directors and its committees are engaged in the oversight of significant enterprise risks, including climate-related and cybersecurity risks. The Safety, Environment and Technology (SET) committee provides guidance on environmental sustainability, while the Audit Committee oversees enterprise cybersecurity.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 67,400 persons worldwide as of December 31, 2025.
• Geographic Distribution: Employees are distributed globally.
• Skill Mix: Not explicitly detailed, but the company emphasizes developing authentic and capable leaders and building effective organizations.
• Union Representation: Approximately 20,000 employees worldwide were represented by various unions under collective bargaining agreements expiring between 2026 and 2030.

Talent Management:

• Acquisition & Retention: Focuses on providing progressive, market-competitive pay, benefits, and rewards. Conducts market analyses and annual compensation studies to ensure competitive and equitable wages.
• Retention Metrics: Not explicitly disclosed, but the company aims to cultivate an environment where employees can thrive and reach their full potential.
• Employee Value Proposition: Offers base and variable pay, healthcare programs, global mental health support, paid time off, flexible work arrangements (most employees spend at least 60% of their time in facilities or with stakeholders), retirement saving plans, and employee stock purchase plans.

Diversity & Development:

• Diversity Metrics: Not explicitly disclosed, but a long-standing commitment to diversity and inclusion is core to the company's fabric, aiming for a workforce mirroring the communities served.
• Development Programs: Designed leadership and talent development programs for employees from manufacturing to executives, promoting a learning culture with tools and resources for career planning and development.
• Culture & Engagement: Fosters an accountable culture that champions company values of caring, integrity, excellence, teamwork, and diversity and inclusion.

Environmental & Social Impact

Environmental Commitments:

• Climate Strategy: Guided by the "Destination Zero" strategy, which aligns business and sustainability goals. The Board's Safety, Environment and Technology (SET) committee provides oversight.
• Emissions Targets:
  • Reduce absolute GHG emissions from facilities and operations by 50% by 2030 (baseline 2018).
  • Reduce Scope 3 absolute lifetime GHG emissions from newly sold products by 25% by 2030 (baseline 2018).
• Carbon Neutrality: Not explicitly stated, but emissions reduction targets contribute to broader decarbonization efforts.
• Renewable Energy: Not explicitly stated, but clean energy adoption is implied through the Destination Zero strategy.

Supply Chain Sustainability:

• Supplier Engagement: New 2030 goal to reduce upstream Scope 3 GHG emissions by engaging with key suppliers.
• Responsible Sourcing: Suppliers are managed to comply with the Supplier Code of Conduct and prohibited and restricted materials policy.

Social Impact Initiatives:

• Community Investment: Environmental sustainability strategy includes a focus on communities.
• Product Impact: Innovating lower-emissions technologies to help customers decrease emissions now and in the long term through fuel-efficiency projects and technology upgrades.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: While individual product lines may experience modest seasonal variation in production, there is no material effect on the demand for the majority of products on a quarterly basis.
• Economic Sensitivity: Financial performance is largely dependent on varying conditions in the on-highway, off-highway, power generation, and general industrial markets, which tend to fluctuate in response to overall economic conditions.
• Industry Cycles: The markets served are cyclical in nature, leading to periods of significant demand fluctuation. Demand can also be impacted by OEM inventory levels, production schedules, stoppages, and supply chain challenges.

Planning & Forecasting: The company faces the challenge of accurately aligning its capacity and production with demand, which is crucial for operational results and cash flows. Management adjusts manufacturing workforce, capital expenditures, and purchases from suppliers in response to demand fluctuations.

Regulatory Environment & Compliance

Regulatory Framework:

• Industry-Specific Regulations: Products are subject to extensive statutory and regulatory requirements worldwide governing emissions and noise, including standards from the EPA, EU, CARB, and other global agencies. Regulatory agencies are increasing scrutiny and making certification and compliance more stringent.
• International Compliance: Operations are subject to complex commercial and trade regulations globally, including laws regarding trade compliance, anti-corruption (e.g., U.S. Foreign Corrupt Practices Act), and data privacy (e.g., EU General Data Protection Regulation).
• Trade & Export Controls: Changes in international, national, and regional trade laws, tariffs, embargoes, sanctions, and export controls (particularly concerning China) can affect demand, competitive position, and operational costs.

Trade & Export Controls:

• Export Restrictions: Embargoes, sanctions, and export controls imposed by the U.S. and other governments could limit sales and affect business operations, especially with respect to China.
• Sanctions Compliance: Compliance with rapidly changing sanctions and export control laws requires significant resources and data management systems.

Legal Proceedings:

• Material Litigation: In April 2024, Cummins Inc. finalized Settlement Agreements with U.S. regulatory bodies to resolve civil claims regarding emissions certification and compliance for certain pick-up truck engines. This resulted in $1.9 billion in payments in Q2 2024 and a $2.0 billion charge in Q4 2023. The company is in communication with non-U.S. regulators regarding similar matters and faces related shareholder, consumer, and third-party litigation.
• Environmental Remediation: Identified as a potentially responsible party at fewer than 20 manufacturing and waste disposal sites under U.S. federal and state environmental laws, with aggregate future remediation costs not expected to be material.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 25.4% in 2025, compared to 17.0% in 2024. The increase was primarily due to the absence of the non-taxable gain on the Atmus Filtration Technologies Inc. split-off, the impact of the One Big Beautiful Bill Act, and additional tax expense from Accelera actions.
• Geographic Tax Planning: Subject to income taxes in the U.S. and numerous international jurisdictions. Certain non-U.S. earnings are considered indefinitely reinvested outside the U.S.
• Tax Reform Impact: The One Big Beautiful Bill Act, signed into law in July 2025, increased tax expense by $39 million in 2025 (primarily due to reduced foreign income deduction and changes to R&D tax credit), but is expected to result in lower U.S. tax-related cash payments for several fiscal years.
• Unrecognized Tax Benefits: $272 million as of December 31, 2025, with $263 million related to tax positions that, if recognized, would favorably impact the effective tax rate.

Insurance & Risk Transfer

Risk Management Framework: Cummins Inc. monitors and manages financial risks from volatility in foreign exchange rates, interest rates, and commodity prices through physical forward contracts and financial derivative instruments. Derivatives are used strictly for hedging purposes.

• Insurance Coverage: Maintains various forms of commercial, property and casualty, product liability, and other insurance. Cyber insurance is in place to mitigate the impact of cybersecurity incidents.
• Risk Transfer Mechanisms: Utilizes foreign currency forward contracts, commodity swap contracts, and interest rate swaps and locks for hedging. Also enters into purchasing arrangements to fix prices of certain commodities (e.g., platinum, palladium, iridium).
• Guarantees: Enters into guarantee arrangements for non-U.S. distributor financings, residual value guarantees on operating leases, and other miscellaneous guarantees, with a maximum potential loss of $46 million at December 31, 2025. Performance bonds and other performance-related guarantees totaled $221 million.