Strategies for Business Growth in China: The Cummins Experience

Steven M. ChapmanGroup VP – Emerging Markets and Businesses

Cummins Inc.June 2006

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Cummins Inc.

• Global power leader headquartered in Indiana

• Four Segments, Seven Complementary Businesses:– Engines (Diesel and Natural Gas)– Power Generation– Components: Filtration, Emissions Solutions, Fuel

Systems, and Turbo Technologies– Distribution

• 2005 Sales of US$9.9B, 50% outside US

• NYSE: CMI

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Strategies for Business Growth in China: The Cummins Experience

1989-2000 Actual/Plan Revenue (1997 Forecast of 25% Compound Annual Growth)

50

100

150

200

250

300

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Net Revenue

$ M

Year With JV RevenueWith Retail GMCummins Net Revenue

CAGR 25%

2000

350

400

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Wuxi

ShanghaiXiangfan

Chongqing

Chongqing Cummins Engine Company Ltd.

Dongfeng CumminsEngine Co., Ltd.

Cummins Engine (Beijing) Co., Ltd.

Wuxi Newage Alternators Co.,Ltd.

Wuxi Holset Engineering Co., Ltd.

Shanghai Fleetguard Filter Co., Ltd.

Beijing

EA Tech CenterA Solid Foundation in China

Wuhan

Xi’an

Xi’an CumminsEngine Co., Ltd.

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Strategies for Business Growth in China: The Cummins Experience

Mine trucks 85%

Track equipment 73%

Excavators 33%

Commercial trucks 20%

Buses 17%

Alternators 33%

Generator Sets 26%

Turbochargers 32%

Filters 30%

Source: Company estimates

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Strategies for Business Growth in China: The Cummins Experience

• Develop and follow a clear strategy.• Play the cards you are dealt.• Form strong partnerships and alliances.• Generate multiple sources of value – for both partners.• Emphasize fairness, trust, and mutual respect.• Make smart investments in local manufacturing, R&D and

customer support.• Develop local managers and locally-capable expatriates, and

put them in leadership positions based on merit.• Stay constantly attentive to negotiating leverage, and remain

patient but relentless.