In North America, the Fleetguard filtration business continued to see growth even as the heavy-duty truck market turned down in the second half of 2000. The Nelson exhaust business, which is more sensitive to OEM market cycles, was directly affected by the truck market slowdown and softness in some other key markets caused by a slowing economy.

Growth in international markets had a positive impact on overall sales, supported by new plants in Brazil and Mexico as well as the completion of a Nelson exhaust system joint venture in India. These results were achieved despite the adverse effects of a strong U.S. currency.

Our three subsidiariesÑKuss, Universal Silencer and Separation TechnologiesÑoperate in related markets such as automotive fuel filtration, noise control and air filtration for power generation equipment, and industrial hydraulic filtration. Together, they grew sales and earnings in excess of 25 percent.

In 2000, our Kuss subsidiary achieved high level recognition in the Ohio Quality Excellence Award. The launch of Six Sigma was a key focus area for the Filtration Business Unit in 2000, with annualized savings from current projects likely to reach $4.5 million. In response to a slowing economy, we have implemented several cost reduction initiatives focused on direct and indirect material cost reductions, manufacturing and distribution facility consolidations, and work force reductions.

The synergies from the combination of Nelson, Fleetguard and Cummins have provided us with unique market opportunities for products that contribute to a cleaner environment. For example, we are applying filtration to exhaust systems in aftertreatment solutions that remove soot from diesel exhaust to meet increasingly stringent emissions standards. In addition, our new high efficiency closed crankcase ventilation systems significantly reduce oil aerosol emissions to the atmosphere.

We also lead the industry in innovative technologies that meet end user needs for extended service life and reduced waste. Our new centrifugal filtration system with the patented ConeStaCª inner element offers longer service intervals and an incinerable plastic filter element. Our next generation air intake system Ð Openflowª Ð provides longer air filter life while using less component material.

A leading independent market research company surveyed 2,000 fleets in North America in 2000 for brand preference. Fleetguard ranked highest among industry competitors for air, coolant, fuel and lube filtration.

The Filtration Business is well positioned for increased growth and profitability as well as consistent year-over-year performance. Its balanced approach in filtration, exhaust and related subsidiaries provides customers with an unmatched range of product and service solutions. Our diversification Ð across technologies, products, markets and geographies Ð is a source of strength that points to a bright future.

Rick Mills

Vice President

President, Filtration & Fleetguard, Inc.

Distributors and Holset

Cummins' 16 international distributors allow us to interface with our end user customers worldwide. Total retail sales exceeded plan for the year. Asian and South American outlets in particular achieved superior results. The Holset turbocharger business continued profitable growth. Holset was first to market with heavy-duty variable geometry turbochargers, power turbines and titanium compressors for ultra-high pressure ratio applications. The development of new products was focused on improving engine performance to meet higher environmental emission standards.

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