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The Filtration Business and Other ended a challenging year with
solid growth and profitability. Sales rose by nine percent while
earnings before interest and taxes (EBIT) remained strong, approaching
nearly 11 percent for the year.
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.
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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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