Cummins Power Generation enjoyed another great year with EBIT almost doubling for the second consecutive year on modest sales growth.

Continued strong growth is expected as the "new economy" of high tech companies, heavily reliant on uninterrupted sources of power, rapidly increases its demand for electrical consumption. The fast growing Internet and telecommunication sectors continue to rely on our unmatched high technology in the form of digital control systems and sophisticated back-up power for immediate, seamless solutions.

The growth in distributed power generation, which is a move to put electrical generating capacity closer to utility customers rather than solely in large, centralized utility plants, also creates new business opportunities, especially in North America.

Our growth is diversified across many fronts with special emphasis on increasing our value-added services.

Cummins is participating in a US Department of Energy project for advanced research on ten kilowatt fuel cells, another emerging technology. This segment of the fuel cell market complements Cummins' small genset business.

In addition to providing traditional prime power to developing countries, the demand has increased for Cummins to provide entire power plants which includes all facets of the process from buildingÉto operating and maintenance.

Sales from our PowerRent business, providing temporary rental generator sets to a wide range of customers, more than tripled in 2000 and product is available across all of North America.

www.funroads.com was launched to offer our recreational vehicle (RV) customers, with whom we enjoy an 80 percent market share, a variety of information and services from campgrounds to cookbooks.

Newage, our United Kingdom-based alternator subsidiary, enjoyed another impressive performance with strong profits and improved market share. Newage's successful joint venture in China has expanded to serve as a low cost, regional export base for Asia.

Major process changes were another important contributor to Power Generation's improved performance. In 2000, we capped a three year effort to change how we deal with suppliers which resulted in lower costs and improved quality. We also initiated a new, three year Six Sigma quality effort and the first year's results were even better than we expected.

The Cummins Power Generation business has emerged from our major restructuring as an agile and profitable business, well positioned, and taking advantage of the rapidly growing global demand for cost effective, reliable power.

Jack K. Edwards

Executive Vice President

President, Power Generation

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