Welcome back to the Deep Dive. This is where
we dig into the technical reports, the market
analysis, all that dunce corporate history. And
we we really distill it down into the knowledge
you need. And today. We are talking about a company
that is just synonymous with heavy -duty power.
Oh, yeah. We are strapping ourselves into the
cab of Cummins Inc., a company you hear and,
well, you immediately think of Big Rigs, of that
iconic diesel rumble. Right, but that iconic
sound, that's both their legacy and the source
of, you know, this immense pressure they're under
today. Yeah, the sources we went through, they
really paint a picture of a fascinating paradox,
don't they? They do. Cummins absolutely mastered
the internal combustion engine. They turned it
into a $34 billion global powerhouse. But that
same dominance came with a just a massive financial
cost. I was looking at the numbers. It's nearly
$2 billion in U .S. regulatory fines in just
the last 25 years. $2 billion. And that's the
story right there. OK, so let's unpack that.
Our mission today isn't just a history lesson.
It's really an exploration of corporate survival
and, frankly, a radical pivot. We need to understand
how a company that was founded way back in 1919
in Columbus, Indiana. Right. On an engine technology
that was already two decades old at that point.
Exactly. How did they manage to dominate transportation
and power generation? But even more importantly,
why is this champion of diesel now in this aggressive
high stakes race to master zero? emissions power
with their new unit, Accelera. That pivot you
mentioned, that's the whole story for modern
Cummins. They're not just tweaking things to
follow market trends. No. They are trying to
pull off an industrial scale transformation.
all while living under the shadow of these huge
regulatory penalties. And the scale is just as
hard to get your head around. It started with
two people. Just two. The mechanic, Klessie Lyle
Cummins, and his financial backer, the banker,
William Glanton Irwin. And today, they're operating
in what, nearly 190 countries and territories?
A massive player. We're talking U .S. $34 .1
billion in revenue for 2024 with almost 70 ,000
employees globally. And the product line is?
It's everything now. It's the whole energy spectrum.
You've got your traditional diesel and natural
gas engines, sure, but also filtration, advanced
turbocharger. And then the future -facing stuff,
hydrogen fuel cells, industrial batteries, all
those complex components. It's a full -spectrum
power company. Okay, so this is the deep dive,
the race against their own legacy. Let's start
at the beginning. Let's do it. Part one, the
persistence of diesel, their early history. and
how they built that dominance. Well, the foundational
partnership back in 1919, it's a classic story,
really. You have Klessie Cummins, the absolute
mechanical genius. The tinkerer. Completely consumed
with making the diesel engine reliable, economical,
and small enough for transportation. And then
you have the money. William Glanton Irwin, the
banker who had the patience and, crucially, the
deep pockets to fund what turned out to be a
really long R &D cycle. Erwin's role is key.
I mean, like you said, Cummins wasn't inventing
diesel. Rudolf Diesel's patent was 20 years old.
They were just trying to tame it. Take this brilliant
but temperamental, expensive technology and turn
it into a real product that could compete with
the gasoline engines of the time. And it takes
relentless funding. And, you know, because the
tech was known but had basically failed to find
a market, their initial success was anything
but guaranteed. Right. The sources show a nearly
15 -year struggle. Klessy understood that skepticism
was his biggest enemy. People trusted simple
gas engines. Diesel was complicated, unproven.
So how do you convince the market? This is where
he shifted from being an engineer to something
of a showman, right? Absolutely. Klessy became
a master of what the sources call well -publicized
endurance trials. These weren't just lab tests.
Oh, no. He deliberately sought out these grueling
high visibility challenges. Imagine it's the
1920s. He's putting a Cummins engine in a race
car at the Indianapolis 500. Multiple times.
Yeah, or driving coast to coast. Just trying
to prove diesel was more fuel efficient, more
reliable than anything else out there. It was
extreme public proof of concept. It's a genius
marketing strategy for a technical product. Make
it exciting. But even those spectacles didn't
lead to huge sales right away. Where was the
real commercial breakthrough? It didn't come
until 1933. And this is the surprising part.
The first confirmed commercially successful product
was the Model H engine. Okay. And its application
wasn't in a big truck on a highway. It was in
small railroad switchers. The little yard engines.
Why there? Because a railroad yard is a brutal
environment for an engine. They're under constant
extreme load. All day long, it's start, stop,
high torque, moving incredible weights at low
speeds. It's the ultimate stress test. Exactly.
The reliability and torque of the Model H proved
it was superior in that one punishing niche.
And once they conquered the railroad yard, the
rest of the market finally accepted that this
Cummins diesel was ready for the heavy -duty
road. That credibility, forged in the middle
of the Great Depression no less, it positioned
them perfectly for what was coming next. The
post -war boom, the 1950s, all that massive infrastructure
spending, the creation of the interstate highway
system, that was their golden age. And the Cummins
N -series engines became the industry standard.
They were in everything, construction equipment,
long -haul trucking. The sources quantify it
perfectly. From 1952 to 1959, just a seven -year
stretch. What was it? Cummins engines were in
more than half of the entire heavy -duty truck
market. More than half? That's not a market position.
That's market control. And they were already
thinking globally. While a lot of American companies
were just focused on the domestic boom, Cummins
opened an assembly plant in Shotts, Scotland.
in the 1960s. That plan eventually closed, but
it showed their intent early on. It did. And
by 2013, they had operations in 197 countries.
So that global mindset was part of their DNA
from the very beginning. Okay, so that's the
foundation. Persistence, smart marketing, and
conquering the post -war road. But to understand
the $34 billion operation today, we have to look
past the engine block. You have to look at the
modern company. Let's move to part two. The five
business pillars of Cummins. This is critical.
Because if you think of Cummins as just an engine
company, you're missing the whole picture. It's
like calling a skyscraper just a foundation.
It's a full -stack power ecosystem. Exactly.
And if you understand these five units, you understand
how they make money and how they manage risk
in this rapidly changing landscape. So pillar
one has to be the core, the engine business itself.
Section 2 .1, the Cummins engine business. This
is the historical heartbeat, the source of that
famous rumble. And it covers pretty much every
application you can imagine. Heavy duty trucks,
buses, RVs, and all those industrial sectors.
Mining, rail, marine, defense, you name it. But
for a lot of our listeners, their most direct
exposure to a Cummins engine is through one very
specific, very legendary partnership. The Dodge
Ram. The Dodge Ram heavy duty pickups. Starting
in 1988, they put the 5 .9 liter i6 engine into
those trucks. And that move just fundamentally
redefined the heavy duty pickup market. It created
this fiercely loyal following of owners who wanted
that durability, that immense torque from a diesel.
It gave Cummins a consumer visibility they've
never had before. And that engine has had incredible
staying power. It evolved into the larger 6 .7
liter version that's been in the Ram since 2000.
It's famous for its longevity. But even that
iconic engine ran into some pretty massive manufacturing
challenges. Right. We talked about complexity
being a risk. And the 53 block controversy is
a perfect example. A class action suit was filed
back in 2008. And this was about the Cummins
ISB 5 .9 liter diesel in Dodge Rams from about
1998 to 2001. That's right. The allegation was
that a specific casting pattern on the engine
block marked with the number 53 was structurally
weak. Prone to cracking. Prone to cracking, which
would create a coolant leak. And if you don't
catch that, it could lead to catastrophic engine
failure. So how did that end? The case was settled
and qualified owners got a $500 settlement for
repairs. But it just shows you how a tiny technical
detail in manufacturing can cascade into this
huge legal and financial problem involving hundreds
of thousands of vehicles. The challenge of high
volume manufacturing. But before we leave the
core engine business, it's worth noting they
didn't just stick to diesel even within internal
combustion. No, they've been proactive. Back
in 2013, they partnered with a company called
Westport Innovations to ship large natural gas
engines to U .S. truck makers. So it wasn't a
new engine design, really, but a new fuel strategy.
Exactly. It coincided with the expansion of the
natural gas distribution network. It shows they're
always thinking about how power generation has
to match the available infrastructure. And their
R &D is global, too. There's a big technical
center in Darlington, England. Yeah, that one's
focused specifically on products for the European,
Middle Eastern, and Asian markets. They don't
just build one engine and push it everywhere.
Right, they have to customize for all the different
emission standards. Which vary wildly. And we
should also just briefly mention the really specialized
stuff here, like the military -specific V903.
A 14 .8 liter V8. Yeah, which powers things like
the Bradley fighting vehicles. It's just a good
reminder that their engine business goes way
deeper than just highway trucks. Okay, so that's
the core. What about pillar two, the components
business? Section 2 .2. If the engine is the
muscular core, the components business is the
brain and the lungs. It provides all the hardware
and software to make sure that core runs efficiently
and compliantly. This is all the support systems?
All of it. There are five key areas. Emission
solutions, filtration under the Fleet Guard brand,
fuel systems, turbo technologies, and electronics.
Let's focus on a couple of those. The tobos first.
That's the Turbo Technologies unit. It operates
under that very famous brand name, Holset. Right.
They specialize in turbochargers, but specifically
for diesel engines above three liters. These
aren't just aftermarket add -ons. They're incredibly
complex, precision devices you need to meet power
and efficiency targets. And the second critical
part, the digital brain. The electronics unit.
This is where the real intelligence is. They
design the engine control units, the ECUs, and
all the sensors. And the ECU manages everything.
Everything. Fuel injection, airflow, and most
importantly, the complex algorithms that govern
emissions control. And as we'll get into later,
that ECU software is both the source of their
modern performance and the source of their biggest
regulatory risk. And Fleet Guard just keeps everything
clean. A vital job. Air, fuel, hydraulic, lube
filtration. In mining or construction, those
engines are in the absolute worst environments.
If you don't keep the fluids and air clean, the
engine just dies. Simple as that. Okay, on to
Pillar 3, Cummins Power Systems. This is their
off -grid power business. Section 2 .3, yeah.
This traces its lineage back to the Cummins Onan
Corporation. It's the segment that provides power
when the road ends or the grid goes down. Backup
power specialists. Right, and their product line
is huge. Everything from small consumer generators
to huge commercial power systems, alternators,
automatic transfer switches. It's interesting
they're also into paralleling systems, which
let multiple generators work together. That's
the move toward high -capacity stationary power.
And speaking of shifts, it's really important
to note that in August 2017, they sold off all
their mobile power generation assets. All of
them? To who? To United Rentals. Why would they
sell off a business that seems so core to their
history? It was a strategic move, a streamlining
effort. By selling the mobile assets, which require
a huge service and rental infrastructure, they
let a specialist like United Rentals handle that,
while Cummins could focus its own resources on
the stationary, high -horsepower industrial systems.
Optimizing for higher -margin complex systems
makes sense. Exactly. Pillar 4. The distribution
business. This sounds administrative, but you
can argue it's the most important part for keeping
customers happy. Section 2 .4. You're right.
If a mining truck breaks down in the middle of
nowhere in Chile or a generator fails at a hospital
in India, this is the unit that saves the day.
It's the Global Service and Parts Network. It's
their global nervous system. They have 17 company
-owned distributors, 10 joint ventures, covering
90 countries with 234 locations. That's a massive
footprint. It has to be. When you're dealing
with mission -critical assets. Defense vehicles,
marine vessels, oil rigs, uptime is everything.
This network ensures that a Cummins part or an
expert technician is never too far away. That's
a huge competitive advantage. OK, that brings
us to the fifth and final pillar, the most forward
looking high stakes division of them all. Accelera.
Session 2 .5, Accelera by Cummins. This is their
explicit answer to the climate and regulatory
challenges of the 21st century. This is their
future. This is the future of Cummins. It was
rebranded from the new power unit in March 2023.
And this isn't some cautious little side project.
This is a comprehensive, dedicated focus on zero
emissions power. They're basically trying to
replicate their success in diesel across three
or four new energy platforms all at once. And
what makes their approach so aggressive? They're
betting on the whole spectrum. Accelera makes
hydrogen fuel cells, which are great for long
-haul trucks where battery weight is a problem.
They also make batteries, e -axles, and traction
systems for EVs. But the crucial piece, the real
foundational commitment, is the electrolyzers.
That's the key. Electrolyzers are the machines
you use to produce clean hydrogen fuel from water.
So they aren't just selling the components for
the vehicles, they're investing in the infrastructure
required to actually generate the fuel for the
new hydrogen economy. It shows they understand
the whole supply chain problem, just like Klessie
Cummins had to solve the diesel reliability problem
100 years ago. And this unit, Accelera, is the
financial counterweight to the massive regulatory
risks we're going to talk about in Part 5. That
sets the stage perfectly. Because even as they're
racing into the future with Accelera, they are
still consolidating their traditional power.
Let's get into that in part three. Specializations,
subsidiaries, and their global footprint. Right.
When you look at their acquisitions, you see
this relentless focus on securing strategic IP
and manufacturing so they control every critical
component of their engines. Let's start with
Holset, the turbocharger brand. Holset Engineering
was originally a British company. Cummins saw
how important it was to control forced induction
technology, so they bought them way back in 1973.
And they kept the brand name. They did. They
renamed the division Cummins Turbo Technologies
in 2006, but they wisely kept the Holset brand
for the turbos themselves. That name recognition
is priceless in the heavy -duty world. And their
manufacturing for Holset is global, just like
the rest of the company. Centralized IP, but
decentralized manufacturing. China, India, Brazil,
the UK. But maybe the most fascinating story
of reacquisition involves the engine brake. The
famous Jake brake. Exactly. Klessie Cummins himself
invented the engine brake in the late 1950s.
But he sold the technology to Jacobs Chuck in
1961. And Jacobs created a whole division to
make it. Yep. Jacobs Vehicle Systems. And then
in 2022, Cummins bought that very same company.
So they bought back their founder's invention.
That's an incredible full circle moment for IP
strategy. It's a huge move. They still use the
Jacobs name for the brake products, but that
division now designs much more advanced tech,
specifically variable valve actuation systems.
Okay, let's quickly define VVA for the listener.
VVA, variable valve actuation. It's critical
for modern engines. It's technology that lets
the engine precisely control when the intake
and exhaust valves open and close. What you need
for. What? For optimizing power, for engine braking,
and most importantly... for enabling the complex
emissions control strategies required to meet
today's strict standards. By owning the VVA tech,
Cummins controls the heart of a modern, compliant
diesel engine. And quickly, the Onan rebranding
shows a desire for a single, unified brand. Yeah,
they bought Onan back in 92. In 2017, they decided
to consolidate their retired names like Cummins
Power Generation. The Onan name was repositioned
just as a product line. the mobile generators
for the RV market, all under the single Cummins
brand. It's about making the promise of Cummins
dependability consistent everywhere. Now, this
huge investment in Accelera and Green Power,
it hasn't gone unnoticed politically. Not at
all. The visit by President Joe Biden to the
Cummins plant in Fridley, Minnesota in April
2023 was a very strong signal. And that visit
was part of his investing in America tour. What
was the focus? It was centered on Cummins announcing
a massive $1 billion initiative to accelerate
clean energy tech production. The friendly facility
was highlighted specifically for producing those
electrolyzers for hydrogen cells. So the government
is seeing Cummins, a traditional diesel giant,
as a key domestic partner in the whole transition
to a hydrogen infrastructure. Exactly. It's proof
that the solar investment isn't some marginal
side project. It's a serious capital intensive
move to secure U .S. manufacturing leadership
in the clean energy space. OK, let's talk about
their global hubs, specifically China and India,
because China is where the sheer volume of their
engine business is. And that has huge strategic
implications. China is fundamental to their current
success and their future engine design. They
have several successful joint ventures, but the
most significant is the Beijing Foton Cummins
engine company. And that Foton joint venture
is responsible for the engine platform that is
now the backbone of their entire global line.
The ISGX -12 engine platform, that's the core
insight here, was developed by that joint venture
in the mid -2010s, and it's a masterpiece of
high -volume engineering. What kind of volume
are we talking? The sources say production in
China has surpassed an astonishing 240 ,000 units
per year. It is now the single highest volume
heavy -duty engine in the entire global Cummings
lineup. 240 ,000. And here's the crucial sentence
from the sources. The ISGX -12 platform is the
foundation for all future Cummins engine platforms.
Let that sink in. It means no matter where a
new Cummins engine is designed, the architecture,
the design lessons, the manufacturing cost efficiencies,
they all come from their Chinese joint venture.
The center of gravity for their highest volume
techs is in China. That's a major strategic reality.
And you contrast that high -volume manufacturing
with their presence in India, which also has
huge scale but focuses much more on R &D and
technical talent. Cummins India is a massive
operation. By 2013, it was already doing $1 .5
billion in revenue with 20 factories. But the
investment in human capital is what really stands
out. The technical center in Pune. Yes. They
established the Cummins Research and Technology
Center in 2003, and that Toon Center, CTCI, now
houses over 2 ,500 engineers. This isn't a back
office, it's a major globally integrated R &D
hub. And as a sign of their long -term commitment
there, there's that detail about the Women's
Engineering College. It's remarkable. The MKSS
Cummins College of Engineering for Women in Pune,
establishing a dedicated women -only engineering
college, shows this. deep institutional investment
in fostering local talent, ensuring they have
an R &D pipeline for decades. It's a very sophisticated
global strategy then. Control the core IP like
Holset and Jacobs, secure the future fuel tech
with Accelera, and leverage the manufacturing
scale of China and the R &D talent of India.
That's the playbook. Okay, let's quickly run
through the engine catalog in part four, not
as a list, but to see how they've strategically
covered every single market segment. From light
duty delivery trucks. all the way to mountain
-moving mining equipment. Let's start with the
IS, or Interact series. This is their on -highway
power. The trucks, buses, RVs. And the strategic
insight here is how deeply integrated this IS
family is across the whole industry. Take the
ISB 6 .7 liter I6, one of the Ram trucks and
school buses. It's such a proven design that
other major manufacturers just buy it and rebrand
it. like who the sources confirm it's sold to
paccar and branded as the px6 or px7 and Tuscania,
where it's called the DC -07. So the heart of
trucks made by their competitors often has a
Cummins design inside. That's the ultimate measure
of market dominance. It really is. And they offer
alternative fuels in this family, too, with the
ISLG and ISXG natural gas engines. Right. So
now if the IS family is the road, the QS or Quantum
Series is everything off -road. Section 4 .2.
Exactly. Whale, marine, construction, mining,
extreme power generation. This is where you see
the immense scale. of their engineering. These
engines are designed to literally move mountains.
They go way beyond the 15 liter limit of highway
trucks. We're talking about the QSD 30 liter
V12, the QSK 78 liter V18, but the true definition
of extreme power is their largest offering, which
is the QSK 95 liter V16. To give you some perspective,
this engine is taller than an average person
and weighs more than several cars. And it's used
in what? Ultra class mining haul trucks that
carry hundreds of tons of rock. It just proves
that Cummins Engineering can deliver power at
the absolute apex of industrial demand. And looking
forward, the evolution of the on -highway IS
family is the X -Series. Correct, the X -12 and
the X -15. These represent the latest optimization
of their heavy -duty architecture, building on
that foundation we identified in China. Cleaner,
more efficient, squeezing every last drop of
performance out of diesel tech. And the final
symbolic piece of the pivot. The concept vehicles.
The Cummins EOS, an all -electric conventional
truck concept. The EOS is crucial because it
shows they can transfer all their knowledge of
integration, cooling, durability from diesel
into the electric world. It's a message to the
market. Exactly. The brand is telegraphing that
even when the power source changes, the promise
of heavy -duty reliability remains. Okay. We've
built the whole picture, the history, the five
pillars, the global footprint, but this entire
narrative is being driven by the enormous financial
pressures we hinted at. It is. So, part five.
Let's address the critical risk driving this
whole zero emissions pivot, the high cost of
emissions and regulatory failure. This section
reveals the vulnerability of the entire $34 billion
structure. Compliance is incredibly complex.
And failure, especially repeated failure, is
ruinous. We have to start back in 1998, a landmark
moment that really shook the entire diesel industry.
It did. The EPA leveled fines of $83 .4 million
against Cummins and six other diesel manufacturers.
At the time, that was the biggest fine ever.
But the way they cheated is what's so shocking.
They basically had a cheat code built into the
engine's digital brain. That's the simplest way
to put it, the defeat device. The EPA found that
manufacturers were using sophisticated ECU software
that was programmed to recognize the exact parameters
of the 20 -minute lab test for Clean Air Act
compliance. So during that test, the pollution
controls would engage fully. Making the engine
look perfectly clean. It passed the test every
time. But what happened the moment that truck
left the lab and started driving on a normal
highway? The software... quietly, deliberately
disabled the full emissions controls. The result
was trucks emitting no LOX, nitrogen oxides,
at up to three times the legal limit. And non
-X is a serious pollutant. A major contributor
to smog and respiratory problems. The fallout
was immense. The manufacturers were mandated
to spend more than a billion dollars to fix the
problem. Over a billion dollars. A quarter century
ago. You would think a lesson that expensive
would lead to permanent changes. You would think.
But then we have to address... the record setting
Fine that hit them just recently. The 2023 Fine
Redefined Massive. In December 2023, the U .S.
Justice Department fined Cummins a record -setting
$1 .675 billion. $1 .675 billion. It just dwarfs
the 1998 case. And the scope of the deception
was incredibly broad, spanning a full decade
of production. From model years 2013 to 2023.
Right. Cummins was found to have installed defeat
devices to bypass or disable emissions controls
on an astounding 960 ,000 -vinconel birch Dodge
and Stellantis Ram pickup. diesel engines. Nearly
a million vehicles, the core consumer vehicle
we talked about. This wasn't a mistake. It's
just a systemic institutional practice that went
on for years. What was the total financial hit?
On top of the record fine, the company agreed
to pay another $325 million in remedies and recalls.
That included recalling and fixing 600 ,000 diesel
Ram trucks. So the total cost is approaching
$2 billion. That sends an unmistakable signal,
doesn't it? It says that the regulatory risk
of staying in the complex high emissions technology
game has become financially toxic. These two
major cases separated by 25 years, but connected
by the same type of defeat device. They aren't
just news stories. They are the single strongest
financial argument. for why the Accelera business
unit has to exist. Absolutely. When the risk
of diesel compliance reaches $2 billion, the
transition to zero emissions tech, which inherently
lacks those complex pollution control systems,
it stops being a philosophical choice. It becomes
a critical financial imperative for survival.
It's about mitigating future regulatory risk.
And that ties everything together, the global
scale, the specialization, the technical expertise,
and these regulatory challenges. all point to
one overarching corporate strategy. They have
to transition to survive. Exactly. Okay, so to
recap, we dove deep into Cummins Inc., tracing
their story from Klessy Cummins' persistent push
to commercialize a diesel engine back in 1919,
all the way to becoming this global power infrastructure
giant. They dominate heavy transport, military
power, stationary power, all through strategic
IP control and the sophisticated global footprint
that leverages both Indian R &D and Chinese manufacturing
scale. We've seen, though, that technical dominance
comes at a shattering cost. The massive repeated
Clean Air Act violations culminating in that
record 2023 fine exposed the systemic financial
risks tied to complex emissions compliance. And
that risk has catalyzed this rapid multi -billion
dollar shift into Accelera, positioning Cummins
to lead in hydrogen, in batteries, and even in
the production of green hydrogen fuel itself.
So the company is now effectively split. One
foot is still firmly planted on that diesel foundation
built over a century, and the other is sprinting
toward a zero -emissions future. But here is
the final provocative thought for you to consider
as you reflect on all this. We established that
the massive high volume success of the ISGX -12
engine platform in China is the technical foundation
for all future Cummins engine platforms. Given
the foundation is still diesel based and given
the existential financial penalties they've incurred
in the last, how much intense institutional pressure
is now on the Accelerate unit to succeed, not
just as another profitable venture, but as the
only long term pathway to mitigate that regulatory
risk. completely replace the $2 billion legacy
of diesel dominance.