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Cummins Hits Milepost on 3-Millionth Engine Output for RAM

Zacks Equity Research

Cummins Inc. CMI recently produced 3-millionth turbo diesel engine for RAM, which is Fiat Chrysler’s FCAU truck division. This is undoubtedly a very important milestone for the company.

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The new 6.7 liter I-6 turbodiesel high-output engine serves 400 horsepower and 1,000 pound-feet torque, boasting a host of upgrades for improved fuel efficiency, lower NVH and higher power.

The association between the carmaker and engine maker dates back to more than three decades. Notably, both the companies have immensely benefitted from each other via this association. The partnership between the two has been raising the bar for power and durability, with Cummins-powered Ram heavy-duty trucks enjoying best-in-class capability.

The latest move is a milestone in the legendary history between the two companies. The association between Cummins and RAM had commenced in 1988, when the former supplied 5.9-liter engine for RAM 2500 and 3500 models. Cummins crossed the 200-horsepower mark in 1996 and built engines with 500 pound-feet of torque in 2001. In 2007, 6.7-liter 350 horsepower engines became available. In 2013, the engines reached 385 horsepower while making 850 pound-feet of torque. The latest one is the first engine to cross the three-figure torque mark and hit 400 horsepower.

Cummins’ Strategic Initiatives to Lift Prospects

From traditionally being a global power company and diesel engine maker, Cummins has lately diversified into electrification and hydrogen fuel cell technology. Last year, the company had launched the Electrified Power business segment. Lately, Cummins is involved in hybrid and all-electric drivetrains, along with battery systems.

In sync with its aim of becoming a leader in electrified power, it had acquired battery specialist Brammo in 2017. In 2018, Cummins had acquired Johnson Matthey’s U.K. automotive battery systems business to bolster its electrification and energy storage capabilities. The auto-engine maker had further strengthened its portfolio by acquiring Silicon Valley-based Efficient Drivetrains last year. Lately, it closed the acquisition of Hydrogenics Corporation, which will likely boost Cummins’ ability to innovate hydrogen fuel-cell technologies across commercial markets.

Over the past couple of years, Cummins has been focusing on introducing innovative products and making acquisitions to generate high returns. In addition to widening the product portfolio through acquisitions, the company had signed separate partnership deals with Hyundai Construction and Isuzu Motors last October. Notably, it will develop an electric-powered mini excavator with Hyundai. The Cummins-Isuzu Motors team will discover opportunities in the powertrain area. Further, it collaborated with Russia’s KAMAZ to supply electrified power solutions for KAMAZ’s latest line of battery-powered vehicles.

A couple of days back, Cummins announced collaboration with Hyundai for Hydrogen Fuel Cell Technology. The new power trains are anticipated to be developed by integrating Cummins’ electric power trains, battery and control technologies with Hyundai fuel cell systems.The cooperation is a golden opportunity for Hyundai and Cummins to leverage their respective strengths to grow and widen their product portfolios.

All the aforementioned initiatives are likely to bolster Cummins’ prospects. The company — whose peers include Deere & Company DE and Caterpillar Inc. CAT among others — is focused on enhancing shareholder value through aggressive share repurchases and increasing dividend payouts. For 2019, it has set a target to return 75% of yearly operating cash flow to its shareholders in the form of dividends and share repurchases.

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