Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2011


        Investments in and advances to equity investees and our ownership percentage are as follows:

  December 31,  
In millions
  Ownership %   2011   2010  

Dongfeng Cummins Engine Company, Ltd. 

  50%   $ 131   $ 150  

North American distributors

  30% - 50%     127     114  

Komatsu alliances

  20% - 50%     115     91  

Beijing Foton Cummins Engine Co. Ltd. 

  50%     87     38  

Chongqing Cummins Engine Company, Ltd. 

  50%     71     78  

Cummins-Scania XPI Manufacturing, LLC

  50%     62     57  

Tata Cummins, Ltd. 

  50%     49     49  

Shanghai Fleetguard Filter Co., Ltd. 

  50%     29     25  


  Various     167     132  


      $ 838   $ 734  

        Equity, royalty and interest income from investees, net of applicable taxes, was as follows:

  For the years ended
December 31,
In millions
  2011   2010   2009  

Distribution Entities


North American distributors

  $ 134   $ 101   $ 100  

Komatsu Cummins Chile, Ltda. 

    22     16     12  

All other distributors

    4     3     3  

Manufacturing Entities


Dongfeng Cummins Engine Company, Ltd. 

    80     99     33  

Chongqing Cummins Engine Company, Ltd. 

    68     46     36  

Shanghai Fleetguard Filter Co., Ltd. 

    15     12     7  

Tata Cummins, Ltd. 

    14     14     5  

Cummins Westport, Inc. 

    14     10     3  

Valvoline Cummins, Ltd. 

    7     8     7  

Komatsu manufacturing alliances

    3     11     (2 )

Cummins MerCruiser Diesel Marine, LLC

    (3 )   (3 )   (10 )

Beijing Foton Cummins Engine Co., Ltd. 

    (7 )   (16 )   (5 )

All other manufacturers

    24     20     7  

Cummins share of net income

    375     321     196  

Royalty and interest income

    41     30     18  

Equity, royalty and interest income from investees

  $ 416   $ 351   $ 214  

Distribution Entities

        We have an extensive worldwide distributor and dealer network through which we sell and distribute our products and services. Generally, our distributors are divided by geographic region with some of our distributors being wholly-owned by Cummins, some partially-owned and the majority independently owned. We consolidate all wholly-owned distributors and partially-owned distributors where we are the primary beneficiary and account for other partially-owned distributors using the equity method of accounting.

  • North American Distributors—Our distribution channel in North America includes 12 partially-owned distributors. Our equity interests in these nonconsolidated entities range from 30 percent to 50 percent. We also have more than a 50 percent ownership interest in three partially owned distributors which we consolidate. While each distributor is a separate legal entity, the business of each is substantially the same as that of our wholly-owned distributors based in other parts of the world. All of our distributors, irrespective of their legal structure or ownership, offer the full range of our products and services to customers and end-users in their respective markets.

    Komatsu Cummins Chile, Ltda.—Komatsu Cummins Chile, Ltda. is a joint venture with Komatsu America Corporation. The joint venture is a distributor that offers the full range of our products and services to customers and end-users in the Chilean market.

        We also have 50 percent equity interests in five other international distributors.

        We are contractually obligated to repurchase new engines, parts and components, special tools and signage from our North American distributors following an ownership transfer or termination of the distributor. In addition, in certain cases where we own a partial interest in a distributor, we are obligated to purchase the other equity holders' interests if certain events occur (such as the death of the distributor principal or a change in control of Cummins Inc.). The purchase price of the equity interests is determined based on the fair value of the distributor's assets. Outside of North America, repurchase obligations and practices vary by region. All distributors that are partially-owned are considered to be related parties in our Consolidated Financial Statements.

Manufacturing Entities

        Our manufacturing joint ventures have generally been formed with customers and generally are intended to allow us to increase our market penetration in geographic regions, reduce capital spending, streamline our supply chain management and develop technologies. Our largest manufacturing joint ventures are based in China and are included in the list below. Our engine manufacturing joint ventures are supplied by our Components segment in the same manner as it supplies our wholly-owned Engine segment and Power Generation segment manufacturing facilities. Our Components segment joint ventures and wholly owned entities provide fuel system, filtration and turbocharger products that are used in our engines as well as some competitors' products. The results and investments in our joint ventures in which we have 50 percent or less ownership interest are included in "Equity, royalty and interest income from investees" and "Investments and advances related to equity method investees" in our Consolidated Statements of Income and Consolidated Balance Sheets, respectively.

  • Dongfeng Cummins Engine Company, Ltd.—Dongfeng Cummins Engine Company, Ltd. (DCEC) is a joint venture in China with Dongfeng Automotive Co. Ltd., a subsidiary of Dongfeng Motor Corporation (Dongfeng), one of the largest medium-duty and heavy-duty truck manufacturers in China. DCEC produces Cummins four- to 13-liter mechanical engines, full-electronic diesel engines, with a power range from 125 to 545 horsepower, and natural gas engines.

    Chongqing Cummins Engine Company, Ltd.—Chongqing Cummins Engine Company, Ltd. (CCEC) is a joint venture in China with Chongqing Machinery and Electric Co. Ltd. This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines, primarily serving the industrial and stationary power markets in China.

    Shanghai Fleetguard Filter Co., Ltd.—Shanghai Fleetguard Filter Co., Ltd. is a joint venture in China with Dongfeng that manufactures filtration systems.

    Tata Cummins Ltd.—Tata Cummins Ltd. is a joint venture in India with Tata Motors Ltd., the largest automotive company in India and a member of the Tata group of companies. This joint venture manufactures the engines in India for use in trucks manufactured by Tata Motors, as well as for various industrial and power generation applications.

    Cummins Westport, Inc.—Cummins Westport, Inc. is a joint venture in Canada with Westport Innovations Inc. to market and sell automotive spark-ignited natural gas engines worldwide and to participate in joint technology projects on low-emission technologies.

    Valvoline Cummins, Ltd.—Valvoline Cummins, Ltd. is a joint venture in India with Ashland Inc., USA. This joint venture manufactures and distributes lubricants and oil related products in India which are used in automotive and industrial applications. Products include transmission fluids, hydraulic lubricants, automotive filters, cooling system products, greases and specialty products.

    Komatsu manufacturing alliances—Komatsu manufacturing alliances consists of two manufacturing joint ventures and one design joint venture including Komatsu Cummins Engine Company (KCEC) in Japan and Cummins Komatsu Engine Company (CKEC) in the United States (U.S.) with Komatsu Ltd. These joint ventures manufacture Cummins-designed medium-duty engines in Japan and Komatsu-designed high-horsepower engines in the U.S. The industrial engine design joint venture is located in Japan.

    Cummins MerCruiser Diesel Marine, LLC—Cummins MerCruiser Diesel Marine, LLC (CMD) is a joint venture in the U.S. with Mercury Marine, a division of Brunswick Corporation, to develop, manufacture and sell recreational marine diesel products, including engines, sterndrive packages, inboard packages, instrument and controls, service systems and replacement and service parts and assemblies, complete integration systems and other related products. In the fourth quarter of 2011, Cummins Inc. and Mercury Marine announced a plan to dissolve their joint venture and to transition to a strategic supply arrangement between the two companies to more effectively and efficiently serve customers in the global diesel marine market. All business activities will move from CMD to the parent companies, with completion of the transition anticipated by mid-2012. CMD will conduct business as usual through the transition. Cummins will continue to use Mercury Marine drives and control systems in conjunction with its extensive offering of mid-range and heavy-duty marine engines. This move will leverage Cummins' strong global distribution footprint and create additional synergy with other Cummins recreational marine products, including marine generator sets offered under the Cummins Onan brand. The dissolution of the joint venture is not expected to have a significant impact on the financial results of Cummins.

    Beijing Foton Cummins Engine Co., Ltd.—Beijing Foton Cummins Engine Co., Ltd. is a joint venture in China with Beijing Foton Motor Co., Ltd., a commercial vehicle manufacturer, which produces ISF 2.8 liter and ISF 3.8 liter families of Cummins high performance light-duty diesel engines in Beijing. These engines are used in light-duty commercial trucks, pickup trucks, multipurpose and sport utility vehicles. Certain types of marine, small construction equipment and industrial applications are also served by these engine families.         

Equity Investee Financial Summary

        We have approximately $441 million in our investment account at December 31, 2011, that represents cumulative undistributed income in our equity investees. Summary financial information for our equity investees is as follows:

  As of and for the years
ended December 31,
In millions
  2011   2010   2009  

Net sales

  $ 8,659   $ 7,107   $ 5,554  

Gross margin

    1,948     1,651     1,365  

Net income

    788     668     427  

Cummins share of net income





Royalty and interest income

    41     30     18  

Total equity, royalty and interest income from investees

  $ 416   $ 351   $ 214  

Current assets

  $ 2,892   $ 2,741        

Non-current assets

    1,440     1,253        

Current liabilities

    (2,055 )   (1,837 )      

Non-current liabilities

    (391 )   (499 )      

Net assets

  $ 1,886   $ 1,658        

Cummins share of net assets

  $ 855   $ 744