Cummins and Shaanxi Automobile Group Sign ISM Joint Venture Feasibilit

    Business Editors/Automotive Writers

    BEIJING--(BUSINESS WIRE)--Feb. 22, 2005--Cummins Inc. (NYSE:CMI) and China's Shaanxi Automobile Group Company Ltd. today announced that both sides have signed a feasibility study agreement on the formation of a 50/50 joint venture company to produce the Cummins ISM 11-liter heavy duty engine in Xi'an, the capital city of western China's Shaanxi Province.
    The feasibility study is the last step before Cummins and Shaanxi, which is part of the Shaanqi Group, sign the joint venture agreement and it outlines the parameters of the partnership. Construction of the plant could begin as soon as the fourth quarter of 2005 and production could start as early as the third quarter of 2006.
    The ISM is one of the flagship engines of Cummins heavy-duty product line. In addition to proven fuel economy and dependability, the ISM meets the toughest emission standards worldwide. The ISM is the ideal power choice for heavy-duty vehicles with gross vehicle weight between 26 and 44 tons -- including trucks, long-distance coaches and double-decker buses.
    Shaanqi Group, headquartered in Xi'an, is the leading producer of heavy-duty trucks (payload above 15 tons) in China. Shaanqi, which has been buying a small number of imported ISM engines from Cummins for several years, will be the largest customer for the engines produced by the joint venture. Cummins East Asia marketing organization will handle non-Shaanqi sales of the ISM made at the new plant.
    The joint venture provides Cummins with a strong OEM customer and partner in a growing market and offers Shaanqi an independent engine supplier with a proven product, solid foundation and positive brand image in China.
    Under the terms of the agreement, the companies initially will invest $24 million in capital into the joint venture. The joint venture company will have access to the most advanced Cummins 11-liter, full-electronic ISM engine platform from 305 to 440 horsepower (hp).
    The agreement was signed by John Watkins, President of Cummins East Asia, and Zhang Yupu, Chairman of Shaanqi Group.
    "Partnering with Shaanqi presents a golden opportunity to provide high-performance and low-emission diesel engines to meet the rapidly growing demand of local Chinese customers for better, faster and cleaner heavy duty trucking solutions," Watkins said.
    Heavy duty trucks with payload above 15 tons and engine power above 300 hp are part of China's "Tenth Five-Year Plan." With the world's second-longest highway system, behind only the United States, and robust GDP growth, China's heavy duty trucking industry has seen rapid development since 1999. The country plans to implement Euro 3 equivalent emission standard that will dramatically push forward the technological advancement of diesel engines.
    The market for heavy-duty trucks with payloads greater than 15 tons is expected to be around 200,000 units by 2010. The joint venture's projected production is 50,000 units by 2010.
    "Today's signing is an important milestone in Shaanqi's international cooperation since the 1980s. Shaanqi is a leader in China's heavy duty truck market and Cummins is a leading diesel maker worldwide with solid footprint and long term commitment in China, our cooperation is a win-win for both sides," said Chairman Zhang, "It will no doubt lead to a new chapter in China's trucking industry."

    About Shaanxi Automobile Group Company Limited (Shaanqi Group)

    Shaanqi Group is the one of the leading producers of heavy-duty vehicles in China. With 8,000 employees, Shaanqi produced over 20,000 heavy-duty trucks in 2004 - a 76 percent over 2003. Shaanqi reported sales of $600 million and ranks as one of China's Top 500 enterprises. Shaanqi's product line includes off-road vehicle, heavy-duty and medium-duty trucks, and high-end bus chassis.
    Shaanqi Group's aftermarket network in China consists of more than 20 regional offices, 200 distributors, 50 quick service stations along major highways and more than 300 service points across the country. Further information can be found in Shaanqi's website at www.sxqc.com.

    About Cummins in China

    Cummins is the largest foreign investor in the China diesel engine industry. The Company's ties to the country date back to 1975 when then-CEO J. Irwin Miller led the first Cummins delegation to Beijing, making him one of the first American business leaders to seek opportunities in China.
    Cummins began licensing its engine technology in China in 1981 and formed its first joint venture in the country in 1995. Today, Cummins operates 20 facilities in China - including six manufacturing sites - with all areas of the Company's business represented in China. Eight of the 14 Cummins engine series have been produced in China. Cummins sales in China exceeded $1 billion in 2004, representing nearly 10 percent of Cummins total consolidated and unconsolidated revenue.

    About Cummins

    Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in more than 160 countries through its network of 550 distributor facilities and more than 5,000 dealer locations. With more than 24,000 employees worldwide, Cummins reported sales of $8.4 billion in 2004. Press releases can be found on the Web at www.cummins.com.

--30--SLB/cl*

CONTACT: Cummins Inc. Mark Land, 317-610-2456 812-350-9678 (mobile)

KEYWORD: INDIANA CHINA INTERNATIONAL ASIA PACIFIC INDUSTRY KEYWORD: TRANSPORTATION AUTOMOTIVE ENERGY UTILITIES MARKETING AGREEMENTS SOURCE: Cummins Inc.

Copyright Business Wire 2005