I follow technology-driven
changes reshaping transportation.
An electric vehicle is fine
for the morning commute, but to power the huge trains, trucks and
ships that move the global economy, hydrogen, heavy-duty batteries and
cleaner fuels are the ticket. Cummins, a century-old maker of dirty
diesels, is leading the charge.
CumminsInc.’s stylish, cantilevered steel-and-glass office
tower in Indianapolis looks more like the headquarters of a tech
company than a business that lives on diesel fumes. The incongruity
continues in Columbus, Indiana, where Cummins was born a century ago
and where the company’s foundation funded cutting-edge designs by I.M.
Pei and Eero Saarinen for schools, fire stations and a library.
That the leading U.S. maker of diesel
engines happens to be run by a Silicon Valley native with Stanford
engineering degrees is another surprising twist. It’s also entirely
relevant: The battle for the truck engine market will be fought on
environmental territory, with Cummins taking on seemingly greener
upstarts offering electric trucks.
Bring it on, says Thomas Linebarger,
Cummins’ chief executive for the past decade.
“Teslas won’t drive our economy,”
he says. “They’ll drive rich people.” Cummins is thriving
precisely because it has been adept at meeting the ever more demanding
environmental rules imposed on diesel engines. And when the day comes
for battery-powered or hydrogen-fueled trucks to displace diesel
entirely, Linebarger will be ready.
The lanky 59-year-old executive began
laying the groundwork for an evolutionary shift at Cummins six years
ago, acquiring companies with battery, hydrogen and fuel-cell
expertise and setting up a new division focused solely on next-gen
powertrains. Linebarger is betting that those moves and Cummins’ large
global customer base can help it lead the market for cleaner trucks,
buses, boats, trains, mining equipment and generators through the
2020s and beyond.
“We need solutions that will get
things to market—get your mattress delivered, deliver your flowers,
all this other stuff that goes on out here,” he says, pointing out a
large conference room window as a heavy winter rain soaks
Indianapolis. “One solution isn’t going to do it. Nobody understands
the range of those solutions more than we do.”
Cummins is supplying
heavy-duty hydrogen fuel cell systems to power zero-emission buses and
passenger trains.
Cummins Inc.
A variety of approaches is necessary
because the company’s product line is vast. Annually, Cummins supplies
more than a million heavy-duty engines to power buses, Dodge pickups,
Kenworth semi trucks, Bradley M2 Army vehicles, Siemens trains,
fishing trawlers, mining machines and backup generators for data
centers.
The environmental challenges of diesel
are considerable. Besides carbon dioxide, the fuel emits black soot, a
cause of heart and lung disease, and precursors to smog and acid rain.
California is demanding that by 2024 commercial fleets begin replacing
diesel trucks with zero-emission models. The U.S. Environmental
Protection Agency intends to phase in stricter requirements for heavy
trucks starting with 2027 models.
So far, Cummins’ ability to develop
cleaner diesel systems to meet tighter pollution rules over the past
20 years has helped it thrive. It reported $2.1 billion of net income
in 2021 on revenue up 21%, to $24 billion. Its market cap is $30.5
billion.
Transitioning the heavy-duty vehicle
market from diesel fuel won’t be fast or cheap. And the winner in the
long-haul market may not be the battery-powered trucks that Elon Musk
is promising. It might be engines burning hydrogen from renewable
sources. Taking into account the lithium mining for a battery and the
partly fossil-fueled grid used to recharge it, it’s quite possible
that someday Cummins’ trucks will be greener than Tesla’s.
Running a manufacturer wasn’t a likely
outcome for Linebarger. He grew up in a working-class Silicon Valley
home at a time when the region was defined by IBM and Hewlett-Packard
rather than Apple and Google. His parents divorced when he was young,
and at one point his mother turned to food stamps. “She went back to
college, finished her occupational therapy degree at San Jose State
and kind of just kept us moving.”
Good public schools helped Linebarger get
into Claremont McKenna College and Stanford, where he earned
undergraduate degrees in management and mechanical engineering. He
took an internship at Cummins while completing a combined M.B.A. and
master’s degree in manufacturing science at Stanford. “I wanted to
build companies, not finance them,” he says.
Linebarger’s strategy to attack carbon
and further cut exhaust pollution is multi-pronged, mixing
conventional and high-tech options. Cummins’ engineering team plans to
keep improving the efficiency of its diesel engine and generator lines
while also designing them to burn cleaner fuels including natural gas
and hydrogen made from renewable sources. They’re also readying hybrid
options that, like Toyota’s Prius, boost fuel efficiency without the
huge battery of an all-electric truck.
“Today, with the techniques we have
with big data and analytics, we can design efficiency into the system
in a way that we couldn’t 10 or 15 years ago. We have a target to
improve the efficiency of our engines by 20% or 25% by the end of the
decade,” Linebarger says. “The next step is mostly fueling;
it’s not really much else to do with the engine at that point. Once
you are perfectly efficient, it’s hybridization and fuel.”
Linebarger created a New Power division
at Cummins in 2018 to design battery and fuel-cell power systems and
hydrogen-generation technology that may supplant its diesel business
by the 2030s. To shore it up, Cummins bought fuel-cell and hydrogen
developer Hydrogenics, took a stake in Sion Power to develop
lithium-metal batteries and started a joint venture with Chinese oil
company Sinopec to produce hydrogen from renewable sources. Led by Amy
Davis, New Power is initially focused on batteries and motors for
light and medium trucks, and hydrogen fuel-cell systems for rail
applications and stationary power generation. Long-haul
hydrogen-fueled powertrains for semis are in the works but won’t
likely be a core business until the late 2020s, she says.
With advances in battery packs and
offerings for lighter commercial vehicles, fleet operators are
“getting their head around last-mile trucks” but are concerned
about replacing diesel systems in semis and heavy-duty trucks, Davis
said while she and Linebarger were in Scotland for the climate-change
conference in November. Cummins customers have concerns that
battery-only systems—like Musk’s planned semis that go up to 500
miles—aren’t realistic. It isn’t just the size of the battery that
gets in the way. It’s the paucity of charging stations.
Davis described customers asking,
“What about my long haul? I couldn’t even charge three of my trucks at
once, given the system that’s out there for charging. So what are we
going to do?” Her answer: “The fuel-cell electric drivetrain can be
quite complementary with the battery work that’s going on.”
To further bolster its clean powertrain
tech, the company on February 22 unveiled a plan to
buy components maker Meritor in a deal valued at $3.7 billion.
“The addition of their complementary strengths will help us address
one of the most critical technology challenges of our age: developing
economically viable zero-carbon solutions for commercial and
industrial applications,” Linebarger said of the acquisition.
Along with truck makers including
Daimler, Volvo and startup Nikola, Cummins sees battery power as a
viable option for heavy trucks that need only 200 miles of daily
range, such as rigs hauling cargo from ports or running fixed delivery
routes. For trucks needing to travel 300 miles or more between
fueling, hydrogen power looks more attractive, particularly since a
fuel-cell system that converts the element to electricity is lighter
than a battery pack. Hydrogen’s refueling time can be comparable to
that of diesel.
“I look at decarbonization and say
that’s a growth opportunity for Cummins, because now innovation is
going to matter a lot.”
Cummins reported sales
from the New Power of $116 million last year. That number is a
fraction of total company revenue but greater than the combined
sales of commercial EV makers Rivian, Arrival and Nikola, which are
just starting fleet deliveries.
Matthew Elkott, who covers
Cummins for Cowen & Co., says the path Linebarger has laid
out—blending steady efficiency gains for conventional engines and
readying next-generation technology—looks right. “We don’t know yet
what’s going to be the most ubiquitous technology 10 or 20 years
from now, but [Cummins is] going to help migrate a lot of those
customers toward whatever the future looks like.”
Cummins is building test versions of heavy-duty
hydrogen systems for semi trucks.
Cummins Inc.
Tesla has
lined up thousands of potential customers for the Tesla Semi that was
unveiled in 2017–and that’s at least two years behind schedule. Given
the EV maker’s lack of experience working with big fleets, Elkott is
skeptical about how big a player Tesla or Nikola, which is also
advocating for both battery and hydrogen power, will be in commercial
trucks.
“The advantage [Cummins] has over
someone like Tesla is this installed base of customers worldwide,”
many of whom have dealt with it for decades, Elkott says. If the
company says it has a compelling hydrogen-powered product and the fuel
needed to power it, that’s likely to be taken seriously by companies
it’s already supplying. “If I was that customer, I am more likely
to choose Cummins than someone new to the market.”
Like other long-lasting global
manufacturers such as Ford, Toyota and Harley-Davidson (on whose board
Linebarger serves), Cummins sees engineering innovation as core to its
history. Cofounded in 1919 by Clessie Cummins to advance Rudolf
Diesel’s revolutionary engine, the company initially licensed a design
from a small Michigan firm before developing its own direct-injection
diesel engines that could run pumps, grind grain or power a saw. By
the 1930s Cummins pushed into the truck market with the Model H engine
that became an industry standard.
“Cummins has done best when innovation
is required,” Linebarger says. “As soon as the industry kind of
settles on a technology, then you’re just competing for scale and
cost.”
The U.S. Clean Air Act of 1970, which
forced diesel makers to clean up their products, ultimately boosted
business for Cummins, which was rapidly able to bring cleaner engines
to market. Linebarger expects a similar outcome as carbon dioxide
becomes the enemy.
“I look at decarbonization and say that’s
a growth opportunity for Cummins, because now innovation is going to
matter a lot,” he says. “Innovation is what we do—and then we don’t
have to compete so much on the lowest price times a million units.”
