Cummins CEO Discusses How U.S.-China Trade War Is Affecting The Engine Manufacturer
AILSA CHANG, HOST:
It can be hard with all the mind-numbing dollar figures and percentages, the threats and counter threats the countries are making, to keep up with the state of play in the trade war with China. And while that trade war grinds on, many businesses are trying to cope with the uncertainty. One of those businesses is Cummins Inc, an Indiana-based company that manufactures diesel engines. It's had a presence in China going back decades. Tom Linebarger is the CEO of Cummins, and he joins me now.
TOM LINEBARGER: Thank you very much.
CHANG: So how much of your market now is in China?
LINEBARGER: Roughly 40%...
LINEBARGER: ...Of Cummins engines produced last year were sold in China.
CHANG: OK. And how much of your manufacturing is based in China now?
LINEBARGER: Approximately the same. Almost everything we manufacture in China we sell in China. We tend to manufacture in the region in which we're selling. And the main reason for that is engines are expensive to ship around the world, as you'd guess, so it's much more cost competitive for us to...
LINEBARGER: ...Make the engine and sell the engine in the same region of the world.
CHANG: All right. So unraveling your relationship with China is nowhere near feasible at this point.
LINEBARGER: It really is not. It would cost a lot of jobs for the company in the U.S. We have an estimate that roughly 5,000 jobs in the U.S. are tied to our business internationally, the largest part of that in China.
CHANG: Well, I was going to ask you what you saw on the horizon because, you know, after the G-7 summit this weekend, President Trump said he was optimistic that a deal with China was within reach. But China is not sending those same signals. One thing does seem for sure that - and that is that this trade war is not going to be resolved anytime soon. So what does that mean for Cummins?
LINEBARGER: Of course, our interest would be to see more opportunities for global trade and free trade. We understand and support, frankly, the administration's efforts to rebalance the trade relationship with China.
CHANG: So what specifically would you like to see adjusted?
LINEBARGER: Just market access, kind of where the Chinese government was trying to protect the early start-up of industries in China. And I think now the economy's grown enough that this - many of these things could be opened up again and access could increase for American businesses. It's also information technology, being able to make sure you can move information across boundaries, things like that.
CHANG: OK. I'm hearing you - I'm hearing a wish list on what you want China to do. But is there anything you want to see from this administration that would help things out for Cummins?
LINEBARGER: Most importantly for me, I want to see engagement. I think that U.S. businesses do very well whenever there is any access to foreign markets. We can succeed in markets when we have a chance to compete. And that's really what we want to see with every economy around the world. We'd like to see that with the USMCA, too - the Mexico-Canada agreement, too. We'd like to see that signed and completed. We'd like to see more free trade agreements with other countries.
CHANG: Have you raised any of these concerns directly with the White House? I know that you sit on the Business Roundtable, which is this pretty powerful organization made up of prominent CEOs like yourself.
LINEBARGER: So I have spoken with the U.S. trade representative, with the president and others in the White House. And in each time that the members of the Business Roundtable, and me specifically, have asked to talk with them, they have agreed to talk and been open to hear what we had to say.
LINEBARGER: So I would say we've definitely communicated directly what we think is important.
CHANG: OK. Do you think Cummins and other companies that have also aggressively pursued Chinese business relationships have in some ways brought this on themselves, these problems that you're all facing with this trade war? Is some of this because of the aggressive attempts you guys wanted to make in the Chinese market?
LINEBARGER: I think that the idea of business is that we'd like to serve customers around the world with the capabilities and technologies that we have. But we understand that countries operate differently. They have different political structures. They have different economic priorities. That's just the way the world is, and it's - I think it's always going to be to some degree. What we think is that business can help keep the world a more peaceful place and a more prosperous place. We have a really critical role in keeping the engagement between nations constructive, to make sure that nations talk to each other and feel mutually dependent.
CHANG: Tom Linebarger is the CEO of Cummins Inc, an Indiana-based company that manufactures diesel engines.
Thanks very much for joining us today.
LINEBARGER: It was a pleasure speaking with you, Ailsa. Thank you. Transcript provided by NPR, Copyright NPR.