DOW JONES NEWSWIRES

Engine maker Cummins Inc. (CMI) will cut at least 500 jobs, or 3.5% of the workforce, by month-end as the global economy continues to deteriorate and the auto production continues to slump.

For example, General Motors Corp. (GM) and Ford Motor Co . (F) each said earlier this week that current targets for their first-quarter auto production in North America are 30% to 40% below year-earlier levels.

Cummins Chairman and Chief Executive Tim Solso said Friday, "These are difficult times, but in many ways we are better positioned to weather a downturn than at any time in our history." He said debt is less than 15% of total capital, and that the company has "healthy cash balances" as business operations continue to generate cash. Cummins also had access to a $1.1 billion credit line if needed.

Cummins will start the job cuts by offering eligible U.S. workers a retirement package that would include full pay and benefits for nine months after their departure. The other cuts will be involuntary.

The company in October posted its second-best quarterly results ever, with net income up 25% on strong international sales. But overseas auto sales are weakening as well, and Cummins at the time cut its 2008 expectations and warned the market for pickup trucks and commercial trucks will remain down through much of the next year.

The job cuts are the latest cost-cutting effort taken by Cummins. Previous steps have included temporary plant shutdowns, shedding temporary workers and cutting overhead and discretionary spending.

Cummins shares closed Thursday at $22.51 and there was no premarket trading. The stock is down 65% this year.

-By Shirleen Dorman, Dow Jones Newswires; 201-938-2310; shirleen.dorman@dowjones.com

(END) Dow Jones Newswires

12-05-08 0859ET

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