Indiana Diesel Engine Maker Cummins Sustains $100 Million in Flood Damage

July 11, 2008

Flooding from a creek caused more than $100 million in damage last month to a research and development center for the diesel engine maker Cummins Inc.

But the center should return to full operations, thanks to around-the-clock repair work since the June 7 flood, spokesman Mark Land said. He added that insurance will cover most of the repairs.

Analyst Eli Lustgarten said the hefty repair bill shouldn’t affect Cummins earnings. He said the flooding will be viewed as an extraordinary event not connected to company performance.

“Unless it’s something of substantial magnitude that will hurt the company’s longer term performance, you exclude it,” said the Longbow Securities analyst.

Water filled the Columbus center’s basement and several feet of its first floor, as heavy rain swept through central and southern Indiana, causing widespread damage. Columbus Regional Hospital had to transfer patients and shut down after floodwaters filled its basement and saturated the first floor. Damage there has been estimated at $125 million.

The Cummins research center lost computer and fiber optic equipment.

“The water came in so fast that we didn’t have time to turn the electricity off, so there was a lot of electrical damage,” Land said. “That’s what we’ve really been working on the last three or four weeks.”

Cummins does research and testing on diesel engines and their components at the 454,000 square-foot center. It spread some of that work to other locations. Land said repair crews also “worked their tails off” to fix the center. Insurance will cover all the damages except for a deductible of around $2 million.

Cummins employs about 38,000 people worldwide. Diesel engines are its main product, but the company also makes power generators

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