Cummins shares drop as more engines face emissions repair

(Reuters) - U.S. engine maker Cummins Inc CMI.N said on Tuesday it was widening field repairs to include engines produced between 2010 and 2015 as it strives to quell emissions regulators' concerns that have already cost the company almost $200 million.

A Cummins building is shown in Irvine , California, U.S., August 1 , 2017. REUTERS/Mike Blake

In a first quarter results release that beat expectations on both profit and revenue, the company took an initial charge of $187 million in relation to moves to upgrade engines after some pre-2013 systems failed emissions tests last year.

Shares in Cummins, which makes diesel and natural gas engines for heavy-duty trucks as well as industrial engines for construction and mining industries, fell as much as 7 percent in response.

The company also warned of further charges of up to about $400 million if the California Air Resources Board and U.S. Environmental Protection Agency do not accept its proposed solutions or the company has to order more extensive repairs.

Cummins had said last year only that it was investigating engines designed between 2010 and 2015.

“The piece we’re looking at is a component on the after treatment system that we used only in North America,” Cummins President Richard Freeland said on a call with analysts.

“We’re driven to resolve this thing over the next two quarters. So, we’ll work with agencies, and we’ll get a final answer to this and kind of get this thing behind us,” he said.

The charge comes at a time when the auto industry and its suppliers are facing a global regulatory crackdown on diesel emissions and are adjusting their businesses, including investing heavily in electric vehicles.

German carmaker Volkswagen VOWG_p.DE is still in the process of emerging from the 2015 emissions cheating scandal that resulted in about $30 billion in fines and other costs.

Including the charge, the Cummins’ net income attributable to shareholders fell to $325 million, or $1.96 per share, in the first quarter ended April 1, from $396 million, or $2.36 per share, a year earlier.

Shares in Cummins, which counts PACCAR Inc PCAR.O, Daimler AG DAIGn.DE and Navistar International Corp NAV.N among its customers, traded 6 percent lower at $150.14.

Reporting by Shravanth Vijayakumar, Rachit Vats and Arunima Banerjee in Bengaluru; Editing by Maju Samuel and Patrick Graham