GRAPEVINE, Texas—Cummins completed the acquisition of Meritor last August, and has now revealed how the manufacturer of brakes, axles, and other vital commercial vehicle components will fit into the larger overall company structure.
Cummins has five operating segments: Engine, Power Systems, Components, Distribution, and New Power, with the new Cummins-Meritor business unit sliding into the Components segment. The Meritor brand will remain as before and for customers, nothing will appear different.
Behind the scenes, though, Cummins-Meritor is figuring out how to merge the best of Cummins and Meritor to serve fleets, OEMs, and distributors better than ever, and finding efficiencies to bring products to market faster and with improved support.
“The tools that the broader Cummins brings, married to what Meritor has, is helping us do those things,” said Alan Rabadi, general manager, global aftermarket and business development for Cummins-Meritor, at Heavy Duty Aftermarket Week 2023.
Rabadi, who has been with parent company Cummins for nearly a decade, noted he was impressed with what he saw when diving into the nuts and bolts of the new acquisition.
"We quickly realized is there’s a lot of just fantastic processes and people already placed in Meritor," Rabadi said. "But I think above anything has been the cultural aspects between two companies…it feels like a very natural combination. Very similar cultural values, industry depth of knowledge, just the way we work. That’s where it’s gone really well.”
The Meritor brand can also now leverage the manufacturing and supply scale and intellectual property afforded to being part of a company with six times the value of itself.
“We’ll have a lot of value creation,” said Joe Mejaly of Cummins-Meritor. “Meritor was a $4 billion company; now we are housed inside of a $24 billion company. The assets and the IP that Cummins brings to us—it would have taken us years to get to that."
Rabadi noted the deal will be mutually beneficial for Cummins customers.
"This acquisition allows us to enhance our position in the existing commercial vehicle marketplace,” Rabadi said. “Cummins is well established in the core engine technology space with our complimentary technologies and products. Meritor expands that by adding on driveline, axle, brake, and related components. We now have a much broader portfolio that we can serve customers with. But we’re also able to pull on the strengths that both companies have."
With Cummins and Meritor under one umbrella, there will also be operational savings, as there is now one board of directors and one investment relations department, for example.
“But we also see a lot of growth by bringing the two together,” Rabadi said. “The runway of the combined company trends higher than it did individually… the core products, the zero emissions technologies that we’re going to bring to the market in the future are going to unlock that growth for us.”
'Better together'
The tagline for the newly formed Cummins-Meritor business unit is “better together.” Rabadi explained that this tagline has been both the internal and external message of the integration, “because we really do see the combination of the two companies bringing more value internally and externally.”
That value can be seen, Rabadi said, for employees, customers, and shareholders.
Employees have broader access to technologies, people, and resources. “Both companies have footprints all over the world,” Rabadi explained. “If you’re working in one region, one part of the business now has access to different parts of the business in different parts of the world. As an employee of either company, you have access to a broader set of opportunities.”
“The customers will win,” Rabadi emphasized. From a technological standpoint, Cummins-Meritor feels as though the core products offered today have the opportunity to have a better integration and technology development experience. And, moving forward toward zero emission technologies, the business unit can offer advancements for customers as well.
Rabadi furthered that the way in which and ability to serve customers will be enhanced as the Cummins-Meritor team feels stronger and better positioned to respond to customer needs by working together.
New Power and the path to zero emissions
Cummins has made significant investments over the past several years in developing the company’s pathway to zero emissions, Rabadi explained. With Cummins’ focus on batteries, fuel cells, and related technologies, Meritor’s independent development in their e-powertrains and related technologies becomes a perfect match. “As we bring those together, we see that the ability of, one: to expedite the technological advancements of those technologies, but also, [two: to] further improve the technology we’ve developed, together, by bringing the best of both companies together to deliver for the customers,” Rabadi said.
Meritor also fits into the long-term vision of the New Power business segment, Rabadi explained. The New Power segment continues to invest in batteries, fuel cells, and other technologies critical for the future, but such investments do not provide short-term return for the company. “We understand we need to invest ahead of demand,” he continued. “We have to take short-term losses to enable the long-term transition to the market. And Meritor and our products, and now the combination [of the two] is going to help us achieve that.”
Cummins’ strategy, destination zero, is a stated objective to get to a zero-emissions product lineup by 2050. Rabadi said this is going to take a combination of technologies to achieve.
“We see a roadmap to zero emissions,” he said. “But before you get to the end state, you’ve got the phases in between where we will still need to invest in diesel technology, natural gas technology, and other bridge technologies before you get there… Meritor, with the product lineup of the e-powertrain fits in perfectly. Now you have a power agnostic powertrain and driveline where we can develop battery solutions, fuel cell solutions, and tether that around the Meritor e-powertrain… When we combine both what Cummins has been working on with what Meritor has been working on, the two come together extremely well. We feel extremely excited about what this means for us and our future together.”
Remanufacturing ramp-up
Meritor has always prided itself on its remanufacturing capabilities, Mejaly said, but believes it is only getting better and accelerating with the Cummins-Meritor conjoining. “Cummins has created a new standard of excellence in our minds with all kinds of different technologies,” he continued. “We went down and saw their [remanufacturing] facility and we were absolutely blown away by the technology… we’ve already begun to take our products and start [to integrate it] into this IP. We think it’s going to be an accelerator for us as an aftermarket company in spaces for remanufacturing not only in North America, but in Europe and in other regions of the world.”
Meritor had finished 2022 setting a new record for themselves in how many air disc brakes they had remanufactured. With the new organizational structure, Meritor is gaining visibility in Europe, Mejaly said, and the Cummins-Meritor colleagues are already remanufacturing a larger volume of air disc brakes than is being done by the North American team.
The distributor’s private label product
Euclid was a Meritor acquisition the company made more than 20 years ago with the intention to adapt more easily into the independent distributor market. Over the years, the Euclid brand has had varying degrees of success, Mejaly said. In the Cummins-Meritor business unit, “we’re going to be very permitted to a different approach,” he surmised.
That approach is for Euclid to be established as the distributor’s private label product. “We will continue to differentiate between what’s in the Meritor bull box and what’s in the yellow box,” Mejaly said. “And we will continue to create mass along this line in that product to give them more value. It is a distributor-only brand. Our goal is to give the distributor access and something that they can distribute through their networks cross region, cross day, cross city, and have something that will be common among the distributor market.”
Mejaly emphasized that even though Meritor had acquired the brand over 20 years ago, this is a new beginning. “You’ll see, probably, in the next year or two years, this will continue to evolve and really be a staple inside our brand portfolio. It’ll be the Meritor brand; it will be the Euclid brand; and obviously, we’ll play in private label opportunities as they come forward.”
