Cummins Engine Revises Third Quarter; Outlook Will Take Pre-Tax Charge of $145 Million.

COLUMBUS, Ind.--(BUSINESS WIRE)--Sept. 15, 1998--Cummins Engine Company, Inc. (NYSE:CUM) said today that revenues for the third quarter are expected to be approximately 7 to 10 percent below those of the second quarter as a result of lower-than-anticipated sales in Asia and its agricultural markets worldwide, and a seasonal temporary reduction in various North American automotive market revenues due to shutdowns and model changes at several of its key customers. In addition, new product introduction costs are expected to impact gross margins more than previously anticipated.

Cummins also said that the pre-tax charge announced earlier this summer for restructuring will be approximately $110 million in the third quarter, and that the company will add to its reserves approximately $35 million associated with a methodology change in calculating product coverage costs for extended warranty programs.

Cummins Chairman and Chief Executive Officer Jim Henderson said, "Recent economic news around the world is causing us to reassess our near-term business prospects in key international markets. Revenues associated with Asia appear to have fallen further from the depressed levels of the first half of the year. Worldwide agricultural markets are weaker than we anticipated, and we are also seeing a slowdown in our Latin American markets. In other than agricultural markets, our U.S. business continues to be strong at this time."

Continued Henderson, "We are continuing intense efforts to improve our margins through cost reduction and are finalizing the planned restructuring actions we announced at the end of the second quarter. Details will be announced with third quarter results, but the charge currently includes costs associated with our initiative to reduce our worldwide workforce by 1,000 people, as well as costs associated with streamlining certain wholly-owned and joint venture operations overseas. We are on plan in our efforts to reduce selling, administrative, and research and engineering expenses which will be reflected in third quarter and beyond results."

Cummins said that discussions with the U.S. Environmental Protection Agency (EPA) are continuing with the company and other diesel engine manufacturers regarding the level of nitrogen oxide emissions under certain driving conditions. The company reiterated its earlier statements that it believes it is in full compliance with all EPA standards regarding emissions and is working closely with the EPA to improve emissions standards. Cummins said that it hopes that an amicable solution to the matter can be reached, but indicated that resolution of this matter could have a material adverse effect on Cummins' future financial results.

Cummins, headquartered in Columbus, Ind., is the world's largest producer of diesel engines above 200 horsepower. The company provides products for customers in its key markets: automotive, power generation, industrial and filtration. Cummins reported record sales of $5.6 billion in 1997. Press releases by fax may be requested by calling News on Demand (toll free) at 888-329-2305. Cummins' home page on the Internet can be found at http://www.cummins.com.

Certain information included in this press release is forward-looking and involves risks and uncertainties, including general economic and competitive conditions that could significantly affect expected results.

CONTACT: Cummins Engine Co. Inc.

Marya M. Rose, Director -- Public Relations,

812/377-3609