In the following video, Fool contributor Jason Hall chats with Gord Exel, president of Cummins Westport, the joint venture between engine builder Cummins (NYSE:CMI) and natural gas injection and fuel supply expert Westport Innovations (NASDAQ:WPRT).
Cummins Westport recently took a large warranty accrual, affecting the earnings of both Westport and Cummins, and Exel talks about how the warranty accrual process works and how this was a case of having engine sales that were higher than anticipated (a good thing) along with demand for a more capable engine. That demand was leading truckers into pushing the 8.9-liter engine into applications it wasn't built for.
Exel says the release of the ISX12 G has already been having an effect, as truckers are now able to buy an engine that meets their needs, when just a few months ago there wasn't an alternative. The fast adoption of this engine is not only good for Cummins' and Westport's bottom lines because of the sales growth, but will also mean reducing the warranty costs to support the 8.9-liter engine as truckers shift to the larger option. And that means better profitability for both Cummins and Westport Innovations.
See more in the following video, shot at the recent Alternative Clean Transportation Expo.
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Jason Hall owns shares of Westport Innovations. The Motley Fool recommends and owns shares of Cummins and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.