Describing the decision as “an important next step in its turnaround efforts,” Navistar International Corp. (NYSE: NAV) has said it will consolidate manufacturing of its MaxxForce mid-range engines at one plant.
The truck and engine builder will move mid-range engine production at its Huntsville, AL facility to its Melrose Park, IL plant. The company noted it will continue to manufacture its MaxxForce13-liter powerplant at its separate big-bore engine plant in Huntsville.
According to Navistar, completion of the consolidation “later this summer,” is expected to result in the loss of some 280 jobs at Huntsville and a reduction in its operating costs by about $22 million annually.
“As we have stated previously, we have too much excess engine manufacturing capacity in North America and we must take action to reduce our costs and improve the business,” said Jack Allen, Navistar’s COO.
“The consolidation will further lower the company’s breakeven point [which can be used to determine how much volume must be sold to make a profit], strengthen our competitiveness in the marketplace and help position Navistar for a return to profitability,” he added.
Elissa Maurer, Navistar’s manager-- External Communications, told FleetOwner that while this latest development in the OEM’s turnaround effort is “focused on our manufacturing strategy and the consolidation of our mid-range engines at Melrose,” the company “will share information on our engine-platform strategy in the weeks ahead.
“This is the latest step in our ROIC (Return on Invested Capital) and turnaround actions,” Maurer pointed out.
“We will continue to look through the ROIC lens and other actions [taken] during the last 18 months [that] include exiting our truck and engine joint ventures with Mahindra in India; selling our Workhorse, Monaco RV and Bison Coach businesses; reducing our FY2013 structural costs by $330 million, and reducing material costs,” she also advised.
Navistar’s Allen also remarked that consolidating mid-range engine production was “a difficult decision because of its impact on the many great people who’ve been part of our company. We understand that these decisions have an impact on our employees and the community and we will treat our people with dignity and respect throughout this process.”
In its last earnings report, released in December, Navistar reported a net loss of $154 million (or $1.91 per diluted share) for the fourth quarter of 2013. By comparison, for Q4 2012, the holding company recorded a net loss of $2.8 billion (or $40.13 per diluted share).
As for the full 2013 fiscal year, Lisle, Navistar said its net loss was $898 million (or $11.17 per diluted share) vs. the net loss of $3 billion (or $43.56 per diluted share) it recorded for fiscal year 2012.
Navistar’s Q4 2013 revenues came in at $2.8 billion— down from $3.2 billion for the same period a year ago. Per the OEM, that drop reflected “lower sales across all business segments, primarily due to weaker industry conditions and lower market share during the company's emissions strategy transition.”
More recently, two of Navistar’s International truck models were named “Truck of the Year” for 2014 in their respective categories by the American Truck Dealers (ATD).
The ProStar with Cummins ISX15 garnered ATD’s Commercial Truck of the Year honors in the heavy-duty (Class 8) while the TerraStar 4x4 took top honors in the medium-duty (Class 3-7) category.
The winners, announced during the ATD Convention & Expo, were selected by a panel of journalists who judged the trucks on such criteria as innovation, design, safety, and driver satisfaction.
This update includes comments provided to FleetOwner by Elissa Maurer, Navistar’s manager-- External Communications.
