Navistar to cut 200 jobs, focus on engine biz revival
Troubled engine and truck maker Navistar International Corp. said Thursday it will cut 200 salaried jobs, part of a cost-cutting plan, and review its non-core businesses, which means it could sell some units.
Lisle-based Navistar reported its fiscal third-quarter profit plunged 94 percent from a year earlier to $84 million, including a $196 million tax benefit. Revenue declined but beat Wall Street expectations.
Its stock soared 17 percent, or $3.56, to close at $23.97.
Navistar, which employed 6,300 salaried workers in the U.S. in August with more than half in Illinois, said it already has eliminated 500 positions through a voluntary separation program.
In announcing the work force reduction plan, the company said it anticipates the effort will generate $70 million to $80 million in savings, contributing to Navistar’s overall goal to reduce costs by $150 million to $175 million, year-over-year, starting in fiscal 2013.
Morningstar analyst Basili Alukos speculated that Navistar might consider selling off its Monaco recreational vehicle and Workhorse Custom Chassis businesses. Its defense business could also be vulnerable, he said.
“I think this year they’re expecting about $1 billion [in revenue],” he said of the defense business. Prior to landing a 2008 defense contract, they were at $400 million, he noted. The business “spiked to $4 billion, and now it’s down to $1 billion, so it’s definitely declining.
“Some of their name-plate trucks that are lower in volume, a subset of their medium duty trucks or heavy duty trucks, I’m guessing maybe they would reconsider supplying engines for those,” he said of their truck and engine business.
Navistar said it earned $1.22 per share in its fiscal third quarter, compared to net income of $1.4 billion, or $18.24 per share in the yearago quarter.
Its revenue fell 6 percent to $3.3 billion, driven by lower sales in the company’s U.S. and Canadian truck and engine businesses. Navistar blamed lower military sales and reduced engine sales in South America. Wall Street expected revenue of $3.03 billion.
“Clearly, we are not pleased with these results,” Lewis Campbell, Navistar chairman and interim chief executive officer, said in a statement.
He said the company is focused on restoring its core North American truck engine and parts businesses to market leader positions.
Campbell was named to lead the company last week following the abrupt retirement of its former chairman and CEO Daniel Ustian, who had pursued a costly strategy of paying U.S. Environmental Protection Agency fines to keep manufacturing engines that didn’t meet emission standards as the company sought to complete development of technology that ultimately failed to meet the standards.
Last month, Navistar an- nounced it would partner with competitor Cummins Inc. to meet the standards, abandoning its technology after having invested more than $700 million in the failed effort.
Navistar said Thursday it is on track to finalize the agreement with Cummins by the end of October.
Besides producing commercial trucks and diesel engines, Navistar also produces school buses and chassis for motor homes and vans.
Alukos said the market liked what it heard about the company’s plans to be more transparent and focus on returns on invested capital.
“Now they’re focusing on that, which I think is good, and just the idea of cutting costs and trying to improve margins and considering selling any unprofitable or non-core businesses, whatever they may be, I just think that’s a positive direction, if they are able to spin some of them off and get some cash,” Alukos said.