Posted: 10:00 p.m. Saturday, Oct. 13, 2012

Navistar troubles hurt suppliers

Springfield area suppliers feeling effects of company’s continuing problems.



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Navistar troubles hurt suppliers photo
A 280-ton punch press with an auto-feed line at Kreider Corp., the largest press on the premises. Kreider Corp., a local supplier for Navistar, manufactures clips and clamps for Navistar trucks. Barbara J. Perenic/Springfield News-Sun
Navistar troubles hurt suppliers photo
A recent change to the shipping department at Kreider Corp. is the use of plastic totes instead of cardboard boxes. Most of the totes are headed to Navistar with parts. Kreider Corp., a local supplier for Navistar, manufactures clips and clamps for Navistar trucks. Barbara J. Perenic/Springfield News-Sun

By Everdeen Mason

At least two local suppliers have laid off workers as a result of Navistar International Corp.’s ongoing problems caused by failed engine technology and investor fights on Wall Street.

Navistar’s financial issues — which recently resulted in 800 buyouts and layoffs at the corporate level, plus the cutting of product lines — affect local supply companies. And Navistar’s Springfield plant employs about 850 workers.

Navistar officials would not disclose the number or names of suppliers, but the Springfield News-Sun confirmed eight local companies.

“We supply all of the Navistar locations in our country and in Canada and Mexico,” said Jamie Schenck, production supervisor at Kreider Corp. “We are going through a decline rather than an increase.”

Kreider, 2000 S. Yellow Springs St., manufactures clips, clamps and fastening devices that hold different pieces to a truck, mainly in the engine and under the bed. Schenck said Navistar is the company’s main client, and as a result of the company’s financial issues, Kreider laid off employees.

Schenck would not disclose how many people were laid off this year, but he said the company ordinarily employs about 60 people.

“Right now, they’re having some troubles with their engines … It is expected to be short term,” Schenck said.

Navistar’s issues began earlier this year after learning its heavy duty truck engines would not comply with Environmental Protection Agency carbon emissions standards — resulting in penalties up to $3,800 per noncompliant engine sold.

The company has since abandoned its own technology and will roll out a new engine in 2013 that will combine the technology Navistar developed and the after treatment used by its competitors. In other trucks, Navistar will use competitor Cummins’ engines.

Stocks have dropped most of this year, and activist investors have snapped up shares, which prompted rumors of a takeover. CEO Dan Ustian suddenly retired in August, and the company lost out on a $14 billion military contract.

New CEO Lewis Campbell reiterated the company’s new cost-saving approach in interviews with Rueters this month.

He announced the company will look to cut spending, minimize contractors and reduce the workforce — and may possibly cut production plants — in response to losses of $172 million in the second quarter and $153 million in the first quarter this year. The company saw a net gain in income for the first time in the third quarter of $84 million.

Navistar’s Springfield plant has actually grown this year, hiring for the first time in nearly a decade and taking on production lines from other plants. Two weeks ago the company hired around 20 temporary workers, said Jason Barlow, president of United Auto Workers Local 402, which represents local Navistar workers.

“We’ve done everything we can in Springfield, and we feel it is a no-brainer,” he said.

Barlow said besides the quality of a Springfield truck, the plant has the capacity for additional lines and shifts, is paid for, and is accessible to two-thirds of the population in a 600-mile radius.

“We’ve positioned ourselves to receive more product, and we have received more product,” Barlow said. “If they didn’t feel we were doing a good job, then they wouldn’t give it to us.”

While Barlow is confident of the Springfield plant’s success, local suppliers are still affected by plants outside the region.

“I’m not nervous because of the Springfield plant, I’m nervous because of the Mexico and Maryland plants,” said Robert Van Ghale, plant manager for Superior Trim, located at 5225 Prosperity Drive.

Navistar asked Superior Trim to expand and even build another facility in Mexico to help with the company’s southern plant, but there’s been a decrease in business, Van Ghale said.

Van Ghale would not comment on Superior Trim’s employment numbers but acknowledged some layoffs during the truckmaker’s slowdown through the end of the year. Superior Trim will most likely hire again in January.

Springfield’s Navistar plant might be safe, but suppliers may not be. Auto industry analyst Dave Cole said each job at a manufacturing plant could translate to a job at a supplier or other business.

Auto manufacturers “have an economic multiplier of about 10,” Cole said. “That means that there are nine other jobs that flow out of one job with a manufacturer.”

Cole said these jobs are in two categories: supplier jobs and “spinoff jobs, like clothing stores, supermarkets and restaurants.”

Navistar’s Campbell wants to make cuts to plants to restore the company to profitability next year, but it may not be enough.

Gimme Credit, an independent research firm, placed the company in its high yield bottom 10 report, a biannual report that lists companies expected to under-perform for the following six months.

Vicki Bryan, Gimme Credit analyst, anticipates the next six months will be rough. In a report last week, she said Navistar truck and engine orders are down 20 to 40 percent as of July and manufacturing segment cash is down 38 percent.

“And more recently market demand has deteriorated on faltering global economic conditions, resulting in tumbling commercial truck orders and excessive overproduction,” she said.

Auto analyst Cole was confident that Navistar would recover from its troubles, especially once the engine issues are worked out in 2013. Plus, the trucking industry has improved — but slowly, he said.

“It’s still a very slow process that is in many ways tied to economic growth,” Cole said. “If you’re uncertain about growth, you’ll be unconfident about hiring and buying goods like trucks. Things are picking up a little bit, but the pace has been so low.”


The story so far:

June:

  • Courts overruled the EPA’s decision to fine Navistar $1,900 per noncompliant engine for being too lenient and for not notifying all other truck manufacturers about the option before they complied with emissions standards. Navistar could now face up to $3,800 for each noncompliant engine.
  • Created a “poison pill” measure to prevent shareholders from acquiring more than 15 percent of shares after activist investors began buying large amounts of stock — prompting fear that a forced takeover was in the works.

July:

  • Navistar announced it would stop using its engine technology and opt to combine it with the after treatment technology of its competitors.

August:

  • Navistar offered 6,300 salaried employees buy outs as a cost saving measure.
  • The company was taken out of the running for a $14 billion military contract to engineer and develop 55,000 Humvees.
  • A Securities and Exchange Commission investigation of Navistar’s finances is announced because of concerns about disclosure and accounting.
  • Navistar CEO Dan Ustian retired and was promptly replaced with Lewis Campbell.

September:

  • Navistar announces about 500 people took the buyout, so about 200 more jobs will have to be involuntarily cut.

October:

  • In an interview, new CEO Lewis Campbell announces that Navistar may have to close some plants.

Jobs reporter Everdeen Mason has investigated Navistar’s recent crises — including plummeting revenues, rejected engine technology, potential job cuts and government investigation into company finances — and how it affects more than 850 workers at the Springfield plant.

Confirmed local Navistar suppliers

  • AOT Inc., 4800 Gateway Boulevard, Springfield
  • Kaffenbarger Truck Equipment, 10100 Ballentine Pike, New Carlisle
  • Benjamin Steel Co., 777 Benjamin Dr., Springfield
  • Superior Trim, 5225 Prosperity Dr., Springfield
  • Beech Manufacturing Co., 118 North Hampton Rd., Springfield
  • Kreider Corp., 2000 S. Yellow Springs St., Springfield
  • Ohio Distribution Warehouse, 1570 Muzzy Rd., Urbana

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