Navistar quarterly revenues
2012
- 3rd quarter: $84 million net income
-2nd quarter: $172 million net income loss
-1st quarter: $153 million net income loss
2011
-4th quarter: $255 million net income
- 3rd quarter: $1.4 billion net income
-2nd quarter: $74 million net income
-1st quarter: $6 million net income loss
Navistar International Corp. will cut about 200 salary jobs and announced other steps Thursday to stop losses that have plagued the company this year.
The company reported income of $84 million in the third quarter, the first net income gain for the company this year.
Wall Street reacted favorably: Navistar stock rose to its highest in three months, closing up 17 percent to $23.97.
The truck manufacturer employs 850 workers in Springfield.
Navistar lost $172 million in the second quarter and $153 million in the first quarter this year.
The company will look to cut spending, minimize contractors and reduce the workforce, said Steve Schrier, Navistar spokesman. It also will focus on trucks, engines and parts and will look to make cuts to “non-core” businesses. Schrier did not disclose what these are.
In July the company offered 6,300 salaried employees, some of whom are in Springfield, a voluntary separation package in hopes that 20 percent would accept. Only 500 employees took the buyout.
“We are forced to go to our final option: reduction of force,” Schrier said.
After the voluntary separations, the company will need to cut about 200 more jobs, most of which will be at the corporate level.
Schrier could not disclose if any of the jobs lost will be in Springfield. But already the company is cutting some temporary workers from the Springfield plant.
Navistar hired this year for the first time in a decade and has used temporary workers as well. Jason Barlow, president of United Auto Workers Local 402, represents many local employees and said only a small percentage of temporary workers will be let go.
“We’re optimistic that it will be a short period of time once production is back up,” he said. “Everyone is waiting on what corporate decides to do.”
Barlow said Springfield manufactures products that are considered “core” products, so he is not concerned about what Schrier said would be possible cuts in “non-core” segments.
He said he hopes Navistar will consolidate more products in Springfield, where the building is paid for and has an available extra line and second shift.
Job cuts could save Navistar $70 million to $80 million. Navistar said its goal is to reduce total operating costs by $150 million to $175 million a year starting in 2013.
However, 2013 is when Navistar rolls out its new engine — a combination of its own technology and the after treatment its competitors use to reduce carbon emissions. The company abandoned its own technology after realizing the engines would not reach the emissions standards set by the Environmental Protection Agency before banked emissions credits run out.
Once the credits run out, the EPA will penalize the company up to $3,800 per noncompliant engine sold.
Stocks have dropped most of this year, and activist investors have been snapping 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.
National analyst Dave Cole believes Navistar still will come out on top.
“It’s really hurt their business, but it’s a temporary bump in the road and they’ll come out stronger. I don’t think that’s a big deal,” Cole said.
Cole argues that Navistar’s restructuring is typical of the auto industry, especially in these economic times.
“It’s a time for companies to really take a strategic plan and do some tough things no one likes. Many companies are going through exactly the same thing,” Cole said.
National high yield analyst Vicki Bryan maintains Navistar is in trouble and that its struggle is far from over.
Bryan, of Gimme Credit, also doubts Navistar’s compliant engines will be ready when the company says it will be in 2013, so it will have to pay EPA penalties.
“This does little to assuage our concerns about weak sales and red ink for Navistar for the foreseeable future,” Bryan said.
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