Navistar’s president and CEO told investors Monday the company’s long financial recovery is over after the truck maker reported solid financial results in 2018.
The company reported net income of $340 million in 2018, compared to $30 million for fiscal year 2017. Navistar announced fourth quarter income of $188 million. The past year was important for the company, said Troy Clarke, Navistar’s president, chairman and CEO.
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“It’s the year we’re no longer preoccupied with the past,” Clarke said. “We are facing forward.”
Navistar struggled financially for several years after an engine technology system for heavy-duty trucks that failed to meet emissions standards set by the Environmental Protection Agency. Navistar abandoned that technology in 2012, despite records that show the company spent about $700 million on the system.
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Michael McDorman, president and CEO of the Chamber of Greater Springfield, said the company’s Springfield plant was in danger of closing just a few years ago. Navistar had as few as 300 workers in Springfield as recently as 2010, but those numbers spiked as the truck maker restructured and shuttered other facilities to cut costs and become more efficient.
Now the Springfield plant has close to 2,000 workers, and members of the national United Auto Workers union announced approval of a new, six-year contract with the company that will secure labor peace for both sides moving forward. That deal covers members of the UAW Local 402, which represents the majority of workers in Springfield. The UAW Local 402 is also negotiating a separate deal with the company that covers issues such as work rules at the Springfield plant.
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“Now you look at the number of trucks that are coming off the line every day, to realize we have a six-year deal at this facility, that bodes will for the foreseeable future,” McDorman said of the Springfield plant.
Company officials said revenue growth was mostly driven by a 45-percent increase of truck and bus sales in the U.S. and Canada. The company reported annual revenue growth in all four of its segments. The truck segment, which includes the Springfield plant, reported a profit of $397 million for 2018, compared to a loss of $6 million last year.
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The improvement was primarily the result of higher sales and a decline in used truck losses. The gains in the truck segment were partially offset by higher commodity and structural costs, as well as the impact of supplier constraints, according to information from the company.
“2018 was a very strong year for the industry, and a breakout year for Navistar,” Clarke said. “We were the only truck (manufacturer) to grow Class 8 share during the year. With the industry’s newest product line-up, superior quality and a strong focus on customer uptime, we expect to gain market share in 2019 for the third year in a row.”
Navistar also recently announced an agreement earlier this month in which affiliates of Cerberus Capital Management, L.P will acquire a majority interest in Navistar Defense, the company’s defense business.
When that deal closes, Cerberus will become a 70 percent owner and Navistar will remain a 30 percent owner, Navistar officials said. The agreement also includes an exclusive long-term supply agreement for commercial parts and chassis. That deal is expected to close in the first quarter of 2019.
The News-Sun reported earlier this year that near-record demand for heavy trucks is boosting revenue for manufacturers like Navistar and benefiting suppliers and others tied to the industry.
The company also boosted its revenue projections for 2019 t0 $10.75 billion to $11.25 billion, up from projections of 10.1 billion and $10.4 billion.
Next year is expected to be another solid year for the company, Clarke told investors Tuesday. He said the company believes there is room for further growth by gaining more market share and growing its parts revenue business.
“We have only begun to regain the market share we lost earlier this decade,” Clarke said.
The Springfield News-Sun has provided award-winning coverage of Navistar and its impact on the region’s economy, including its financial struggles and long financial recovery. The paper will continue to provide unmatched coverage of Navistar and its workforce.
By the numbers:
2,000 — Estimated workers in Springfield
$340M — Net income in 2018
$188M — Fourth quarter income in 2018
$30M — Net income in 2017
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