Tax Benefit Aids Navistar’s 3Q; Plans Job Cuts
Navistar International Corp. reported a quarterly profit on Thursday (Sept. 6) after a $196 million tax benefit offset the high costs of its unsuccessful program to develop a new style of diesel engine.
Reuters reported that the U.S. maker of International-brand heavy trucks motorhomes and school buses also said it had begun looking to sell operations and was planning layoffs this quarter as it aims to cut operating costs by $150 million to $175 million next year as part of a push by newly named interim CEO Lewis Campbell. Navistar is also parent to RV builder Navistar RV, formerly Monaco RV LLC.
Navistar said net income had dropped to $84 million, or $1.22 per share, in the third quarter ended on July 31 from $1.4 billion, or $18.24 per share, a year earlier.
Without the tax benefit, the company would have lost $100 million, compared with a year-earlier loss of $54 million, also excluding special items.
Sales fell 6.1% to $3.28 billion from $3.49 billion.
“Clearly we are not pleased with these results,” Campbell said in a statement.
CEO Daniel Ustian, a 37-year veteran of the Lisle, Illinois-based company, retired last week and was replaced with Campbell. It also promoted Troy Clarke to the new role of president and chief operating officer.
The company said a combination of staff buyouts completed during its third quarter and layoffs to come in the fourth quarter would reduce its annual expenses by $70 million to $80 million.
Navistar had struggled to win U.S. Environmental Protection Agency (EPA) approval for its new diesel engine. Unlike rivals such as Paccar Inc. and Volvo AB, the company was attempting to limit emissions of the greenhouse gas nitrogen oxide without using the additive urea.
Last month, Navistar abandoned that effort, saying it would instead begin selling trucks with engines from Cummins Inc (CMI.N) early next year. In the meantime, it is paying fines of up to $3,755 per noncompliant engine it sells after the EPA last week nearly doubled the penalties it is imposing.
Navistar shares have lost about half their value over the past year, and the company has drawn the interest of activist investors including MHR Fund Management LLC and Icahn Associates Corp. Each of the two has a stake approaching 15% — the point that would trigger a poison-pill defense the company adopted in June.
The company’s four largest shareholders – a list that also includes Franklin Resources Inc and Gabelli Funds – collectively own more than 55% of Navistar.
To view the entire report click here.