Navistar International Corp. swung to a fiscal third-quarter loss as the commercial truck manufacturer logged lower volumes in its core North America truck business, and it also unveiled a cost-cutting program to save $50 million to $60 million annually starting next fiscal year.
MarketWatch reported that for the quarter, ended July 31, Navistar reported a loss of $247 million, or $3.06 a share, versus a year-ago profit of $84 million, or $1.22 a share. The year-ago quarter included an income tax benefit of $188 million. Excluding one-time items, Navistar reported a loss from continuing operations of $2.94 a share versus a year-ago profit of $1.16. Revenue fell 12% to $2.9 billion.
The company attributed the decline in volume to the impact of its transition to its new emissions treatment system and weaker industry conditions.
Navistar has been mired in a stretch of quarterly losses as the company encounters rising costs for warranty claims on its new 13-liter engines and escalating expenses for adopting a different exhaust treatment system for its engines. The company recently exited the RV marketplace, selling its interests to Allied Specialty Vehicles.
Navistar was unable to meet the latest federal standard for reducing smog-causing nitrogen oxide in diesel exhaust with an alternative treatment process advocated by former Chairman and Chief Executive Dan Ustian. The company ended up adopting the same treatment system used by the rest of the U.S. truck industry. The U.S. Environmental Protection Agency (EPA) certified Navistar’s 13-liter engine this spring, but truckers have been reluctant to buy Navistar trucks.
CEO Troy Clarke said he is “encouraged by the growing customer acceptance” of Navistar’s new products. However, he also said the company needs to step up its game financially.
“We are already implementing additional cost reduction and business improvement actions to counter our near-term volume challenges,” he said. “This includes resizing our company to match our current business environment.”
The new program is expected to impact about 500 salaried employees and long-term contractor positions globally. Navistar has about 18,500 employees, according to FactSet.
Navistar International Corp. on Monday said its losses widened in the second quarter as it absorbed higher-than-expected warranty costs and lost sales as it transitioned to a new engine technology.
“We are in the midst of a very extensive turn-around,’’ Jack Allen, Navistar’s chief operating officer, said in an interview. “We are making great progress in many aspects of our turn around, but we also know that we have a lot of hard work to do and that work centers around quality and sales.”
The company divested its RV interests in May with the sale of Navistar RV to Allied Specialty Group Inc.
During a conference call Monday (June 10), Troy Clarke, Navistar president and CEO, said, “We thought that progress would have come faster. It didn’t.’’
Navistar was expected to narrow its losses to put it on track to return to profitability by the end of the year. Asked if that plan was still on the table, Clarke said the company is taking things “one quarter at a time.”
Clarke said pre-existing warranty costs of $164 million overwhelmed the second quarter, but he doesn’t expect a repeat this quarter. The costs are related to engines that Navistar built using technology that failed to meet 2010 federal emission standards.
Last year, Navistar changed course and began outfitting its trucks with 15-liter engines from competitor Cummins Inc. In April, it started selling trucks with its own 13-liter engines that combine its technology with that of Cummins to reduce levels of smog-causing nitrogen oxide.
Clarke said he also expects fewer one-time charges in the second half of the year related to cost-cutting moves such as layoffs, plant closures and sales of businesses. The company said it is on track to exceed its cost-cutting goal of $175 million this year.
Lisle, Ill.-based-based Navistar International Corp. said Tuesday (April 16) that it received federal approval for its big-bore diesel engines, according to a report by the Chicago Tribune.
“We’ve reached another milestone in our emissions strategy transition and are on track to deliver our first ProStar units with our SCR-based 13-liter engines at the end of April,” Jack Allen, Navistar executive vice president and COO, said in a statement.
Navistar spent more than $700 million over a decade designing a engine technology that failed to comply with 2010 federal emission standards. To sell the engines after the 2010 deadline, the company used emission credits and paid fines.
Last year, shortly after the U.S. Environmental Protection Agency (EPA) nearly doubled the fines to about $4,000 per engine, Navistar decided to build an engine that combines its technology with that of competitor Cummins Inc. Under the deal with Cummins, Navistar also will outfit its trucks with 15-liter engines.
The partnership is part of the company’s plan to return to profitability by the end of the year. The plan also includes layoffs, selling business units and closing manufacturing plants.
“If I look back, it’s been a nearly three year journey to get certification,” said Basili Alukos, an analyst with Chicago-based Morningstar. “It’s a huge relief.”
Alukos said that while the company can focus on recouping market share, the slow pace of the economy is a concern for Navistar and other manufacturers. Navistar’s market share of heavy duty trucks was about 11% in the first quarter, down from estimates of 21 percent in 2011.
Navistar operates 18 plants in North America: 11 make and assemble trucks, buses and chassis; six build engines; and one makes rail cars. Navistar also builds recreational vehicles through its Navistar RV subsidiary.
Navistar International Corp. today (April 16) announced that its board has appointed Jack Allen as executive vice president and COO, effective immediately. Allen, 55, has been president of the company’s North America Truck and Parts business since June 2012.
“Jack is a results-focused leader with a deep understanding of the commercial truck industry and Navistar. He has successfully run nearly every important part of our business at one point during his 31-year career at the company,” said Troy Clarke, Navistar president and CEO, in a news release. “Together, Jack and I look forward to working with our experienced leadership team and talented group of employees as we take further steps to strengthen our North American core businesses, improve quality and customer satisfaction, drive future profitability, and deliver value to shareholders.”
Prior to his most recent assignment, Allen served as president, North America Truck since 2008. Previously, he was president of Navistar’s Engine Group, where he led major business initiatives including the acquisition of Brazilian engine producer MWM and a partnership with MAN of Germany. He also has served as vice president and general manager of the company’s parts organization.
Allen joined the company in 1981 as a design engineer. He holds a bachelor’s from the Milwaukee School of Engineering and an MBA from the Illinois Institute of Technology. He is a board member of The Valspar Corp. and also serves on the boards of the Milwaukee School of Engineering’s Corp. Council and Lurie Children’s Hospital of Chicago.
Navistar International Corp., its former CEO and the company’s CFO are being accused of misleading shareholders about a diesel engine technology that failed to meet 2010 federal emission standards, according to a Chicago Tribune report.
A lawsuit filed in federal court in Chicago alleges that former CEO Dan Ustian and CFO Andrew Cederoth continued to say that the company’s big bore diesel engines would meet federal emissions standards when they never did. As a result of his statements, the lawsuit alleges, Navistar common stock traded at “artificially inflated prices,” reaching a high of $70.17 in April 2011.
“When defendants revealed Navistar’s true financial condition and future business prospects, the price of Navistar common stock fell over 69% from its Class Period high,” according to the lawsuit.
The lawsuit was filed in March on behalf of Construction Workers Pension Trust Fund and “others similar situated” that purchased shares between November 3, 2010 and August 1, 2012. The pension trust fund purchased 6,709 shares of Navistar stock for a total of roughly $246,000 and sold them for about $165,000.
During that same period, the lawsuit alleges, Ustian sold 55,469 shares for nearly $3.9 million and Cederoth sold 9,548 shares for $642,962.
A company spokesman said Navistar does not comment on pending litigation.
In his first official outing as Navistar International’s new CEO, Troy Clarke jumped right in Friday (March 22) morning by assuring the audience of supplier executives that “Navistar’s not going anywhere but up,” according to a report by TrukcingInfo.com.
“Recently we have come through some challenging issues,” he said, referring to problems such as the company’s financial losses and its failed attempt to meet 2010 emissions regulations without using selective catalytic reduction. “But if I can paraphrase Mark Twain, the rumors of our demise have been greatly exaggerated. We are moving ahead with renewed dedication and resolve.”
Clarke’s speech drew one of the largest crowds the Heavy Duty Manufacturers Association has ever had for its annual Breakfast Briefing at the Mid-America Trucking Show.
Moving on to broader issues, Clarke outlined four of the top issues that will affect where the trucking industry manufacturer and supplier business will be focusing its efforts: The price of fuel, the driver shortage, regulations, and economic-driven changes among carriers.
“We’re gathered on the biggest stage of the trucking industry, the Mid America Trucking Show,” Clarke said.
While uncertainty characterizes the external climate the industry operates in, he said, including such issues as sequestration and regulation, “We can only blame Washington for so much. No industry is immune from change. In fact, change is the only constant we can count on. We succeed by turning uncertainty and the need for change into opportunity.”
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Navistar International Corp. showcased its initial production build of the International ProStar truck equipped with MaxxForce 13 with SCR today (March 20) at the 2013 Mid-America Trucking Show. According to a press release, the company has announced that customer deliveries are beginning next month.
“This signals yet another key milestone in our operating plan and further demonstrates our commitment to delivering value for our customers,” said Jack Allen, president North America Truck and Parts, Navistar. “Our customers are the focal point of everything we do, and this technology was implemented with their needs top-of-mind.”
The MaxxForce 13 features the proven Cummins Emission Solutions after-treatment system and includes numerous improvements to the turbochargers, EGR valves, high and low temperature coolers and exhaust bellows, states the release. The electronic control module recalibration to the SCR system will help the engine deliver more advanced fuel economy and improved overall power and throttle response.
ProStar with MaxxForce 13 with SCR offers fleets and drivers the efficient power of a big bore engine with lighter weight components to maximize payload. Its design and compacted graphite iron (CGI) block construction make it one of the lightest weight 13-liter engines in the industry. Horsepower options range from 365 to 475 with 1,250-1,700 lb-ft. of torque and the engine delivers excellent fuel economy and performance.
The remaining lineup of International heavy-duty truck models will transition to SCR-based clean engine technology in a phased launch throughout the year.
AMP Holding Inc., through a newly formed subsidiary, Amp Trucks Inc., has completed the acquisition of the Workhorse brand, logo, IP, patents and assembly plant from Workhorse Custom Chassis LLC, a wholly owned affiliate of Navistar International Corp. and has today (March 14) taken possession of the assembly plant.
The Union City, Ind., assembly plant has the capacity to produce up to 30,000 chassis per year. AMP plans to produce step-ans and other vehicle types for the North American medium-duty, commercial truck market at the facility.
AMP will manufacture its all-electric Workhorse chassis along with gasoline-powered, and alternative-fuel powered models and will be sold and supported through the existing Workhorse network of 440 dealers. This acquisition positions AMP as the first truck OEM in the United States to offer medium-duty commercial-grade electric, gasoline, propane, hybrid and CNG vehicles.
AMP Chairman Jim Taylor said, “We look forward to owning Workhorse, a highly respected brand, and having the opportunity to install our electric power train in a well-proven chassis and, at the same time, continuing to satisfy the needs of long-standing Workhorse customers.”
Navistar International on Thursday (March 7) tapped insider and former General Motors exec Troy Clarke as the truck and engine maker’s next CEO, revealed plans to split its CEO and chairman roles and posted stronger-than-expected quarterly results.
Fox Business reported that Wall Street cheered the major moves, sending shares of the automotive company racing 27% higher in late afternoon trading.
Navistar said Clarke, the company’s COO since January 2010, will replace interim CEO Lewis Campbell on April 15.
“Today I am pleased to announce our turnaround is firmly underway and our return to profitability is clearly in sight,” Campbell said in a statement. “Troy is the right executive to lead the company forward at this time, and I am confident Navistar will continue to build on its momentum.”
Billionaire activist investor Carl Icahn, who owns a stake in Navistar, also praised the selection of Clarke.
“We are behind Troy 100% in his efforts to build Navistar into a focused, competitive and profitable truck and engine manufacturer,” Icahn said in a statement.
While Clarke, 57, will remain Navistar’s president, the company’s board has decided to split up the CEO and chairman titles, selecting current director James Keyes to serve as non-executive chairman.
“I want to thank Lewis for his guidance and leadership during this period,” Clarke said. “Working together, we have implemented a number of important actions to set Navistar on the right path, and the company now has a strong platform to build upon going forward.”
Clarke joined Navistar after a 35-year stint at GM, where he served as president of GM North America and president of the auto maker’s Mexican business.
Meanwhile, Navistar revealed a lighter-than-expected loss for the fiscal first quarter.
The company said it lost $123 million, or $1.53 a share, last quarter, compared with a loss of $153 million, or $2.19 a share, a year earlier. Analysts had called for a deeper loss of $1.76 a share.
Revenue slid 12% to $2.64 billion, trailing the Street’s view of $2.81 billion.
Navistar International Corp. today (March 7) announced a first quarter net loss of $123 million, or $1.53 per diluted share, compared to a net loss of $153 million, or $2.19 per diluted share, a year ago. Sales during the period totaled $2.6 billion versus $3 billion in the year ago quarter.
Excluding discontinued operations, Navistar recorded a first quarter loss from continuing operations of $114 million, or $1.42 per diluted share, compared to a first quarter 2012 loss from continuing operations of $144 million, or $2.06 per diluted share. The Lisle, Ill.-based company builds RVs through its Navistar RV division.
In a separate announcement, Navistar reported that its board appointed Troy A. Clarke as president and CEO, effective April 15. Clarke, currently the company’s president and COO, will also join the board. At the same time, Lewis B. Campbell, who has served as executive chairman and interim CEO since August 2012, will step down from those positions and from the board. James H. Keyes, who has served as a board member since 2002, will become non-executive chairman, also effective April 15.
The company reported year-over-year EBITDA increased $163 million mainly due to $109 million in lower warranty adjustments and $70 million in reduced SG&A expenses, partially offset by lower volumes. Manufacturing revenues in the quarter were $2.6 billion, down 12 percent from the first quarter of 2012. The decline was reflective of lower overall industry demand and lower market share resulting from the company’s clean engine strategy transition.
“We are beginning to see concrete progress on each of our near-term priorities – improving our quality, launching our new SCR engine programs on schedule and delivering on our 2013 operating plan, which will put us on a path to profitability. Although we reported a first quarter loss, we believe we made solid progress in the first quarter toward these goals,” said Campbell. “That progress includes submitting our 13-liter SCR engine for certification ahead of schedule, kicking off of pilot production for ProStar+ vehicles with the 13-liter SCR engine earlier this week, strengthening our quality performance and effectively managing things that we can control. These include aggressively managing inventories and significantly reducing discretionary spending enterprisewide.”
The company finished the first quarter with $1.19 billion in manufacturing cash and marketable securities, exceeding its cash guidance range of $950 million to $1.05 billion. Contributing factors included improvements in net working capital, delayed capital expenditures and better than expected structural costs.
“In order to move forward on our path to profitability, we recognize the need to do even more given current industry volumes and our short-term market share outlook in North America,” said Campbell. “We believe our market share will begin to improve in the second half of 2013 with the full launch of our clean engine lineup. And while we are already on track to exceed our goal of reducing structural costs by $175 million this year, we recently launched a benchmarking initiative that has already identified additional cost savings to further lower our breakeven point in 2013.”
The company also continues to make progress on its return on invested capital (ROIC) initiatives. Already in the second quarter, Navistar completed the sale of its equity interests in its India truck and engine joint ventures; completed the sale of its Workhorse Custom Chassis brand; and subleased a portion of its Cherokee, Alabama manufacturing facility to a railcar manufacturing company.
Navistar’s manufacturing cash guidance for the end of the second quarter ranges from $1 billion to $1.1 billion.