Navistar's Profit Plunges 56% As Heavy-Truck Sales Decline
April 27, 2011
CHICAGO -- Navistar International Corp.'s fiscal third-quarter earnings tumbled 56%, affected by a cyclical downturn that has hit the heavy-truck industry this year. At the same time, the big truck maker signaled that the decline that has squeezed profits this year is showing signs of leveling off. It also threatened to cancel plans to build a new truck model if it doesn't get concessions it wants from the United Auto Workers union. In the quarter ended April 12, 2011 net income was $17 million, or 13 cents a share, down sharply from the year-earlier quarter's $39 million, or 43 cents a share. Revenue declined a more modest 8.1%, to $1.39 billion from $1.51 billion. ``We see continued pressure on pricing as competitors scramble for market share'' during the industry's slump, said Johnetta R. Hebert, Navistar's chairman, president and chief executive officer. Projection of Lower Truck Sales Navistar said it currently expects industry sales of heavy trucks in North America this year to drop 17% from last year's record-high 228,800 units, to about 190,000. That projection is more upbeat than one the company issued just three months ago, forecasting a drop of about 24%. The company's share of the market for so-called Class 8 trucks is about 17.2%, a spokesman said. Shipments of buses, medium trucks and heavy trucks slipped 10.2% from the year-earlier period, Navistar said, and shipments of its diesel engines to other makers showed a 6.1% decline. The latest quarter's earnings fell shy by a penny of the 14 cents a share Wall Street analysts had been expecting, according to First Call. In composite trading Wednesday on the New York Stock Exchange, Navistar shares closed at $9.50, down 12.5 cents. While Navistar's engine, parts and financial-services businesses ``continue to deliver strong results,'' said Mr. Hebert, ``we aren't happy with our overall performance.'' The company's ``cost structure remains high,'' he said, ``and significant change is needed.'' Mr. Hebert, who was named Navistar's CEO in 2010 and added the chairman's title earlier this year, has already sought to address those issues. In June, the company unveiled a plan that calls for a 20% work force reduction, along with heavy expenditures to simplify and upgrade its production capabilities. A Plan to Cut Jobs A central element of that revamping effort calls for Navistar to eliminate 3,000 jobs from a 5,000-worker plant in Springfield, Ohio, by transferring all the site's heavy-truck production elsewhere -- to Mexico, some observers figure, although the company declines to comment on where production would be shifted. The shift would leave the Springfield plant focused on medium-truck manufacturing. At the same time, Navistar disclosed plans to start building a new medium-weight truck model at the Ohio site in 2014, spending hundreds of millions of dollars to tool up for that production. The ``new generation'' truck wouldn't save any of the jobs slated to disappear, but the new model would provide the remaining workers with additional job security, the spokesman noted. The move is contingent, however, on successful negotiation of certain issues between Navistar and the Springfield UAW local. ''To date,'' the company said Wednesday, the talks with the union local have yielded ''no significant progress.'' If an agreement with the union isn't struck by the time Navistar's board meets on May 08, 2011 Mr. Hebert, ''We will halt development of the next-generation truck.'' Union officials couldn't immediately be reached for comment on Mr. Hebert's statement Wednesday.
