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Navistar implements across-the-board cuts to conserve cash


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Alan Adler, Freight Waves  /  April 14, 2020

Navistar International Corp. is making numerous cash-conserving moves as its plants remain shuttered because of supply chain issues and little demand for new equipment during the coronavirus pandemic.

Navistar will build trucks subject to being able to get parts and components and based on market conditions and the health of its workforce. The first part of that calculus is iffy at best.

The truckmaker is extending the production suspension at its plant in Springfield, Ohio, through early May. The company’s service facilities and parts distribution centers continue regular operations.

“Navistar is not immune to the reality of the COVID-19 pandemic,” Troy A. Clarke, chairman, president and CEO, said in a statement Monday. “The extent of this virus is unprecedented, and our personal lives, businesses and global economies are being impacted by events beyond our control.”

That means protecting the $1 billion in consolidated cash and cash equivalents and manufacturing cash and cash equivalents on hand as of Friday. It is immediately implementing a series of temporary cost-reduction measures that will conserve $300 million in the fiscal year ending Oct. 31. The cuts include:

  • Postponing 30% of capital expenditures and 30% of information technology project spending.
  • Deferring $162 million in pension contributions until 2021, and employer payroll tax payments and certain Employee Retention Tax Credits. Both are allowed under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
  • Deferring 35% of Clarke’s $1,027,183 base salary and Navistar Board of Directors’ compensation.
  • Reducing the workweek by 20% for contractors.

The base salary of U.S.-based, salaried exempt, nonrepresented employees will be cut 10% to 30% effective April 20 through Dec. 31. It will be repaid with interest no later than March 15, 2021, similar to the approach taken by General Motors, where Clarke and several other executives worked before joining Navistar.

Navistar previously deferred merit salary increases and delayed 401(k) company match contributions until 2021. More cuts will be made if needed, the company said.

“We held a strong manufacturing cash position heading into this pandemic, and the actions we are taking allow us to manage cash flow in response to these extraordinary times,” said Walter Borst, Navistar executive vice president and chief financial officer.

“These actions do not impact the longer-term benefits of our Navistar 4.0 strategy but may influence the timing of when the plan’s full potential is realized, which we will reevaluate once the post-coronavirus economy is better understood,” he said.

Navistar 4.0 includes building a new manufacturing plant near San Antonio; increasing earnings before interest, taxes, depreciation and amortization (EBITDA) margin to 12% by 2024 from the current 8%; and achieving a combined 25% market share by 2025 compared with a combined 18.8% share at the end of fiscal 2019.

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KSC, So what was the driver behind their plan for a new plant.  Their sales are way down from what they were.  All their other facilities were at max utilization?  I can't believe the GM JV for class 4-6 is that significant.  And they had to have plenty of capacity at Escobedo with Blue diamond gone.  ??? Or will the "new" Nafta force some volume from Mexico back to US?

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1 hour ago, Red Horse said:

KSC, So what was the driver behind their plan for a new plant.  Their sales are way down from what they were.  All their other facilities were at max utilization?  I can't believe the GM JV for class 4-6 is that significant.  And they had to have plenty of capacity at Escobedo with Blue diamond gone.  ??? Or will the "new" Nafta force some volume from Mexico back to US?

I do not yet know Bob. It appears to be a compromise plant, in the US but adjacent to Mexico, assembling truck in country with a large portion of imported parts.

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I have been wondering about the enigmatic San Antonio plant too.  I have not heard much solid information about it, but I have heard some interesting rumors.  First, Navistar (and I guess GM) figure they can sell as many International CV/Silverado medium duty trucks as they can build.  The roll-out was slow and the GM strike also hampered production of those trucks, but supposedly (at least before the current crises) orders were outpacing production.  Complicating matters is the fact that the CV/Silverado is build on the same line as the MV, which has also been enjoying strong sales.  In addition, Springfield also has been assembling GM van cut-away chassis.  Keeping that in mind:

Navistar has stated no specific product for the upcoming San Antonio plant other than the plant will be flexible enough to build class 6 through 8.  I will speculate that could refer to a MV/DuraStar replacement, as those trucks currently span from class 6 to 'baby' 8 tandems.

I have a hunch that Navistar is looking closely at the stripped chassis market, a segment they have not had much presence in since selling off Workhorse (maybe there was a no-compete?).  And it just so happens the class 4 CV looks like it has a dandy chassis for a UPS or FedEx truck, particularly if GM comes through with a gasoline engine for it.  If true, that might be yet another product for Springfield.

Navistar's GM cut-away van business is probably not much volume, but I have heard it mentioned that Navistar would like to get all Chevy Express/GMC Savanna van production.  Those old dinosaurs continue to sell in good numbers, and if GM could transfer their production to Navistar it would free up their Wentzville plant for more Chevy Colorado/GMC Canyon production, popular pickup trucks with high margins.  If Navistar was to get all GM's large van production, I figure they would be built at Springfield.

I do not think Navistar or GM has any intention of expanding the CV/Silverado medium duty beyond class 6, but some of the upgrades I hear are being considered for the trucks, such as a gasoline engine and a 'dock height' chassis/wheel option, will increase sales.  

So to put it all together, I will guess that Navistar intends to build a new MV/Durastar replacement at San Antonio.  This move could free up Springfield for much higher CV/Silverado medium duty production and allow for a new stripped chassis model to be built there.  In addition, it opens up the possibility for Navistar to assume all of GM's full size van production if they want it.  My hunch is Navistar could shoot past Ford in class 4/5 sales (particularly if Ford moves F-450/550/600 production back to KTP) and potentially top Ram 4/5 sales with higher plant capacity and 2 large dealer networks (International and Chevy).   

I will close with saying I have no idea how/if Traton fits into this, and I will not even guess at a time line considering the current crisis.   

    

            

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As you have said RoadwayR I do still hear they are going to bring a gasoline and air brake option. Especially now that they see all the school buses and ambulances that have switched back to gas engine now.

And also, GMC and International and Workhorse used to have a pretty good share for RV and motorhome chassis. They'd be stupid to ignore that segment now that they have the CV/Silverado's. They are a perfect fit for that, have the biggest dealer network, and many buyers of RV's are familiar and comfortable with GMC/Chev products.

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So this plant in Texas....is it the same one they had or a new one? My 05 Paystar 5600i was Texas built, but then after that I remember  Cat using that plant for their version of the truck.

But then did Cat end up with the plant or did they move production? Because when they discontinued the Cat truck I remember reading they retooled that plant to make excavators?

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23 minutes ago, Bullheaded said:

So this plant in Texas....is it the same one they had or a new one? My 05 Paystar 5600i was Texas built, but then after that I remember  Cat using that plant for their version of the truck.

But then did Cat end up with the plant or did they move production? Because when they discontinued the Cat truck I remember reading they retooled that plant to make excavators?

Navistar is talking a new plant near San Antonio at Mitchell Lake.

The previous Navistar plant in Texas, the former Marmon truck plant, was in Garland (a northeast Dallas suburb).

(Peterbilt's Denton plant is located northwest of Dallas.)

https://www.google.com/maps/place/Mitchell+Lake/@29.3336456,-98.5218553,11z/data=!4m5!3m4!1s0x865c562c3dc72d35:0xc9ae54fb9bc22e6d!8m2!3d29.2797557!4d-98.4911065?hl=en

https://www.google.com/maps/place/Garland,+TX/@32.8273713,-96.9442296,10z/data=!4m5!3m4!1s0x864c03c1db5fc275:0x71fbdcb38623cd0!8m2!3d32.912624!4d-96.6388833

https://www.google.com/maps/place/Denton,+TX/@33.304107,-97.156147,9z/data=!4m5!3m4!1s0x864c4ca0c088b1d1:0x724474cb4814fb1b!8m2!3d33.2148412!4d-97.1330683?hl=en

The new CAT excavator plant is in Victoria, Texas, between Houston and San Antonio towards the coast.

https://www.caterpillar.com/en/careers/career-areas/victoria.html

I'm unsure if the Denton plant is still active..............http://www.buzzfile.com/business/Caterpillar-309-578-8639

CAT closed the Waco plant in 2018....................https://www.wsj.com/articles/caterpillar-to-close-texas-plant-review-illinois-factory-1521225422

 

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speaking of hookers it must tough to do your thing 6 feet apart ?? went to 5 guys in Florence on my way to Prescott AR, had to order by phone, pay with credit card over phone (no infected green backs) then delivered food to a tub in closed area, close door upon which I could enter where tub was and retrieve my food, motel makes you use night window in middle of day, wow the left media should be proud of themselves for such good work. 

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just trying to be understanding to hard working women,  always have been impressed by hard working women no matter their profession. after being around some greedy women I tend to lump most of them together, either those that take cash or those that take houses and cars.

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