Navistar May Consolidate Engine Production

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Published March 21, 2013

| FOXBusiness

Navistar International’s (NAV) chief operating officer Troy Clarke said the truck maker is considering options for consolidating engine production, according to a report from Dow Jones Newswires.

Clarke, who was at the Mid-America Trucking Show in Louisville, Ky., on Wednesday, did not provide details about plant closings. He said the company has more engine plants than it needs, and a decision on possible consolidation will likely be made in three months.

"We build engines in three places and none of them is fully utilized. You just can't make any money doing that,” said Clarke, who will replace interim CEO Lewis Campbell next month. “Under-utilized manufacturing capacity is just a cost and it's a cost that we don't have to bear.”

Navistar has two engine plants in Huntsville, Ala., and one in Melrose Park, Ill. One of the plants in Huntsville was opened to build a 15-liter engine that the company decided last year to cut from production. Navistar now purchases 15-liter engines from Cummins Inc. (CMI).

Also last year, Navistar shifted production of heavy-duty trucks from its Garland, Texas, plant, which was shut down. The trucks are now made at plants in Mexico and Springfield, Ohio.

Clarke said consolidation of engine production is a more difficult decision than the company’s move to consolidate truck production.

“We had invested in this build-any-truck-at-any-plant [system], so shutting a [truck] plant down was easier for us to do than on the engine side,” he said.

Clarke has undertaken an effort recently to cut costs at Navistar, which lost $3 billion last year amid higher warranty expenses.

Navistar also took on a costly strategy to deal with diesel-engine exhaust. The Lisle, Ill.-based company has been unable to meet U.S. regulations for lowering nitrogen oxide in engine exhaust, and the Environmental Protection Agency fined Navistar last year. Navistar has said it expects the EPA to certify its 13-liter engine by the end of March.

Shares of Navistar were trading 13 cents lower to $35.91 after Thursday’s opening bell.

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