June 10, 2013
Navistar International Corporation announced Monday a second quarter net loss of $374 million, more than double the $172 million loss posted a year ago.
Troy A. Clarke, Navistar president and chief executive officer, said he wasn’t satisfied with the company’s financial performance but was encouraged by the progress made in its “turnaround plan.”
“We still face some significant, yet solvable challenges, primarily in the areas of higher pre-existing warranty costs for our earlier EPA 2010 emissions level engines, as well as in rebuilding sales and restoring market share,” he says. “However, we are already implementing the right leadership and business process changes to effectively address these priority issues.”
Navistar says the year-over-year decline was tied to selling fewer trucks and higher pre-existing warranty adjustments of $164 million in the second quarter 2013, primarily related to EPA 2010 emissions level engines.
Manufacturing revenue in the quarter was $2.5 billion, down 23 percent from the second quarter of 2012. The decline reflects a 14 percent drop in overall industry demand and lower market share during the company’s emissions strategy transition. This was partially offset by stronger volumes in the South America engine business.
Among the bright spots was a profit of $91 million from the company’s parts segment, compared to $41 million in the second quarter of last year.
The engine segment recorded a loss of $138 million, compared with a year-ago second quarter loss of $108 million and recorded $107 million in charges for adjustments to pre-existing warranties and $12 million in non-conformance penalties.
“We delivered on a number of our near-term priorities this quarter,” Clarke added. “We exceeded our cash guidance, continued to over-achieve on our structural cost reduction efforts, and obtained regulatory approval for our MaxxForce 13-liter engine with SCR, which we launched on time in our ProStar truck the last week of April. We were also pleased with our ongoing progress in shedding non-core assets that are not providing adequate returns on investment.”
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.
In the current third quarter, Navistar sold its RV business.
As divestment of select ventures will be on-going, Navistar says the future is built on the strength of improving products.
“Our new SCR-based heavy-duty offerings are the highest quality trucks we have built in more than a decade and they have improved fuel economy, a combination that positions us to hit our previously stated goal of stronger sales and increasing market share during the second half of 2013 and into 2014,” said Jack Allen, Navistar’s chief operating officer. “We are off to a strong start as May orders were up 38 percent versus the average sales rate for the previous quarter, driven higher by strong interest in the MaxxForce 13-liter with SCR and the ProStar ISX.”
The company recently announced the hiring of industry veteran Bill Kozek to run its North America Truck and Parts group, and the naming of Bill Osborne, who spent more than 20 years in the automotive industry before joining Navistar in 2011, to head up global quality.