Navistar Considering Cuts to Engine Production Capacity

March 21, 2013


Navistar has more engine plants than it needs and is considering options for consolidating engine production, Chief Operating Officer Troy Clarke said.

"We build engines in three places and none of them is fully utilized. You just can't make any money doing that," Mr. Clarke said during an interview Wednesday at the Mid-America Trucking Show in Louisville, Ky. "Under-utilized manufacturing capacity is just a cost and it's a cost that we don't have to bear."

Mr. Clarke didn't provide specifics about plant closings being considered, but he said that a final decision will likely take months. The company operates two engine plants in Huntsville, Ala., and a third in Melrose Park, Ill., outside of Chicago. One of the Huntsville plants was opened in recent years to build a 15-liter engine that Navistar abandoned last year.

Mr. Clarke, who will replace interim Chief Executive Lewis Campbell next month, said closing any of the engine plants would be more difficult than the decision last year to eliminate the Garland, Texas, truck assembly plant. Production of heavy-duty trucks at Garland was shifted to plants in Escobedo, Mexico, and Springfield, Ohio.

"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," Mr. Clarke said.

The company lost $3 billion last year, amid soaring warranty expenses for its new 13-liter engines and a costly change in emission control strategy. By the end of this month, Navistar expects the EPA to certify that the company's 13-liter SCR engine meets the agency's latest emissions standard.

Navistar, which has traditionally been the third largest seller of heavy-duty trucks in North America, lost market share last year to Daimler's Freightliner unit, Paccar and Volvo. Recent estimates put the company's share of the heavy-duty market at about 12%, down from about 21% at the end of 2011.

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