By Rip Watson, Senior Reporter This story appears in the Nov. 5 print edition of Transport Topics.
Navistar International Corp. last week announced plans to cut costs by closing its Garland, Texas, plant, a move that affects 900 workers but not the company’s overall manufacturing capacity.
The plant primarily makes LoneStar, TranStar, WorkStar and PayStar heavy trucks, as well as military vehicles. Operations are scheduled to end next year, with production shifted to plants in Springfield, Ohio, and Escobedo, Mexico.
“Currently, we have all the capacity we need to achieve historic market-share levels,” Steve Schrier, a Navistar spokesman, told Transport Topics. “We can easily absorb a 30% increase in volume without Garland, and we can add more capacity in our existing plants.”
The plant closing was announced as Navistar searches for ways to lower its costs under the direction of Lewis Campbell and Troy Clarke, its new senior leadership. Campbell and Clarke, who took over after the departure of former CEO Daniel Ustian, are steering the company’s product lineup to include selective catalytic reduction aftertreatment.
“Closing a facility is always difficult because of its impact on the many great people who’ve been part of our company,” said Clarke, Navistar’s president and chief operating officer. “The fact is that Navistar has too much manufacturing capacity in North America, and we must take quick action to improve our business and position the company for long-term success.”
Schrier would not say how many trucks currently are being made at Garland or give a breakdown of how much of Garland’s production would be shifted to each of the other plants.
He also did not rule out further closings or similar cost-reduction moves.
“Everything is on the table for review to drive long-term profitability and significantly improve our financial performance,” he said. “While we have not yet made any decisions, there could be additional plant/facility closures or sales if we determine that those actions will help to aid Navistar’s return to profitability.”
Navistar lost $241 million in its first three fiscal quarters of 2012, reversing a profit in the year-earlier period.
Schrier said the Garland plant was chosen for shutdown because there was no room for expansion and facilities there were constrained by low ceilings and narrow hallways. By closing the plant, Navistar hopes to cut its costs by as much as $35 million annually.
It is also planning a charge of no more than $10 million in its fiscal fourth quarter to pay severance and other closing-related costs of $30 million to $50 million in subsequent charges.
The move should help union members because the Garland plant was nonunion, but workers at the other facilities are affiliated with labor organizations.
The Garland plant will be the fourth one Navistar shut down in recent years. It also has closed facilities in Chatham, Ontario, and Coburg, Ore. Production currently is halted at a chassis plant in Union City, Ind., which also is slated for closure.
