Navistar Threatens to Close Ontario Plant Permanently

This story appears in the July 6 print edition of Transport Topics.

Navistar Inc. closed its sole heavy-duty truck plant in North America outside Mexico when the union contract expired and said it would reopen the factory in Chatham, Ontario, only if a new agreement was reached that gave it “flexibility” over production and allowed Navistar to run a “much smaller operation.”

The plant employed about 500 people who had been producing 35 Class 8 tractors a day — mostly International ProStars and Lone-Stars in both sleeper and day cab models — Navistar spokesman Roy Wiley told Transport Topics.

Two different chapters of Canadian Auto Workers represent union members at the plant.

Local 127 represents about 300 assembly line workers, and Local 35 represents 100 technical and administrative workers, along with engineers, Sonny Galea, chairman of Local 35, told TT. Galea added that he was authorized to speak for both chapters.

“They’re all gone,” Galea told TT. “Navistar shut the plant down and sent everyone home when the contract expired just after midnight on June 30 and wouldn’t permit any employees to enter in the morning.”

Separately, Bob Chernecki, a national CAW officer, said that about 700 other CAW members have been laid off from the Chatham plant at various stages in the past year.

“They haven’t been formally terminated, and we still consider them employees of the plant whose future has to be negotiated along with those laid off June 30,” Chernecki told TT.

Wiley denied reports that the company planned to shift all production to its new plant in Escobedo, Mexico.

“We want to keep a presence in Chatham, but it has to be flexible,”

Wiley said. “We want to reopen the factory with a new contract that will allow us to run a much smaller operation. This will involve a reduction in staff, but we have not negotiated numbers yet.”

He said Navistar wants to expand the model mix at Chatham to build a variety of day cabs, including DuraStar, WorkStar and TranStar, as well as sleepers and day cabs for the ProStar and LoneStar. Navistar also wanted the option to build other, as yet unnamed, models as well, Wiley said.

Daniel Ustian, chairman and CEO of Navistar International Corp., parent company of Navistar Inc., told investment analysts during a conference call in June the company wanted to streamline its operations.

“What we’d like to do is to service Canada and the Northeast from our Chatham operation, with all vehicles for those markets, and serve the rest of the country from Mexico,” Ustian said in a transcript released by Navistar. “If we can accomplish that, there’s significant savings related to doing it that way. That’s the plan, and you’ll see an action to that by the end of this year.”

Wiley said many of Navistar’s suppliers have relocated in recent years to the U.S. South and Southwest.

“It doesn’t make financial sense to bring all the components up to Canada from the other end of the United States, then send the assembled trucks all the way back,” Wiley said.

Wiley said that at its peak, Chatham was producing 200 tractors a day in two shifts. Predecessor companies of Navistar Inc. have been operating the plant since 1923.

CAW leader Galea said that if the union accepted Navistar’s terms for a new contract and the Chatham plant reopened, it would mean drastic job losses.

“We did calculations from the information that Navistar gave us, and we’re convinced that we’d be left with only about 100 union workers in Chatham,” Galea said. Nevertheless, Galea said CAW was ready to negotiate.

“We’ll meet with Navistar whenever necessary,” he said.

Navistar currently builds most of its medium-duty trucks at its plant in Springfield, Ohio. It has a plant in Garland, Texas, where it builds day cabs, Class 7 severe-duty trucks and military vehicles. It also has two bus factories in the United States.

In a separate development, Paccar Inc., which builds Peterbilt and Kenworth trucks, confirmed it would hold to its previously announced decision to delay the opening of its new heavy-duty engine plant until the end of 2010.

Paccar plans to manufacture 12.9-liter and 9.2-liter diesel engines based on models made by its European subsidiary DAF at a the factory it has built in Columbus, Miss.

In January, Paccar said low truck demand made it impractical to open the factory this fall, as originally scheduled.

“With truck demand still down, we decided that we can go forward with our plan to import engines from DAF through most of next year,” Robin Easton, Paccar’s treasurer, told TT on June 30.

DAF, based in Eindhoven, the Netherlands, describes itself as one of Europe’s largest truck and bus manufacturers. It builds diesel engines ranging from 4.5 liters to 12.9 liters — all renamed last year as Paccar engines. It will be exporting only its two largest engines to North America, however, the 9.2-liter and 12.9-liter models, Easton said.

“They have the exact same selective catalytic reduction system that we need to meet U.S. federal standards to reduce nitrogen oxide emissions,” he added.

Easton said the engineering necessary to meet other U.S. standards, which include a diesel particulate matter filter added to other North American trucks in 2007 but not used in Europe, was minor.

The imported engine, once modified, would have to pass the same Environmental Protection Agency tests as domestic engines. Daimler Trucks North America is ending the import of European-built Mercedes heavy-duty diesel engines after this year. Previously, the Mercedes power plants had to pass the same EPA tests as domestically built engines.