Navistar International's losses continue to mount, though the company says its order board is strengthening and the addition of the Cummins ISB mid-range engine sets its medium-duty business up for a turnaround.
The company this morning reported a Q3 net loss of US$247 million, compared to an $84 million profit for the same period in 2012.
Navistar attributed the y-o-y decline to lower volumes in its North America truck business, resulting from its transition to SCR-based products, coupled with weaker economic conditions. Its Q3 revenue was US$2.9 billion, down 12% from the third quarter of 2012. Industry-wide demand was down 9% for the quarter, the company noted. The company reported it finished the quarter with US$1.09 billion in cash and marketable securities.
"We were pleased with our strong cash performance in the quarter. We also continued to make solid progress on key elements of our Drive to Deliver turnaround plan, especially the on-time launches of our new Class 8 product offerings, which drove Navistar's order share up to more than 20% in the quarter, compared to 12% in the second quarter. We're encouraged by the growing customer acceptance of our new products," said Troy A. Clarke, Navistar's president and chief executive officer. "At the same time, we clearly need to accelerate progress with our financial results, and we are already implementing additional cost reduction and business improvement actions to counter our near-term volume challenges. This includes resizing our company to match our current business environment."
Navistar says it has begun implementing new cost-reduction initiatives, including an "enterprise-wide reduction in force," which will affect 500 salaried employees and long-term contractors. The job reductions are expected to generate $50-$60 million in annual savings, beginning in 2014.
"These actions are always difficult, but we are committed to making tough choices to return Navistar to profitability," Clarke said.
The company also noted it expects increased demand for its medium-duty trucks, with yesterday's announcement it will make the Cummins ISB engine with SCR available on the International DuraStar.
"Adding the Cummins ISB allows us to get medium-duty SCR offerings into the market faster while providing customers with a market-proven engine," said Jack Allen, Navistar's executive vice-president and chief operating officer. "We expect it will open the door to new customers, while strengthening demand with existing ones. In fact, a number of customers had already approached us about adding this choice. As a result, we're convinced the ISB will put us on a positive path to recapture medium-duty truck and school bus sales and market share."
