Navistar said on Monday it would close its foundry operations in Indianapolis, Indiana, where it currently produces engine blocks and heads for its proprietary engines and will outsource these components from suppliers.
The change of sourcing will occur during the first half of next year and the company expects to complete the foundry closure in the summer of 2015.
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“Over the last two years, we’ve taken a number of steps to strengthen our business and position the company for a return to profitability and long-term success,” said Persio Lisboa, Navistar’s president of operations.
“We’ve determined that leveraging our suppliers for these components will reduce our engine costs, improve our overall manufacturing capacity utilisation, and free up additional resources to invest in our core North America truck and parts business.”
Closing the Indianapolis foundry is expected to eliminate approximately 180 jobs and reduce Navistar’s operating costs by about US$13m a year.
The company took an $11m charge in Q4 2014 that includes employee separation benefits, pension and other post-retirement contractual termination benefits, inventory reserves and other related costs. In addition, the company anticipates up to $40m in additional charges for accelerated depreciation related to the closure of the Indianapolis foundry and related impacts during the first half of 2015.
“Closing a facility is a difficult decision because of its impact on the many great people who’ve been part of our company,” Lisboa added. “We will treat people with dignity and respect throughout this process.”
