As previously forecast, Navistar International Corporation reported a loss for both the three and nine months ended July 31, 2002, as demand for commercial trucks continues to be soft.
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For the three months ended July 31, 2002, the company reported a net loss of $US16 million, equal to ($0.27) per diluted common share, compared with earnings of $2 million or $0.03 per diluted common share a year ago. Consolidated sales and revenues from manufacturing and financial services operations for the third quarter totalled $1.6 billion, consistent with the same period in 2001.
Chairman and chief executive officer John Horne said that in addition to continued weak demand for new trucks, results for the third quarter were impacted by a number of unusual and nonrecurring items that totalled $30 million pretax or $0.31 cents per share after taxes.
These included the inability of a major supplier to supply pre-emission engines, product recall expenses, the weaker than expected Brazilian exchange rate and costs associated with the six week strike at the company’s Chatham, Ontario, Canada heavy truck assembly plant.
Shipments of International brand heavy and medium trucks and school buses during the third quarter totalled 19,800 units, down slightly from the 20,600 units shipped in the third quarter of 2001. Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totalled 73,400 units, down 8% from the third quarter last year.
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By GlobalData
Manufacturing gross margins in the third quarter declined to 12.2% from 14.2% in the third quarter last year. The $30 million in unusual and nonrecurring charges reduced gross margins by 1.5%.
According to Horne, with weak demand expected to continue over the next several months, the company could experience a fourth quarter loss of ($0.20) to ($0.25) per share from continuing operations.
Horne emphasised that even if the truck industry demand does not increase in 2003, the company expects to be profitable for the full year 2003.
Horne said the company continues to work on a number of actions aimed at fixed cost reductions and improved operating efficiencies, and cited two such examples as the discontinuance of operations at the Springfield body plant and the secondary production line at the Springfield assembly plant.
“As these actions are finalised and decisions made on additional fixed cost reductions, it is likely that there will be a restructuring charge in the fourth quarter,” Horne said.
For the first nine months of fiscal 2002, Navistar reported a loss of $76 million, or ($1.27) per diluted common share, compared with a loss of $30 million, or ($0.51) per diluted common share in the first nine months of 2001.
Consolidated sales and revenues for the first nine months of fiscal 2002 declined slightly to $4.7 billion from $4.9 billion in the same period in 2001. Manufacturing gross margin for the nine months was 12.5% compared with 13.1% last year.
The company has lowered its previous industry forecast of 101,500 medium trucks for the year ending October 31, 2002, to 97,500, including 75,000 Class 6-7 trucks. School bus demand remains unchanged at 26,000 units as does the forecast for Class 8 heavy trucks at 156,000 units.
The decline in medium truck demand was attributed in part to reluctance by leasing companies to commit to new orders until there are more definitive signs of economic recovery. The continued strong demand for heavy trucks is the result of pre-buy activity in advance of the new emissions standards that take effect October 1.
While the company is increasing production of heavy trucks at its Chatham plant to 65 units per day from 39 units per day, it has also issued a 12 week advance layoff alert effective November 1. The alert is required under Canadian law and could impact up to 500 workers as demand for heavy trucks is expected to decrease in the first half of 2003.
Horne said the new contract with the Canadian Auto Workers gives the company flexibility to schedule production with up to nine hours of overtime per week. The company has the option to close the plant in June 2003. Negotiations with the United Auto Workers have just begun and Horne said the company hopes to achieve an agreement that provides the company with an affordable cost structure that includes production flexibility and manageable health care costs.
