Aftermarket

Navistar Considering Reopening Ontario Plant

March 17, 2011

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Commercial truck manufacturer Navistar International said it could decide by summer whether it will need to restart an idled assembly plant in Canada.


Chairman and chief executive Daniel Ustian said the company has sufficient truck-making capacity at the moment, but might need the Chatham, Ontario, plant if truck orders continue to trend higher through next year.

"Do we need another manufacturing facility? We don't know the answer to that," Ustian said Wednesday during a conference call with analysts. "At least in the short term, likely no. We're not capacity-limited on making trucks."

Industry-wide production of heavy-duty trucks in North America this year is expected to rise 58 percent to 244,000 vehicles. During previous up-drafts in the cyclical truck industry, the production volumes have climbed significantly higher before peaking.

Ustian said a decision on "whether Chatham fits with us or not" could reached by the middle of the year.

Chatham had been Navistar's primary assembly plant for heavy-duty trucks in North America. But in the midst of slumping demand for commercial trucks, the company two years ago said it needed to reduce its costs by moving truck production from Chatham to plants in Escobedo, Mexico, and Garland, Texas. Navistar laid off Chatham's work force and ceased production there in June, 2009.

The idling of Chatham coincided with the expiration of Navistar's contract with the Canadian Auto Workers Union. Any resumption of production would have to be accompanied by a new contract with the CAW. There are no talks under way between the company and the union, and the two sides have met only occasionally in the past two years. The last meeting occurred in January.

Navistar has insisted that a new contract give the company broad discretion over the size and the use of Chatham's workforce, as well as the plant's production volume. Navistar has suggested the plant could supply trucks for Canada and the Northeast region of the U.S.

So far, the CAW has balked at the company's vision for the plant. Union leaders argue that using the plant as a regional truck supplier would require no more than 200 union workers and result in frequent production outages. Moreover, the union opposes the company's demands that outside contractors be used for maintenance and other plant functions that had been performed by CAW workers. At peak production levels in 2006, the plant employed 1,100 workers and turned out 150 trucks a day.

"It's a tragedy for the workers in our community," Bob Chernecki, an assistant to CAW President Ken Lewenza, said Thursday about the prolonged layoffs. "To just leave [workers] hanging out there is unconscionable. They deserve a decision on what [the company] is going to do with the plant."

Chatham's future became more precarious late last year, when Navistar agreed to bring heavy-duty truck assembly to its Springfield, Ohio, plant as part of a new contract with the United Auto Workers Union. The Springfield plant is the company's main assembly site for medium-duty trucks. Analysts have said Springfield could provide Navistar with enough additional production capacity to accommodate further growth in heavy-duty truck orders.

Tensions between the CAW and the Navistar over maintaining the plant have persisted for nearly a decade. Chatham workers waged a six-week strike against the company in 2002. Navistar announced plans to close Chatham in 2002 and move its production to Escobedo. Ustian relented in 2003 after the union accepted cost reductions for the plant and Navistar received money from federal and provincial government programs for modernizing the plant and training workers.

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