Truck and engine manufacturer Navistar International announced a fiscal third quarter 2013 net loss of $247 million, compared to third quarter 2012 net income of $84 million. Earlier this month, the company began implementing new cost-reduction initiatives, including a reduction in its workforce.
The year-over-year decline was primarily driven by lower volumes in its core North America truck business due to the impact of the company's transition to selective catalytic reduction-based products and weaker industry conditions.
Total revenue in the quarter was $2.9 billion, down 12% from the third quarter of 2012. The decline reflects lower net sales across all classes of its core truck business, due to the impact of the company's SCR emissions transition for both heavy and medium-duty vehicles and a 9% drop in overall industry demand in North America during the quarter.
Navistar finished the third quarter 2013 with $1.09 billion in manufacturing cash and marketable securities, delivering at the high end of its cash guidance range of $1.0 billion to $1.1 billion.
"We were pleased with our strong cash performance in the quarter," said Troy A. Clarke, Navistar's president and chief executive officer. "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.
"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."
Earlier this month, the company began implementing new cost-reduction initiatives, including a reduction in its workforce, which will affect a combined 500 salaried employees and long-term contractor positions globally. The company expects to complete nearly all of these job reductions by the end of its 2013 fiscal year, and projects these and related activities will generate an additional $50 to $60 million in annual savings starting in its fiscal year 2014.
Navistar says it is moving forward quickly on the next critical product strategy phase in its turnaround, offering selective catalytic reduction emissions after-treatment on its medium-duty vehicles. On Tuesday Navistar announced plans to expand its medium-duty engine offerings to include the Cummins ISB 6.7-liter engine for International DuraStar and IC Bus CE Series vehicles. Production begins this month with the first units expected to be sold late in the year
Navistar emphasized that adding the availability of the Cummins engines to its medium-duty offerings does not mean it is getting out of the engine business.
"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."
For the third quarter 2013, the truck segment reported a loss of $58 million, compared with a $26 million loss for the same period one year ago, on lower net sales of $1.92 billion, a 15% decrease. The segment's loss was primarily driven by a decline in traditional truck volumes due to lower industry conditions and the impact of the company's emissions transition, as well as lower military volumes and service revenue.
The engine segment reported a loss of $86 million, compared to a $47 million loss in third quarter 2012. Net sales were 14% lower year-over-year at $723 million. The loss was driven by lower volumes in the United States and higher adjustments to pre-existing warranties and partially offset by reduced engineering and product development costs.
The parts segment reported a profit of $76 million, a 4% improvement versus third quarter 2012, despite a 9% decline in net sales year-over-year, while the financial services segment profit was $23 million, up slightly versus third quarter 2012, despite net revenues being down 5% year-over-year.