Navistar Shutting Down Workhorse as Part of Cost-Cutting

CORRECTED -- Workhorse Custom Chassis is going out of business and is due to shut down in October, though Navistar International Corp., its owner since 2005, is saying little about it.

Spokesman Steve Schrier confirmed the news and responded to questions by referring to statements in the company's recent 10Q disclosures to the federal Securities & Exchange Commission.

Workhorse stopped making its W42 and W62 van chassis early this year, one competitor said, and final production is apparently of motor home chassis. Production should wrap up this month, a worker at the plant in Union City, Ind., said before directing further questions to Navistar headquarters in Lisle, Ill.

eStar Still Alive

However, Navistar's eStar electric van, though managerially connected to Workhorse, remains an active product, Schrier said. Introduced in 2009 with the help of a federal grant, eStar captured early sales from several customers for use in California, which encourages use of zero-emissions vehicles with its own grants.

Nonetheless, "the commercial viability of electric vehicles is what drives sales in this market," Schrier said. With no engine or conventional drivetrain and the comparative simplicity of electric components, maintenance and operating costs are very low, even if purchase prices are high.

And although A123 Systems, which supplies batteries for the eStar and other electric vans, has been struggling financially and currently is the subject of a controversial investment proposal from a Chinese firm, "individual suppliers are not impacting our eStar business," Schrier said. About 100 were built at the Navistar-Monaco plant in Wakarusa, Ind., last year.

Workhorse Acquisition

Workhorse was started in 1998 by investors who took over production and sales of General Motors' popular P-series Stepvan chassis when GM dropped it. GM gasoline and diesel engines powered vehicles which, like competitors' chassis, got bodies from outside suppliers. Large delivery fleets like FedEx, UPS and Frito-Lay were among its customers.

Navistar acquired Workhorse seven years ago and it seemed a good fit, as Navistar diesels would find another outlet, even if emphasis was still on gasoline.

It also seemed that the new subsidiary might be strengthened through its association with a big corporation whose history from the 1930s into the '60s included the popular Metro van. For a short time Workhorse offered an integrated chassis-body product called MetroStar.

Recession Hits

The Great Recession a few years later hurt both parties, and Navistar executives' losing bet on their non-SCR "in-cylinder solution" to diesel emissions limits contributed to heavy financial losses. These prompted serious cost-cutting.

Two financial reviews showed that Workhorse could not recover investments in it, the 10Q statement said. So earlier this year Navistar ordered Workhorse to stop accepting orders for W-series chassis and to begin to "idle" the business. It has taken a $10 million charge as part of shutdown expenses.

Schrier said Navistar would continue to provide warranty and parts and service support for existing Workhorse chassis.

Gasoline Power

Executives at Freightliner Custom Chassis Corp., a major competitor, said one result of Workhorse's closure has been more interest from customers in gasoline power, something Workhorse specialized in. FCCC last year began offering General Motors' 6-liter Vortec 6000 gasoline V-8, the same engine that Workhorse used toward the end.

Until late last week, Navistar's website listed Workhorse as one of its truck brands and offered a link to the Workhorse site. A newly redesigned website now lists only International and Mahindra International as Navistar's truck brands.

But Workhorse's site as of this writing is still active and describes the W series commercial and motorhome chassis, and gives no hint of their demise.

Updated 9:30 a.m. EDT to include a statement that Navistar would continue to provide warranty and parts and service support.

Corrected 12:10 p.m. EDT to indicate A123 is not in bankruptcy. We regret the error.