Navistar International Corp. reported a loss for its fiscal third quarter and the nine-month period ending July 31.

John R. Horne, chairman and chief executive officer, 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. Among other things, the company cited costs associated with the six-week strike at the company's Chatham,Ontario, Canada heavy truck assembly plant and the inability of “a major supplier” to supply pre-emission engines, the company said. Navistar did not name Caterpillar, which put International and other truck manufacturers on allocation for pre-October engines some time ago, but Truck Group President Steve Keate has said that International lost some new truck orders because it couldn’t get enough Caterpillar engines.
Net loss for the quarter was $16 million compared with earnings of $2 million for the same period a year ago. Consolidated sales and revenues from manufacturing and financial services operations totaled $1.6 billion, consistent with the same period in 2001. Horne noted that without the unusual items, which totaled some $30 million pretax, the company would have reported profit in the third quarter despite flat truck and engine sales.
Worldwide shipments of International brand heavy and medium trucks and school buses during the third quarter totaled 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 totaled 73,400 units, down 8 percent from the third quarter last year.
Manufacturing gross margins in the third quarter declined to 12.2 percent from 14.2 percent in the third quarter last year. The $30 million in unusual and nonrecurring charges reduced gross margins by 1.5 percent.
Horne warned of a fourth quarter loss, noting that weak demand is expected to continue over the next several months. But he emphasized that even if the demand for new trucks doesn’t increase in 2003, Navistar 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.
"While these are challenging times, I am more excited about the future potential of our business than at any time since I became chairman," Horne said. "We now have the products and processes to be a great company but we need to continue our focus to take costs out of our operations so that we have a flexible cost structure and which will make us a stronger, much more profitable company at any part of the cycle."
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 l2 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.