Navistar reported a net loss of $62 million for the first quarter this year, citing continuing weak demand in the heavy truck industry.
Company officials said Tuesday they expect weak demand in the industry to continue for the next several months, but said the market should rebound late this year. The company’s losses were significantly larger than at the same time last year, when the company reported a net loss of $33 million for the first quarter.
Navistar’s Springfield plant is one of the largest employers in Clark County, where it employs more than 1,500 workers. Thousands of retirees also remain in the area.
Tuesday’s results come on the heels of a separate announcement last week that Navistar finalized its deal with Volkswagen Truck and Bus, a deal that’s expected to boost Navistar’s finances while giving Volkswagen a foothold in the U.S. truck market.
“We’re hitting the ground running to take full advantage of the opportunity the alliance provides,” said Troy Clarke, chairman, CEO and president of Navistar during a conference call with investors Tuesday.
That deal calls for Volkswagen to buy a 17 percent equity stake in Navistar and invest about $256 million in the Illinois-based truckmaker.
Navistar’s earnings came in below market estimates, said Vicki Bryan, a senior high yield analyst with Gimme Credit. But she said there were some reasons for optimism that Navistar will begin to see better results later this year.
“I was cautiously optimistic with firming order trends and improving penetration with major customers, and do expect Navistar to beat last year’s performance in the second half and produce a profitable year,” Bryan said. “With firming revenue and recovering profit margins, credit quality also looks meaningfully improved. I expect the Volkswagen partnership to contribute substantially to performance in 2018, on a path I expect will lead to the sale of Navistar to Volkswagen in the next two to four years.”
Company leaders also said Tuesday they recently began production last month to produce cutaway G vans in Springfield as part of a joint manufacturing project with GM. That deal, one of two agreements Navistar has reached with GM, is expected to generate additional revenue for Navistar while improving the local plant’s use of its manufacturing capacity, company officials said Tuesday.
Navistar and GM also made a joint agreement in 2015 to build medium-duty trucks in Springfield.
The Volkswagen deal isn’t expected to have an immediate impact on workers in Springfield, but company officials have said it’s possible it could lead to more work in Clark County in the future.
The deal is also expected to lead to cost savings as the manufacturers collaborate to develop new technologies and establish a joint procurement venture for purchasing. Initially, the deal will focus on powertrain systems, but will also allow more collaboration for future commercial development.
Clarke said Tuesday the VW collaboration could lead to savings of at least $500 million over the first five years of the agreement.
“This alliance is a real game-changer for us and the Volkswagen Truck and Bus partnership will make a great alliance,” said Walter Borst, Navistar’s chief financial officer and executive vice president.
Navistar is also moving forward with a plan to introduce new products every four to six months through the end of 2018, until the company’s entire product line has been updated, company leaders said Tuesday.
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