The Springfield News-Sun reported Thursday that local officials and union leadership are unsure how Navistar’s challenges will affect the local plant, which employs around 800 people and is hiring for the first time in a decade.
Locally, the main concern is Navistar’s struggle to gain approval for one of its new engines. The company is currently being fined for each non-compliant engine it sells and could be banned from using them in the future.
The Springfield production plant is still receiving these engines to make trucks, said Jason Barlow, president of United Auto Workers local 402, which represents local Navistar workers.
“Unless the government steps in and says we can’t produce those engines anymore, we won’t see any loss,” Barlow said previously. He was not available for comment Friday.
National analysts say the lack of a resolution on the engine issue is what will hold any takeover of the company at bay.
This week, Navistar tried to avert any takeover by adopting a poison pill that would prevent outsiders from gaining a stake of 15 percent or more in the company.
Navistar did this after hedge fund MHR Fund Management LLC last week disclosed that it now holds 13.6 percent of the company’s shares, an even larger position than billionaire activist investor Carl Icahn’s stake of 11.9 percent.
Fitch said that the recent changes introduce some uncertainty about the company’s long-term operating and financial policies.
Dave Hobson, a former congressman who does work for Navistar’s military group, said there are always investors looking to acquire a company like Navistar on the cheap.
“If someone acquires them, who knows what will happen,” he said earlier this week.
The rating agency lowered ratings on the company’s long-term debt and senior unsecured notes one notch in junk-grade territory to “BB-” from “BB” and said it remains on rating watch negative. It lowered the rating on its senior subordinated notes to “B’’ from “B+”.
Fitch said it could take the company off watch for further downgrades if the EPA determines Navistar’s new engine meets emission requirements.
But a decision against the engine could mean another downgrade in the future.
The rating agency is concerned about the company’s high costs, low margins, slower sales in some key markets and overall poor financial performance.
Navistar shares were down sharply in morning trading, but rebounded in afternoon trading, finishing up 57 cents, or 2.2 percent, to $27.02. The stock has traded between $20.21 and $58.50 in the past 52 weeks.
The Associated Press contributed to this report.
Contact this reporter at (937) 328-0371 or emason@coxohio.com.
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