Navistar’s national struggles cause local concern

Corporate HQ turmoil clouds plant’s success. Many in Springfield still confident in company’s strength.

The local plant’s successes this year, however, could now be overshadowed by turmoil at Navistar International Corp.’s corporate headquarters.

The company faces millions in federal penalties because of a noncompliant diesel engine. A group of shareholders called for top management to resign or sell the company, and some analysts suggested Navistar could face bankruptcy because of its engine issues and a heavy pension debt.

That has some local officials concerned.

“ ... We’re at the mercy of what goes on in (Navistar’s corporate headquarters) Chicago and New York,” said John Detrick, Clark County commissioner. “There’s always concern, but we just hope it’s just one of the many little shifts in the sand, and Navistar will continue to be a viable company like they have been for over a 100 years.”

The company, once Springfield’s largest employer, has made a comeback locally. After recalling workers laid off in 2006 and 2011, Navistar hired more than 100 full-time and temporary workers, said Jason Barlow, president of United Auto Workers Local 402.

But after the company reported $172 million in second quarter losses and the price of shares dropped, activist investors swooped in and now threaten to force the company to make a change in leadership — or even sell or go bankrupt.

Investor Mark Rachesky’s MHR Fund Management LLC. acquired 13.6 percent of Navistar’s shares this week, taking the top spot from his former mentor and investor Carl Ichan, who has 11.9 percent of the shares.

“In our system there’s always someone out there looking for an opportunity to try an acquire a really big company like Navistar,” said Dave Hobson, a former congressman who works for Navistar’s military group. “If someone acquires them, who knows what will happen.”

But national analysts believe a sale won’t happen until Navistar works out its issue with its engines.

Gimme Credit Analyst Vicki Bryan said in a CNBC article she believes investors Ichan and Rachesky are banking on Navistar eventually getting Environmental Protection Agency certification for its new 13-liter diesel engines. She says no buyer will take Navistar until this happens.

So far the EPA has allowed Navistar to pay $1,900 per engine that’s not EPA certified, and the company has accrued $10 million in penalties in the second quarter.

The courts ruled against Navistar using the engines even with the penalties.

Herb Greenberg, a senior stocks commentator for CNBC, writes that this is why bankruptcy is likely an outcome to Navistar’s woes. He said if Navistar is unable to reach compliance, the company would have significant loss in income and face major layoffs.

Auto industry analyst David Cole said he thinks that Navistar is a strong enough company to make it through tough engine regulations.

“The issues with the (engine) technology and power train is really complex, and the rules are more of a temporary issue,” Cole said. “It’s not the kind of thing that blows up and then the company is going to evaporate.”

Barlow, president of Local 402, said he remains confident that Navistar will keep hiring. In fact, the company hired 24 full-time workers this month, he said.

“Unless the government steps in and says we can’t produce those engines anymore, we won’t see any loss,” Barlow said.

“There is some concern from members,” Barlow said. “But as long as we build the best product we can, that’s going to be our lifeline.”

Barlow argues that recent additions to production prove that Springfield is one of Navistar’s most sought-after plants for building trucks.

After July’s annual two-week shutdown, Springfield will need to hire additonal workers to make more WorkStar models, which have more labor content and are more profitable, Barlow said.

“We’re at the top of the list. People are asking for trucks to be made here,” Barlow said.

Contact this reporter at (937) 328-0371 or emason@coxohio.com.

Thank you for reading the Springfield News-Sun and for supporting local journalism. Subscribers: log in for access to your daily ePaper and premium newsletters.

Thank you for supporting in-depth local journalism with your subscription to the Springfield News-Sun. Get more news when you want it with email newsletters just for subscribers. Sign up here.

X