By Chelsey Dulaney
Navistar International Corp.'s loss narrowed in its October
quarter, but fell short of Wall Street's expectations for a
profit.
The news comes just a day after the truck maker disclosed plans
to close a foundry that makes engine components in an effort to
shed operations from an ill-fated move to build all of its own
truck engines.
Navistar has posted a stretch of quarterly losses as it has been
hit by rising costs for warranty claims and escalating expenses for
adopting new emissions technologies for its engines. Reliability
problems with Navistar's engines, beginning with 2010-model trucks,
have also eroded the company's market share and sales. The truck
maker has faced pressure from activist investors Carl C. Icahn and
Mark Rachesky.
In recent quarters, though, the company has appeared to turn a
corner as it has lowered costs.
In the latest period, ended Oct. 31, quality improvement helped
reduce warranty spending by 22%, while total costs fell 1.3%.
Overall, Navistar reported a loss of $72 million, or 88 cents a
share, compared with a year-earlier loss of $154 million, or $1.91
a share. The latest period included $60 million in restructuring
charges and write-downs. Revenue grew 9.3% to $3.01 billion.
Analysts polled by Thomson Reuters had expected a per-share
profit of 15 cents and revenue of $3.02 billion.
Profit at its North America parts segment inched down to $143
million during the period from $147 million a year earlier.
The North America truck segment posted a loss of $55 million,
narrowing from a year-earlier loss of $355 million. Results were
driven by higher traditional truck volumes and declining warranty
expenses.
Navistar expects the closure of the Indianapolis foundry to cut
operating expenses by $13 million a year. The foundry supplies
engine blocks and cylinder heads for Navistar's truck engines, and
for decades it has produced castings for engines supplied to Ford
Motor Co. The company idled the foundry in 2009 when Ford opted to
build its own diesel engines for its heavy-duty pickup trucks.
Navistar restarted production at the foundry in 2011 on the
assumption that it would need more casting capacity for its new
13-liter and 15-liter engines. But when Navistar was unable to
comply with tougher federal standards for engine exhaust, the
company shelved plans for the 15-liter engine. Moreover, its
13-liter engine was beset by a host of reliability problems,
causing the company to offer 15-liter engines manufactured by
Cummins Inc.
The company further reduced its need for engine castings last
year by offering Cummins engines on Navistar's medium-duty trucks
and school buses.
The company said it recorded an $11 million charge during the
quarter for severance, benefits, inventory reserves and other costs
from the foundry. It expects to report $40 million in additional
charges related to the closure during the first half of next
year.
Write to Chelsey Dulaney at chelsey.dulaney@wsj.com
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