Navistar also has engine plants in South America, a hang-over from its links with MWM. As well as the former MWM plant at Santa Amaro, Sao Paulo, Brazil, there is the former MWM plant at Canoas Rio Grande do Sol, Brazil which builds the NGD 3.0E, the first diesel in Brazil to comply with European and US EPA regulations.
Wednesday, 19 June 2013
Navistar’s Clarke: Three into one is a must
Troy Clarke, Navistar International’s chief executive officer has let it be known the company has still not finalised its engine strategy.
Clarke, announcing second quarter results, now admits the company will decide by “the end of the year” how to deal with a situation where the company has three engine facilities but only needs one.
Many expected this month that Clarke would spell out in detail how engine overcapacity could be resolved, but clearly more time is needed to deal with what is a very sensitive issue.
In our 2 April 2013 issue we reported that Clarke, then chief operating officer, noted that not only does the company build diesel engines in three places, but ‘none of them is fully utilised’. He added that the company has more engine plants than its needs and a decision on possible future consolidation was expected in three months’ time. Three months have passed and a decision seems no nearer.
Navistar has two plants in Huntsville, Alabama and a third plant in Melrose Park, Illinois.
At Huntsville, Navistar Diesels of Alabama LLC produces MaxxForce 5 to MaxxForce 10 diesel engines in a 700,000 square foot complex for truck and bus, defence and OEM applications.
Also at Huntsville, the Jetplex Industrial Park complex is the location for Navistar Big Bore Diesels LLC. Using a 300,000 square foot area this business activity makes the more recent MaxxForce 11 and MaxxForce 13 engines (derived from MAN in Germany), both of which have compacted graphite iron cylinder blocks (CGI), as well as the now discontinued MaxxForce 15 engine. These engines are intended for Class 8 truck applications.
Huntsville was originally build by Onan and later closed by the subsidiary of Cummins Engine Company Ltd. It was converted to the manufacture of V6 and V8 diesel engines – ill-fated PowerStroke engines it delivered to Ford – and was up and running in 2002. It had an annual capacity of 125,000 engines. Later, production was converted to manufacture of in-line diesel engines.
The oldest facilities are at Melrose Park with its Melrose Park Engine Plant and the Technical Centre. The plant has its origins in 1941, but in 1946 International Harvester (now Navistar International) purchased the facility.
The plant makes the wet-sleeved MaxxForce DT (formerly the DT466) as well as the MaxxForce 9 and the MaxxForce 10.
It might be assumed that when executives come to “bite the bullet” Melrose Park will be shuttered together with one of the Huntsville plants.
Among those who could be involved in any re-jig could be Bill Kozek who, on 20 May, was introduced as president of the company’s North America Truck and Parts business. He succeeds Jack Allen, who was promoted recently to chief operating officer.
Kozek, 50, joins Navistar following a 26-year career at Paccar Inc., where he most recently served as vice president and general manager of its Peterbilt Motors Company.
“Bill is a recognized and respected leader in the North America truck industry, having successfully run both the Peterbilt and Kenworth truck divisions during his career,” said Clarke at the time. “We look forward to the new perspectives and expanded strategic thinking he will bring to our core North America truck and parts business.”
Next year, Navistar will begin building medium-duty trucks powered by diesel engine equipped with SCR emissions control – the lack of such technology has been Navistar’s downfall in recent years and partly prompted the recent crisis of confidence.
Also possibly linked is the announcement on 11 June that International Industria Automotiva da America do Sul Ldta. (IIAA), the South American subsidiary of Navistar, celebrated the launch of commercial truck production at the Navistar Industrial Complex, the company’s manufacturing facility in Canoas, Rio Grande Do Sul, Brazil.
The new truck manufacturing line will have capacity for 5,000 trucks per year – about 100 a week – and potential for added expansion as demand grows.
The 40,000 square-meter facility already serves as a parts distribution centre and produces diesel engines for MWM-International—a leading manufacturer of diesel engines from 2.8 to 13 litre for Latin America and other global markets, serving commercial vehicle, agricultural, industrial and marine applications.
“We are seeing great success in Brazil with our MWM engine business and we remain committed to the future in Brazil as we begin our truck manufacturing operations in Canoas,” claimed Eric Tech, president of Navistar Global Truck and Engine. “Our business in Brazil has served as a great model for our global growth efforts. Our on-going investment in the Brazilian truck market — one of the largest commercial truck markets in the world — is a logical next step in our strategy.”
Navistar Engine Group is a leader in technology and development of diesel engines in Latin America. With more than 3.8 million engines produced in its 59-year history, the company has a complete line of advanced technology engines from 2.5 to 13 litres and 50 to 428 bhp.
Navistar claims the engines meet the “strictest emissions standards for pollutants”. The company's products compete in diverse market segments including: vehicular, agricultural, industrial and marine.
During the last three years, Navistar has invested more than US$200 million in Brazil on a number of important strategic initiatives, including manufacturing operations, research and development, an emissions change from EURO-III to EURO-V standards and new product launches for the Brazilian truck market.
By leveraging the existing facility in Canoas, Navistar was able to avoid a significant investment required by a green field project.
“Our Brazilian business is having a strong year and their success is an important part of the great progress we’re making in our company’s turnaround strategy,” Tech added. “While we remain focused on improving our core North American business, we continue to look for smart, strategic ways to invest in select global markets and our investment in Brazil is just one example of that approach.”
Clarke will no doubt have been watching developments at Volkswagen AG in far-away Germany. VW AG has now taken control of MAN and also effectively controls Scania in Sweden.
To be able to truly claim itself a “global truck manufacturer” VW needs to have a foot in North America. It rebranded its own limited truck operations in South America under the MAN marque, but this is not enough for an expansive German car and truck maker that has seen Daimler succeed in trucks in North America. Quite likely VW will make an acquisition in North America – this is the quickest way to grow in the region.
Navistar has just seen its second quarter loss slump from US$172 million in 2012 to US$374 million in 2013. No one is saying that with these figures Navistar is ripe for a takeover. But Navistar executives will be working hard in the next 12 months to pull their company round and limit the potential for any reverse takeover.