Monday 24 February 2014

Navistar to shutter US engine plant

Troy Clarke, Navistar International’s chief executive officer, has bitten the bullet and ordered the closure of the Huntsville plant of Navistar Diesel of Alabama LLC with the loss of 280 jobs.

Production of the plant will be moved to Navistar’s Melrose Park facility which will add about 75 jobs.

The Melrose Park plant, in Chicago, Illinois, according to Navistar, makes a variety of diesel engines from 6 litres to 9 litres, namely the MaxxForce DT (previously the DT466), MaxxForce 9 and MaxxForce 10 engines. The facility has a combined manufacturing and office floor area of 1.5 million square feet.

Clarke has said last year that he was in the process of reviewing engine production so closure of one or more plants has been on the cards since then.

In an interview with The Wall Street Journal on 20 February 2014 Clarke is reported as saying: “We are not going out of the engine business. We just have too much manufacturing capacity at this point.”

Containing costs has been Clarke’s priority since taking the helm at the troubled US diesel engine and truck maker from Daniel Ustian in August 2012, as he attempts to steer a new path for the leviathan and restore profits.

As part of this strategy, Clarke is reviewing Navistar’s engine lines for mid-range trucks and could discontinue some low-volume lines, possibly shrinking further the company’s manufacturing footprint.

The latest moves have to be viewed against the backdrop of Navistar’s increasing reliance on engines from Cummins Inc. In January, for example, IC Bus, part of Navistar, began shipping school buses powered by Cummins ISB 6.7-litre diesel engines.

Navistar will continue to make engines at a second plant in Huntsville, namely Navistar Big Bore Diesels LLC. This plant, sited at the Jetplex Industrial Park makes the MAN-derived 10.5-litre MaxxForce 11 and 12.4-litre MaxxForce 13 “big bore” engines for Class 8 truck applications, though Navistar makes little reference to the MaxxForce 11. This facility is more compact than the other plant in Huntsville, with 300,000 square feet of production space. 

Navistar also cites the plant as making the MaxxForce 15 “big bore” engine. However, the Caterpillar-derived C15 15-litre MaxxForce was stillborn. Navistar is now buying 15-litre ISX engines from Cummins by way of substitution.

The plant of Navistar Diesel of Alabama LLC now scheduled for closure covers an area of 700,000 square feet of offices and production space and is located also on the Jetplex Industrial Park. It builds MaxxForce 5 through to MaxxForce 10 engines. A Navistar website also notes that Huntsville produces “vee engines, MaxxForce 5, MaxxForce 7 and 6.4-litre PowerStroke engines”, though not all these models remain in production.

It will be recalled that Navistar also has a facility at Indianapolis, Indiana where, until 2009, it had another major engine plant, building V8 PowerStroke diesels, primarily for use in Ford F-Series heavy-duty pickups. 

When Ford abruptly cancelled the contract in 2009 in favour of building its own 6.7-litre diesel in-house at its Chihuahua Engine Plant, Mexico, the Indianapolis operation was rebranded by the company as Pure Power Technologies.

The business comprises a foundry which has capacity to produce 250,000 tons a year, including Compacted Graphite Iron (CGI) for “blocks, heads and other parts including housings, front covers and much more”. There is another Navistar foundry in Waukesha, Wisconsin - the birthplace of Orson Welles (1915-1985).

In 2011, Navistar announced a five-year plan to revamp the Indianapolis plant as part of a strategy to make Pure Power Technologies “a world-class supplier of engine components”.

In January 2012, Foundry Management & Technology reported the foundry as “producing diesel engine blocks and cylinder heads for cars and trucks” in CGI using SinterCast process control technology.

Pure Power Technologies also makes fuel injection equipment (from Siemens); fuel injection equipment from businesses in Columbia and Blythewood, South Carolina, that it acquired from Continental AG; aftertreatment equipment (from Amminex) and emissions control business (from Holley).

Clarke expects to trim $22 million a year from Navistar’s cost base as a result of his latest moves. This is not much in the great scheme of things so no doubt he will cast his eyes on other activities around the world.

On 20 December 2013, Navistar announced fourth quarter results of a net loss of $154 million on revenue of $2.8 billion. The company finished the year with “structural cost savings” of $330 million.

Prior to problems with its engine business, largely the result of poor management strategy in the past by Ustian, the company led in medium duty trucks with a share of about 30 per cent. Its share of the heavy duty truck business allowed it to hold third spot behind Daimler’s Freightliner unit and Paccar Inc.

Meanwhile, Navistar seemingly has refused to deny last month’s Bloomberg report that it is looking to dispose of the MWM engine manufacturing business in Brazil, which it acquired from Klockner-Humboldt-Deutz as recently as 2005. 

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