Navistar sets aside $1.38bn for warranty claims

According to Troy Clarke, chief executive officer of Navistar International Corporation, the OEM has “capacity” to satisfy warranty claims by using a balance-sheet reserve of $1.38 billion dedicated to warranty work.

In an item published in the 14 July 2014 issue of Transport Topics, following an interview with Transport Topics editors and reporters, Clarke said that part of the company’s turnaround includes working through a backlog of warranty claims made against the company’s MaxxForce engines made from late 2010 and into 2012 — before Clarke became chief operating officer.

According to the published item, turnaround boss Clarke  now nearly two years into his attempts to rebuild Navistar International Corporation, has “slashed expenses, reduced employment rolls, closed unnecessary divisions and streamlined purchasing and production in order to return the original equipment manufacturer to profitability, adding that he and his managers still have more ground to cover.”

Clarke claims the Lisle, Illinois, OEM “has the capacity to spend $600 million to $700 million a year to satisfy warranty claims by using a balance-sheet reserve of $1.38 billion dedicated to warranty work.”

The MaxxForce engines, however, have generated civil litigation, with a Dallas-based law firm announcing three lawsuits against Navistar filed by trucking companies in Tennessee, Texas and Washington states. The legal action was announced July 8.

Navistar’s spending on warranty work during the February-to-April fiscal quarter was $23 million.

“Until [July 8], I think we were doing pretty well,” said Clarke to Transport Topics of his customer satisfaction efforts.

“I can’t say there’s not been litigation against us, but it hasn’t been a lot,” he declared.

Clarke has been Navistar CEO since April 2013. He told reporters the company’s “liberal” warranty policy sides with customers if a claim is at least close, as he is aiming to increase market share while imposing financial controls.

In May of this year we reported that Dallas-based attorney-at-law Miller Weisbrod had advertised in Transport Topics and asked operators with MaxxForce-powered vehicles which had “experienced repeated and excessive breakdowns” to make contact.

In February 2014 we noted Clarke had ordered the closure of the Navistar Diesel of Alabama LLC in Huntsville, Alabama engine plant and production of medium diesels moved to Melrose Park leaving Navistar Big Bore Diesels LLC at the Jetplex Industrial Park, Huntsville.