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Cost-cutting efforts underway at Navistar

Cost-cutting efforts underway at Navistar

Editor's note: The Monaco RV subsidiary of Navistar is not affected by the Workhorse shutdown. 

Navistar is planning to close down its Workhorse Custom Chassis business and reduce headcount amongst its U.S. employee base part of its efforts to reduce costs and return to profitability.

In the third quarter last year, Navistar initially combined its Workhorse and Monaco recreational vehicles operations collectively into a Custom Products division, announcing plans to close down Workhorse’s Union City, IN chassis facility while shutting down and transferring business from Monaco’s motor coach plant in Coburg, OR, to the Monaco facility in Wakarusa, IN.

Those moves have cost Navistar $10 million worth of restructuring charges to date and forced its truck segment to accept $51 million in impairment for intangible assets, primarily customer relationships and trade names, associated with Workhorse.

For those reasons, Navistar said in its most recent 10-K filing that it decided by the second quarter this year to discontinue accepting orders for its Workhorse business and to shut it down by the end of 2012; costing some $28 million, with Navistar’s parts segment suffering a $10 million hit to cover the closure of parts distribution operations related to the Workhorse business.

“[This] means we will no longer be producing chassis for step vans or any other vehicles beyond our current orders at this time,” Steve Schrier, Navistar’s manager of corporate communications, told Fleet Owner by email. “But we will continue to provide our dealers and customers with warranty and parts and service support for existing Workhorse chassis.”

On a broader cost-cutting scale, Navistar said it began a “voluntary separation program” or VSP starting in August to the majority of its U.S.-based non-union salaried employees to reduce headcount.

The company added in its 10-K filing that it will also use attrition and layoffs to eliminate additional employee positions as well in order to meet what Navistar calls “targeted reduction” goals.

Severance benefits of various amounts, depending on the pay and length of service of the affected employees, are estimated to cost Navistar between $40 million and $60 million, with the VSP effort and any layoffs expected to be completed by the end of 2012. 

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