Navistar is in hot water after it has reported a low 2019 net income and revenue as well as a need to recall 12,539 of its trucks for safety issues.
On December 17th, Navistar International Corp. of Lisle, Illinois announced it will reduce its global employment rate by at least 10% after low revenue numbers in its fiscal year fourth quarter. Corporate factors such as 2018 chargeouts have caused a decrease in demand for heavy-duty trucks in the industry.
According to Navistar, chargeouts are the trucks invoiced out to customers, while units in dealer inventory show the difference between retail deliveries and chargeouts themselves.
In its forecast for 2020 revenue, Navistar cut its estimates so much that they are now among the lowest of all manufacturers surveyed by Bloomberg. Shares proceeded to plummet 10%, the largest decline since October 2018
“We are taking actions to adjust our business to current market conditions, including reducing production rates and selling, general and administrative expenses while restructuring our global and export operations,” said Navistar president and CEO, Troy Clarke, in a release. “Building on the strong gains achieved over the last several years, Navistar has a clear road map in place for sustained growth that will set it apart from the industry.”
As of now, the majority of the 1,300 jobs being cut out completely are due to North American Production cuts. For the period beginning in November, Navistar’s net income dropped to $102 million ($1.02 per diluted share), after having been at $188 million ($1.89 per diluted share) the year before.
Revenue in this fourth quarter fell to $2.78 billion, down 16% from its $3.27 billion revenue in the same quarter of last year. To be sure, that quarter of 2018 was a particularly strong one, and the drop was caused in part by vehicle chargeouts following supplier production constraints in 2018’s third quarter, lower industry demand, and the sale of Navistar Defense’s in December 2018.
An 18% core chargeout decline for Navistar lead to a profit drop of $86 million from $197 million in 2018, as well.
2020 revenue is predicted to drop to between $9.25 billion and $9.75 billion, especially after a net income decline of 53.8%–from $340 million to $221 million.
Additionally, as its holding company’s new fiscal year began in November of this year, Navistar issued a recall for more than 12,500 of its International brand medium-duty work trucks due to a risk of unintended movement while the parking brake is applied.
The safety recall report from November 21st explained that the defect has the potential to cause serious injury and damage to property. While the parking brake is in use, automatic transmission is in the drive or reverse position, and the stationary power takeoff switch is on, the engine’s RPM accelerates rapidly and can override the parking brake’s function.
This defect comes from the trucks’ programming lacking PTO neutral interlock in their powertrain databases.
Currently, the recall applies to the 2019-20 International MV, 2018-20 International WorkStar, 2019-20 International HV, and 2018-19 International DuraStar. These four truck models are medium-duty work trucks used for deliveries, towing, and dumping.
Recalled trucks were built exclusively between February 2017 and September 2019–trucks without power takeoff are exempt from the recall.
The company first learned of the problems in these models over the summer of 2019. A field service representative was able to speed up the engine throttle with the steering wheel switches while the transmission was in gear, even when the parking brake was applied, on HV model trucks. In September, Navistar began its investigation.
The next month, Navistar determined a potential number of defective vehicle models, and finalized the suspect population on November 7th. The safety recall was put into place a week later on November 14th.
Customers will receive a recall notification by January 20th, and can have a recalibration performed for free.
As the notifications begin their delivery, Navistar must keep the National Highway Traffic Safety Administration up-to-date. According to the NHTSA Office of Defects Investigations’ letter to Navistar on December 10th, the company will need to submit copies of all bulletins, as well as all draft owner and agency notification letters.
Additionally, Navistar will update its parameters in the Cummins’ engine control module for feature codes enabling a neutral interlock for the PTO.