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Navistar reports $2.8 billion fiscal 4Q loss, shares sink

Lisle-based Navistar International named Troy A. Clarke as its president chief executive officer Thursday March 7 2013.
File pho| Sun-Times Media

Lisle-based Navistar International named Troy A. Clarke as its president and chief executive officer on Thursday, March 7, 2013. File photo | Sun-Times Media

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Updated: January 21, 2013 3:46PM



Lisle-based Navistar International Corp., which is in the midst of a restructuring, reported a $2.8 billion net loss for its fiscal fourth quarter Wednesday, compared to a profit of $255 million a year earlier, sending its shares down double digits in early trading.

The company’s earnings included a $2 billion tax expense, $149 million in warranty expenses, which was above Wall Street expectations; $73 million tied to its cost reduction actions and $14 million in U.S. Environmental Protection Agency fines.

Sales sank 24 percent to $3.3 billion.

Net loss per share was $40.13, down from net income of $3.48 per share.

The company’s shares sank as much as 11.5 percent after the market opened to $20.23 before recovering some to $20.93, down 8.4 percent as of 10 a.m. At the market close Tuesday, the company’s shares were down nearly 40 percent for the year.

“This was yet another messy quarter,” JPMorgan Chase & Co. analyst Ann Duignan said in a research note, adding investors want to know if the worst is now behind the company.

The market also may be reacting to news that Ramin Younessi, the head of product development, is leaving the company. Navistar made that announcement Wednesday and named Dennis Mooney as group vice president, Global Product Development, to succeed him.

For the year, the company said it lost $3 billion, or $43.56 per share, vs. net income of $1.7 billion, or $22.64 per share.

“We continue to make significant progress on our turnaround and the complexity of this quarter’s results is reflective of the actions necessary during this time of transition,” Navistar Chairman and Chief Executive Officer Lewis Campbell said in a statement.

He added the company is positioned to exceed its goal of reducing costs by $175 million.

Navistar has been cutting costs and analyzing all of its businesses and programs to determine their return on invested capital and identify areas for improvement. In October, it announced it would close a truck manufacturing plant in Garland, Texas, the first half of next year due to too much manufacturing capacity in North America, eliminating 900 jobs. That followed 700 job cuts previously disclosed by the company.

In August, the company announced the abrupt retirement of its top executive, Daniel Ustian, and named Campbell its chairman and interim CEO. That move came after the company said it would buy 15-liter engines for its largest commercial trucks from competitor Cummins and was abandoning a lengthy and costly strategy, pursued under Ustian’s leadership, of trying to develop its own EGR emissions technology, a strategy that included paying fines to the U.S. Environmental Protection Agency for having noncompliant engines. Navistar had invested $700 million in the failed effort and lost market share because of it. The company now has decided to use the same exhaust treatment process as its competitors, called SCR, and is retrofitting its 13-liter and 11-liter engines.

“We continue to make significant progress on our turnaround and the complexity of this quarter’s results is reflective of the actions necessary during this time of transition,” Navistar Chairman and Chief Executive Officer Lewis Campbell said in a statement.

He added the company is positioned to exceed its goal of reducing costs by $175 million.

The fourth quarter report was worst than expected, said Gimme Credit senior high yield analyst Vicki Bryan.

Navistar’s “strategy for survival after abandoning its failed engine technology ... is expensive, ambitious, and requires perfect marksmanship to succeed in implausibly record time, all while global market conditions are worsening for commercial truck makers,” she said in a research note. “Good luck with that.”

She added “cash flow is severely negative and worsening, liquidity remains under terrific pressure, and the company already has borrowed heavily against assets that probably are worth substantially less than book value. Navistar could deplete its liquidity by early next year.”



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