Truck and diesel engine builder Navistar International is considering how to reduce its operating costs, and consolidating its engine production capacity may be one option. According to various reports, the company’s chief operating officer and future CEO Troy Clarke indicated such a strategy recently in comments at the Mid-America Trucking Show, in Louisville, Ky.
"We build engines in three places and none of them is fully utilized,” Clarke reportedly explained. “You just can't make any money doing that. Underutilized manufacturing capacity is just a cost, and it is a cost that we don't have to bear."
Navistar also operates two metalcasting operations: the foundries at Indianapolis and Waukesha, WI, produce gray and ductile iron and CGI castings for the group’s diesel engine products, but there has been no indication of capacity excess in those operations.
No specific plans for downsizing have been concluded, and no final plans would be expected for several months to come.
Navistar has been looking for cost-cutting opportunities over the past year, in order to stabilize its financial status as it works to make its diesel engine products compliant with U.S. Environmental Protection Agency standards for NOx emissions. The company reported losses of about $3 billion for 2012.
Navistar initially committed to an exhaust-gas recirculation (ECR) technology to capture NOx, but EPA ruled that process unacceptable, which forced Navistar to pay penalties on its existing engines, and to invest in development of an alternative. Changes in production programs also have been necessary.
The company adopted an alternative, selective catalytic recirculation (SCR) technology, and recently Navistar officials indicated that the company expects EPA this month to validate its 13-liter, MaxxForce Big Bore engine.
Capacity consolidation would be a familiar strategy for Navistar. Last fall it initiated plans to close one of its Class 8 truck plants, in Garland, Tex. Two other plants in Springield, Ohio, and Escobedo, Mexico, were in line to absorb the production volume from the Texas plant.
Similarly, Navistar has two diesel engine plants in Huntsville, Ala., and Melrose Park, Ill. Also, however, the company has started sourcing heavy-duty diesel engines from Cummins Inc., as part of its effort to comply with current EPA standards for NOx emissions.