Navistar Wants To Build More Heavy-Duty Trucks In Mexico
By Bob Tita, Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- Navistar International Corp. (NAV) said it wants to
lower its costs for assembling heavy-duty trucks by shifting more production
from Canada to Mexico.
Most of Navistar's heavy-duty trucks have been built at the company's Chatham,
Ont., plant. But the Illinois-based company said Tuesday it's considering
moving some of Chatham's volume to a plant in Escobedo, Mexico, where Navistar's
heavy-duty rigs are built for the Mexican market.
Navistar's attempt to divert production from Chatham is a major issue in
contract talks under way between the company and the Canadian Auto Workers
Union, which represents Chatham plant workers. The union's contract with the
company expires at the end of June.
Navistar Chairman and Chief Executive Daniel Ustian said building more trucks
in Mexico would better-align Navistar's production operations with the location
of its suppliers and trucking companies, making it cheaper to obtain components
and deliver new vehicles.
"Many of our suppliers have moved from the Midwest down into the Southwest and
even into Mexico and that poses a challenge to our cost structure" in Chatham,
said Ustian, during a conference call with Wall Street analysts Tuesday. "The
logistics can cost as much or more than putting the vehicles together."
Ustian said the company also has picked up additional heavy-duty truck
customers recently whose operations are largely in the South and Southwest.
Ustian did not offer specifics on how many trucks the company wants to shift
to Escobedo, which already produces medium-duty trucks sold by Ford Motor Co. (
F). But he said he's considering a plan whereby Chatham would supply trucks to
customers in Canada and the Northeast U.S. and Escobedo would provide trucks
for the rest of the U.S.
Most of the 1,100 Chatham workers are laid off as a result of falling truck
sales caused by a downturn in the U.S. economy. Before the current sales slump
began in 2007, production at Chatham reached as much as 200 trucks a day.
A representative for the union said Navistar's plan would idle large portions
of Chatham's operations, leaving the plant underutilized and vulnerable to a
permanent shutdown.
"It's an excuse, in our minds, to move our work to Mexico," said Bob
Chernecki, an assistant to Canadian Auto Workers President Ken Lewenza. "We're
being devastated. The commitment to Chatham is clearly not there."
Navistar and the union engaged in a protracted standoff earlier in the decade
that featured a six-week strike by the union in 2002. In 2003, Navistar
announced it would close Chatham and move its operations to Escobedo.
Ustian, however, relented after the union agreed to $31 million in cost
reductions at the plant. It also received more than $40 million in federal and
provincial government money for modernization and worker training. In exchange,
Navistar agreed to maintain a minimum production of 35 trucks a day at the
plant.
During contract negotiations this spring, Navistar has insisted the production
guarantee be eliminated and wants greater flexibility over the plant's uses and
its workforce.
-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com
-0
(MORE TO FOLLOW) Dow Jones Newswires
06-09-091724ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|