Navistar International Corporation
) announced that its Navistar Defense business will be suspending
production at its West Point, Miss., plant. The sequester led to
this decision and Jul 5 will be the last day of production in the
plant that employs 80 workers.
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The West Point plant was opened five years ago and used to
assemble MRAP - mine resistant vehicles, which was used by
soldiers to protect them against roadside explosives in Iraq and
Afghanistan. The plant also produced other related vehicles like
armored tow trucks and ambulances for the military.
Navistar had to take the decision to suspend production in the
plant owing to the reduction in the federal budget, which was
effective from Mar 1, 2013. In addition, a challenging
environment in the defense industry also put pressure on the
The plant witnessed high production level in the first three
years but demand started dipping thereafter. According to
management, Navistar needs to adapt the changes in the defense
environment and thus it had to suspend production at West Point.
Navistar's second quarter (ended Apr 30, 2013) loss widened to
$353 million or $4.39 per share compared with $137 million or
$1.99 per share (excluding special items) in the year-ago
quarter. Reported loss was also significantly wider than the
Zacks Consensus Estimate of a loss of $1.09 per share.
Lower sales volumes and higher pre-existing warranty adjustments
related to EPA 2010 emissions level engines primarily dragged
down the profits. However, this was partially offset by lower
SG&A expenses and decrease in engineering and product
Revenues declined 22.5% year over year to $2.5 billion in the
quarter, missing the Zacks Consensus Estimate of $2.9 billion.
The year-over-year decrease in revenues was due to a 14% decline
in industry demand and lower market share of the company due to
its transition to clean engine systems as per EPA regulation.
This was partially offset by higher sales volumes in the South
America engine business.
Warrenville, Ill-based Navistar manufactures and sells commercial
trucks, mid-range diesel engines, buses, military vehicles and
chassis for motor homes and step-vans. It also provides service
parts for various trucks and trailers. Currently, the company
carries a Zacks Rank #4 (Sell) on its stock.
Some stocks that are performing well in the industry in which
Navistar operates include
STRATTEC Security Corporation
Magna International Inc.
). All these companies carry a Zacks Rank #1 (Strong Buy).