The Lisle, Ill.-based truckmaker, which last month ousted CEO Dan Ustian and in June suspended guidance for the rest of the year, said it hopes to reduce annual spending by upward of $175 million by fiscal 2013, in part through layoffs and buyouts.
Navistar also said it was launching a review of all noncore businesses "with a goal of improving [the company's] return on invested capital and driving long-term profitability."
Navistar said it considers its truck and truck engine businesses to be core. In recent years the company has also expanded into areas including recreational vehicles and construction equipment, and has a number of overseas joint ventures that could be candidates for a sale.
The announcement came on the same day that Navistar said third-quarter after-tax profit fell 94% compared to the same quarter a year prior. The company reported a pretax loss of $100 million on sales of $3.3 billion, a revenue number that beat analyst estimates of $2.96 billion but which was down from the $3.5 billion in sales reported a year prior.
Lewis B. Campbell, who replaced Ustian as CEO, in a statement said "clearly we are not pleased with these results," but added that management is "working on a plan to deal with many of the important issues we face, most importantly restoring our core North American truck, engine and parts businesses to their market leader positions."
Navistar has been in a tailspin due to difficulties stemming from its 2001 decision to invest more than $700 million in an ambitious, but so far not viable, technology designed to meet higher emission standards by recirculating exhaust gases in the combustion chamber.
As that technology has sputtered, Navistar has fallen behind rivals including Cummins Inc., which used less technically challenging methods to meet emissions requirements. Navistar's key truck segment lost $30 million in the most recent quarter in part due to engine charges, and its engine segment recorded a loss of $47 million including $14 million in emissions nonconformance penalties.
Navistar said Thursday a previously announced deal to buy engines from Cummins while the company works through its research and development difficulties should be finalized by the end of October.
Vicki Bryan, senior high-yield analyst at Gimme Credit LLC, in a note said that any delay in the Cummins deal could be "a big problem," noting that "we don't think Navistar can make serious progress with its recovery strategy without its key strategic supplier and development partner on board."
Shares of Navistar have fallen more than 50% from February highs due to its troubles, attracting the attention of activists including Icahn and his one-time protégé Mark Rachesky. Both investors own 14.9% of Navistar apiece, a level right below the company's poison pill trigger, but so far have been silent about their plans for the truckmaker.
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