Following UAW Ratification Vote, Navistar Moves Forward With Strategies To Boost Competitiveness, Reduce Costs
19 August 1997
Following UAW Ratification Vote, Navistar Moves Forward With Strategies To Boost Competitiveness, Reduce Costs
* Next Generation Truck to be built in Springfield, Ohio
* Springfield facility to be focused on building medium-duty trucks only
* Indianapolis foundry to close in late 1998
CHICAGO, Aug. 19 -- Following contract ratification voting by
the United Auto Workers (UAW) earlier this week, Navistar International Corp.
today announced plans to build its next generation truck (NGT),
focus and streamline its manufacturing operations, and close its Indianapolis
foundry.
On Sunday, an extension of the current master contract was ratified by
63 percent of voting UAW members. It takes effect immediately and runs
through October 1, 2002. Approximately 8,000 production, maintenance,
clerical and technical employees at Navistar facilities in Springfield, Ohio;
Indianapolis; Ft. Wayne, Ind.; Melrose Park, Ill.; and other parts
distribution locations are represented by the UAW.
A NEW PARTNERSHIP
"We are very excited about this agreement. It represents the shared
commitment of employees and management to make the changes necessary to
strengthen Navistar's leadership position and drive the market in quality,
innovation and customer service," stated John R. Horne, chairman, president
and chief executive officer. "We are well on the road to renewal, and this
contract is a major milestone."
Jack Laskowski, international vice president of the UAW, said, "This
agreement signals a new partnership between labor and management. I am very
pleased with the positive vote on the master contract, and with the work done
in Springfield to create a brighter future there. I only wish we had the same
success in Indianapolis."
TRUCK STRATEGY TO GO FORWARD
Under the agreement, Navistar can continue moving forward with the five-
point strategy the company announced last year to make its truck business more
competitive.
"We are delighted with this very progressive, win-win agreement that
allows us to re-focus our energy on external customer and competitor
challenges," said Don DeFosset, Navistar executive vice president and
president, truck group.
Specifics of the deal include:
* Focused manufacturing plants -- Navistar's Springfield assembly plant
will be focused exclusively on the production of medium-duty trucks, as the
company's Chatham, Ontario plant was focused earlier this year on production
of heavy-duty trucks. Heavy models currently manufactured in the Springfield
Assembly Plant will be moved to other facilities.
* New product development -- Navistar will introduce and build its next
generation truck (NGT) in Springfield. Replacing the current, industry-
leading medium-duty truck model, NGT will offer world-class customer features
including enhanced driver comfort, operating efficiency, overall appearance,
quality and performance. Funding for the NGT program is set for approval by
the company's Board of Directors at its October meeting.
* Reduced product complexity -- The next generation truck will be produced
through a state-of-the-art modular assembly process, reducing assembly hours
per unit by more than 30 percent. NGT design and manufacturing principles
will be later applied to a new range of heavy-duty truck models.
* Competitive wage, benefit and productivity levels -- The agreement will
help make Navistar's truck business more competitive from a total labor cost
standpoint.
The fifth element of Navistar's truck strategy is international expansion,
beginning with a strengthened presence in the Mexican market. Last year the
company established a dealer network and began producing International(R)-
brand trucks in Mexico. A $167 million plant, designed to meet Mexican and
Latin American demand, is currently under construction and will open next year
in Escobedo.
INDIANAPOLIS FOUNDRY TO CLOSE
In a separate vote Sunday, local UAW members working in one of the
company's foundries, Indianapolis Casting Corp. (ICC), rejected a proposal
that would have kept the foundry cost competitive and financially viable in
the face of foreign competition. As a result, Navistar said it would proceed
with plans to close ICC in late 1998.
Preparing for the possibility that the foundry's competitive situation
would not be resolved, Navistar has developed alternative sources for the
castings ICC now produces.
In recent years, the company invested heavily in ICC to make it more cost
competitive, spending $50 million on upgrades and providing 10,000 hours of
training for workers. Since then, the foundry made major strides in
increasing productivity and efficiency and reducing waste.
With wage levels 50 percent higher than the competition's, however, ICC
could no longer stay competitive without a new labor agreement, particularly
in the face of future competition from foundries in Latin America, where labor
costs are significantly lower.
Currently employing 650 people, ICC manufactures grey-iron castings for
engines, which it supplies both internally to Navistar and to external
customers.
The decision to close ICC will result in a charge to fourth-quarter
earnings.
Navistar International Corporation, with world headquarters in Chicago, is
the leading North American producer of heavy trucks, medium trucks and school
buses. Navistar maintained its position as the sales leader in the combined
United States and Canadian retail markets for medium and heavy trucks and
school buses through the first three quarters of the year, achieving a
27.1 percent share that is consistent with the same period a year ago. The
company is the worldwide leader in the manufacture of mid-range diesel
engines, which are produced in a range of 160 to 300 horsepower. Navistar
reported sales of $5.8 billion in 1996.
SOURCE Navistar International Corp.
