Navistar Wants To Build More Heavy-Duty Trucks In Mexico
09 Junho 2009 - 6:39PM
Dow Jones News
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
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