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According to Reuters, Navistar International Corporation is planning to reduce headcount through a voluntary separation program. The company may also undertake an involuntary reduction of workforce to accomplish the goal.

Navistar is providing an opportunity for most of the U.S.-based non-represented salaried employees to apply for the voluntary separation program. However, the company could not spell out the exact amount of expenses involved in the workforce reduction program at this stage.

Navistar is developing the next-generation clean engine system – In-Cylinder Technology Plus (ICT+) – to meet the 2010 U.S. Environmental Protection Agency (EPA) emissions standards. To lay emphasis on the new technology, the company is even considering to eliminate certain programs and projects.

The company recorded a loss of $137 million or $1.99 per share (excluding special items) in second-quarter 2012. The results also missed the Zacks Consensus Estimate of earnings of 67 cents per share.

Revenues dipped 2.9% year over year to $3.3 billion, missing the Zacks Consensus Estimate. The decline was attributable to a decrease in sales in the Engine and Part segment, which was partly offset by higher sales in the Truck segment.

Warrenville, Illinois-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. The company’s U.S. controlled domestic competitors include Ford Motor Co. and PACCAR Inc. .

Currently, Navistar retains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating. The company faces difficulty in obtaining smooth supply of materials due to its over dependence on a few suppliers.

In addition, strict regulation by the government also creates pressure on the company as it generates most of its revenues from services rendered to the government. We have a long-term (more than 6 months) Underperform recommendation on the stock.

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