Navistar Shuttering Garland Plant

In a bid to reduce costs and better utilize its manufacturing resources, Navistar International Corporation (NAV - Analyst Report) has announced its plans to shut down its Garland truck assembly plant in Texas by the first half of 2013. The plant employs approximately 900 salaried, hourly and third-party temporary workers. Sources reveal that the company intends to lay off 600 workers and the remaining 300 workers will be employed temporarily by a third party contractor.

Post closure of the plant, the company will be able to reduce operating costs by $25-$35 million annually. The company intends to shift the production of the plant to other North America operations, which builds similar trucks, starting January 2013.

However, the company will incur employee separation benefits charge of around $10 million in the fourth quarter of 2012. It also expects a pre-tax charge of $30 million to $50 million during the quarter.

Navistar recorded an adjusted loss of $86 million or $1.48 per share in the third quarter of fiscal 2012 (ended on July 31, 2012). This was in sharp contrast to an adjusted profit of $46 million or 60 cents in the corresponding quarter of 2011. The loss was wider than the Zacks Consensus Estimate of a loss of $1.39 per share.

Revenues declined 6% year over year to $3.3 billion in the quarter, surpassing the Zacks Consensus Estimate of $3 billion. The year over year decline was due to lower revenues from the company's Truck and Engine segments in the U.S. and Canada.

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. (F - Analyst Report) and PACCAR Inc. (PCAR - Analyst Report).

Currently, Navistar retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.