October 4, 2012 / 5:18 PM / 8 years ago

Navistar may close plants to cut costs: CEO

LISLE, Illinois (Reuters) - Embattled U.S. truck and engine maker Navistar International Corp (NAV.N) is cutting administrative and engineering spending and may close factories as it works to lower its costs, the company’s newly named chief executive said on Thursday.

Navistar CEO Lewis Campbell speaks during an interview at the Navistar office in Lisle, Illinois, October 4, 2012. REUTERS/Jim Young

The company is cutting its white-collar work force by about 800 people through a combination of voluntary buyouts and layoffs, reducing its engineering spending by 28 percent and will review whether it needs all 19 of its North American factories, CEO Lewis Campbell said in his first interview since taking the reins at Navistar on August 27.

“We are now looking at what are the range of industry volumes that could come to us over time and what is the right footprint? More than likely we’ll have to adjust our footprint. And we’re ready to do that,” said Campbell.

The Lisle, Illinois-based company is also reviewing whether to close or sell any of its businesses outside of its core North American truck and engine operations, said Campbell, 66.

The company employed 19,000 people at the end of its last fiscal year, which ended October 31, 2011.

Navistar, which makes International-brand heavy trucks, Monaco Coach motor homes and school buses, has struggled for the past year as it was hit by heavy warranty expenses.

In July, it gave up a lengthy effort to win U.S. regulatory approval for a diesel engine model and instead is adopting the engine technology used by rivals such as Paccar Inc (PCAR.O) and Volvo AB (VOLVb.ST).

The company has lost $241 million through the first nine months of this fiscal year and analysts do not expect it to return to profitability until the third quarter of fiscal 2013, according to Thomson Reuters I/B/E/S.

Campbell’s focus in his first five weeks on the job has been to trim Navistar’s costs. He said the company had already taken cost cutting steps that will lower its annual selling, general and administrative expenses by $150 million to $175 million.

That is in contrast to his predecessor, Daniel Ustian, a 37-year Navistar veteran that the board ousted to bring in Campbell, said Morningstar analyst Basili Alukos.

“Ustian realized that we have a cost structure that’s too high, we need to expand to be profitable. And that’s why they went to all these different product lines. They went after defense, internationally,” Alukos said. “Campbell appears to be taking the opposite approach...We need to pare back, we need to get our returns up.”

Navistar has already identified operations that generate $260 million worth of revenue that it could close or sell, which its projections show would boost profit by about $52 million by lowering costs.

The company does not want to sell its military vehicle operation, Campbell said.

Navistar will sign a contract with engine-maker Cummins by the end of October securing a supply of engines for its tractor trailers.

Navistar shares were up 2.2 percent at $21.46 in afternoon trading on the New York Stock Exchange. (Reporting by Scott Malone; Editing by Leslie Gevirtz)

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