Navistar International Corporation NAV recently announced the implementation of a number of actions to boost the firm’s cash position in a bid to sail through the coronavirus crisis.
The company has slashed its capital spending for 2020 by 30% as well as postponed 30% of the information-technology project spend to minimize costs during this period of reduced business. It has also deferred employer payroll tax payments, certain employee retention tax credits and $162 million in pension contributions until 2021 under provisions of the CARES Act.
Compensation reductions include 35% salary cuts for the CEO and board of directors, and 10-30% pay cut for U.S.-based, salaried exempt, non-represented employees. Navistar also announced a 20% reduction in workweek for its contract workers, which is in addition to the deferral of merit salary increases and a delay in 401k company match contributions until 2021. Salary deferrals, effective Apr 20 through Dec 31, will be repaid with interest by Mar 15, 2021. Other steps to minimize costs shall take place immediately through Dec 31, 2020.
These cost-reduction initiatives are expected to preserve about $300 million in cash, which will be used to deal with the losses caused by the production shutdowns. As of Apr 10, the company stated it had $1 billion in both consolidated cash and cash equivalents, and manufacturing cash and cash equivalents.
Meanwhile, Navistar service facilities and parts distribution centers continue to operate in order to meet the changing customer needs amid coronavirus pandemic. However, the production suspension at the company’s truck assembly plant in Springfield, OH has been extended through early May, in response to the disruptions in Navistar’s supply chain due to the current crisis. Moreover, the company withdrew its financial and industry guidance for 2020 last month.
Navistar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The coronavirus pandemic has become a concern for other global auto biggies as well, including Tesla TSLA, Honda Motor HMC, Toyota Motor TM, Volkswagen AG, Goodyear Tire, Nissan, Harley-Davidson and Hyundai Motor. Several automakers have closed their factories and suspended production, while the others plan to change manufacturing processes and cut production levels in their plants, in line with the nationwide campaign addressing the crisis. The pandemic has not only dented consumer sentiment and thwarted vehicle demand but also distorted the supply-chain balance globally.
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