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Navistar's Mississippi Plant to Stop Production

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Navistar International Corporation (NAV) announced that its Navistar Defense business will be suspending production at its West Point, Miss., plant. The sequester led to this decision and Jul 5 will be the last day of production in the plant that employs 80 workers.

The West Point plant was opened five years ago and used to assemble MRAP — mine resistant vehicles, which was used by soldiers to protect them against roadside explosives in Iraq and Afghanistan. The plant also produced other related vehicles like armored tow trucks and ambulances for the military.

Navistar had to take the decision to suspend production in the plant owing to the reduction in the federal budget, which was effective from Mar 1, 2013. In addition, a challenging environment in the defense industry also put pressure on the company.

The plant witnessed high production level in the first three years but demand started dipping thereafter. According to management, Navistar needs to adapt the changes in the defense environment and thus it had to suspend production at West Point.

Navistar’s second quarter (ended Apr 30, 2013) loss widened to $353 million or $4.39 per share compared with $137 million or $1.99 per share (excluding special items) in the year-ago quarter. Reported loss was also significantly wider than the Zacks Consensus Estimate of a loss of $1.09 per share.

Lower sales volumes and higher pre-existing warranty adjustments related to EPA 2010 emissions level engines primarily dragged down the profits. However, this was partially offset by lower SG&A expenses and decrease in engineering and product development costs.

Revenues declined 22.5% year over year to $2.5 billion in the quarter, missing the Zacks Consensus Estimate of $2.9 billion. The year-over-year decrease in revenues was due to a 14% decline in industry demand and lower market share of the company due to its transition to clean engine systems as per EPA regulation. This was partially offset by higher sales volumes in the South America engine business.

Warrenville, Ill-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. Currently, the company carries a Zacks Rank #4 (Sell) on its stock.

Some stocks that are performing well in the industry in which Navistar operates include Visteon Corp. (VC), STRATTEC Security Corporation (STRT) and Magna International Inc. (MGA). All these companies carry a Zacks Rank #1 (Strong Buy).

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