Navistar International Corporation recently provided an update on actions it is taking in response to the COVID-19 pandemic, including a series of temporary cost-reduction measures to preserve financial flexibility.
As an essential business critical to supporting the country’s increasingly stressed supply chain, Navistar said it plans to continue manufacturing operations at all plants subject to market conditions, component supplier disruptions and the continued spread and impact of COVID-19. Due to component supplier constraints, the stoppage at Navistar’s truck assembly plant in Springfield OH was extended through early May. Navistar service facilities and parts distribution centers are continuing regular operations, and up-to-the-minute International Truck and IC Bus dealership hours are available at internationaltrucks.com/covid19.
“Navistar is not immune to the reality of the COVID-19 pandemic,” said Troy A Clarke, chairman, president and CEO. “The extent of this virus is unprecedented, and our personal lives, businesses and global economies are being impacted by events beyond our control. With considerable uncertainties surrounding coronavirus, we have been monitoring the situation closely and decided to take actions to reduce costs and maximize financial flexibility and liquidity to best position Navistar for the future.”
The company is implementing a series of temporary cost reduction measures to further preserve financial flexibility. Actions include:
- A postponement of 30% of capital expenditures;
- A postponement of 30% of information technology project spend;
- A deferral of $162 million in pension contributions until 2021 under provisions of the CARES Act;
- A deferral of employer payroll tax payments and certain Employee Retention Tax Credits under provisions of the CARES Act as guidance becomes available;
- A deferral of 35% to the base salary of the CEO and board compensation;
- A deferral of 10-30% to the base salary of US-based, salaried exempt, non-represented employees;
- A reduced workweek by 20% for contractors.
Salary deferrals will be effective April 20 through Dec 31, Navistar said, and will be repaid with interest no later than March 15, 2021. Other cost reduction actions will go into effect immediately through Dec 31.
These cost-reduction initiatives are in addition to other previously implemented employee-related actions, including a deferral of merit salary increases and a delay in 401k company match contributions until 2021. In total, these measures conserve approximately $300 million in cash over the balance of the company’s fiscal year, ending Oct 31.
As of April 10, Navistar’s consolidated cash and cash equivalents, and manufacturing cash and cash equivalents, both exceeded $1 billion, the company added.
“We held a strong manufacturing cash position heading into this pandemic, and the actions we are taking allow us to manage cash flow in response to these extraordinary times,” said Walter G Borst, executive vice president and chief financial officer. “These actions do not impact the longer-term benefits of our Navistar 4.0 strategy but may influence the timing of when the plan’s full potential is realized, which we will reevaluate once the post-coronavirus economy is better understood.”