Why Navistar is in Recovery Mode
Navistar’s losses have been well-documented by the company and multiple news outlets in the freight transportation industry. When such a large, well-established carrier takes such a tough hit, it raises questions about what exactly went wrong and what is the best way to remedy the problem.
The Lisle, Illinois-based carrier prides itself on innovation and forward-thinking mentalities, combining the efforts of sales professionals and technology experts to stand out in the trucking industry. However, a bad bet on what seemed like promising technology was the start of a series of setbacks for the company.
The company reported a loss of $80 million in the second fiscal quarter. Compared to a $4 million profit from the same period last year, it is easy to see the magnitude of the company’s slip. While the green movement was praised for its ability to reduce the environmental impact of truck driving, Navistar is a prime example of how the costs of such a change can be a big detriment.
The company invested heavily in diesel-exhaust technology to meet federal standards for reduced emissions. Pollution-cutting technology and gas-exhaust recirculation capabilities helped out with green initiatives, but they also had some nasty side effects. Not only did they lead to issues with fuel economy, but they also created reliability concerns.
The resulting hit to Navistar’s reputation coupled with an empty investment meant big losses. But the problems didn’t stop there. A surplus of trucks made it harder for the company to come out ahead, as its swelling used-truck inventory was written down. The company has rearranged its management structure to help focus on new strategies, and says that about 7,000 trucks still need to be liquidated.
After sales declined by 6 percent and losses in the company’s truck segment doubled, it was clear there was immediate cause for concern. Thankfully, the company’s part business is still making money for them, and turned a profit of $153 million in the second quarter of this year. However, even this was down 13 percent from the same period in 2016.
Management has said they believe the company is in a better place now, and they feel they can bounce back from their string of misfortune.