Navistar International Corporation (NYSE: NAV) intends to close its Garland, Texas, truck manufacturing operation by the first half of 2013 as part of its efforts to reduce costs and optimize its manufacturing footprint.
"Closing a facility is always difficult because of its impact on the many great people who've been part of our company," said Troy Clarke, Navistar President and Chief Operating Officer. "But the fact is that Navistar has too much manufacturing capacity in North America and we must take quick action to improve our business and position the company for long-term success."
Navistar said the Garland plant's shutdown will save the company as much as $35 million a year.
The Garland facility currently employs approximately 900 salaried, hourly and third party temporary workers.
"We understand that these decisions affect employees and the community," Clarke added. "We will treat people with respect and provide support to help them with their transitions."
Truck volume now produced at Garland will transition to other North America operations that currently build similar models beginning in January 2013.
Once completed, the Garland closure is expected to reduce Navistar's operating costs by $25-$35 million annually. The company will record a fourth-quarter 2012 charge, primarily for employee separation benefits, which is not expected to exceed $10 million on a pre-tax basis.
As the closure plan is implemented during the 2013 fiscal year, the company expects to record certain pre-tax charges, primarily related to accelerated depreciation and other related items, ranging from $30-$50 million dependent upon determination of fair value. Navistar projects this action will be cash flow positive in year one.