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Navistar Closing Plant in Garland

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Navistar International Corporation announced at the end of October that the company will be closing its assembly plant in Garland, Texas. The truck manufacturer has cited falling demand for commercial trucks as the reason for diminishing its production capacity.

Nearly 900 workers risk losing their jobs as Navistar winds down operations and ceases production at the plant in the first half of 2013. Located near Dallas, the plant is currently the company’s primary assembly site for heavy-duty trucks. After the plant closes, the company will utilize its other plants more fully in a move that is expected to lower Navistar’s operating costs.

President and CEO of Navistar, Troy Clarke, said in a statement to the press, “Navistar has too much manufacturing capacity in North America, and we must take quick action to improve our business and position the company for longterm success.”

The closing is expected to make a noticeable impact on the community of Garland, but Clarke promised that Navistar “will treat people with respect and provide support to help them with their transitions.”

Demand for Commercial Vehicles

The news of the plant closing was of no surprise to industry insiders. Most of Navistar’s competitors have already begun to slow production or have plans to do so in the near future.

After a long slump in the trucking industry from 2007 to 2010, growth was strong in 2011, and expectations were high that it would continue. However, demand has dropped dramatically in the last few months of 2012, and forecasts predict that the trend will continue through the first half of 2013.

The Navistar plant in Garland has been operating for over 15 years, and closing the plant is one of the biggest moves made by the company to curb expenses. The move is part of a strategy developed by interim CEO Lewis Campbell who was hired last August with the task of improving the company’s returns. Closing the plant is expected to lower Navistar’s annual expenses by up to $35 million.

Closing the plant is only one of several initiatives being taken by Navistar to lower costs. Plans to produce a new 15-liter diesel engine have been scrapped and replaced with a purchase agreement with Cummins Inc. for the required engines. In addition, 800 employees were laid off this past summer. Most of them had worked at the company’s headquarters near Chicago.

Navistar began to experience problems in 2010 when the Environmental Protection Agency (EPA) lowered the acceptable level of nitrogen oxide emissions. Unable to meet the new EPA standard, Navistar instead opted to retrofit its engines, but the uncertainty had already caused the stock to drop.