WASHINGTON — Nearly two years into the rebuilding of Navistar International Corp., CEO Troy Clarke has slashed expenses, reduced employment rolls, closed unnecessary divisions and streamlined purchasing and production in order to return the original equipment manufacturer to profitability, adding that he and his managers still have more ground to cover.
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Part of the turnaround, Clarke said here July 9 in an interview with Transport Topics editors and reporters, includes working through a backlog of warranty claims made against the company’s MaxxForce engines made from late 2010 and into 2012 — before Clarke became chief operating officer.
The Lisle, Illinois, OEM has the capacity to spend $600 million to $700 million a year to satisfy warranty claims by using a balance-sheet reserve of $1.38 billion dedicated to warranty work. The engines, however, have generated civil litigation, with a Dallas-based law firm announcing three lawsuits against Navistar filed by trucking companies in Tennessee, Texas and Washington state. The legal action was announced July 8.
Navistar’s spending on warranty work during the February-to-April fiscal quarter was $23 million.
“Until [July 8], I think we were doing pretty well,” Clarke said of his customer satisfaction efforts. “I can’t say there’s not been litigation against us, but it hasn’t been a lot.”
CEO since April 2013, Clarke said the company’s “liberal” warranty policy sides with customers if a claim is at least close, as he is aiming to increase market share in addition to imposing financial controls.
For more on Navistar’s rebuilding status, see the July 14 issue of Transport Topics.