Navistar International Corp. announced that its fiscal fourth-quarter loss ballooned to $2.76 billion, mostly due to a tax-related charge, but executives said long-term product improvements will restore profits.
Navistar’s loss for the quarter ended Oct. 31 was $566 million — excluding the $2.19 billion charge for valuation of assets for tax purposes — compared with 2011 quarterly net income of $275 million.
Revenue declined 24% to $3.28 billion, reflecting lower sales of trucks, engines and military equipment, as well as annual warranty costs that more than doubled.
“There was a lot of noise in the numbers, which you can expect from a company in transition,” said Lewis Campbell, interim CEO, on a conference call. “This is a 12-to-18-month turnaround. We will be positioned for a profitable 2014. I believe Navistar’s best days are yet to come.”
Campbell and his management team were in place for most of Navistar’s fiscal fourth quarter, taking over on Aug. 27 from former CEO Daniel Ustian. He retired shortly after Navistar joined every other truck maker in adopting selective catalytic reduction engine emissions technology and refocused its product line to include 15-liter Cummins engines.
For the full fiscal year, Navistar lost $2.96 billion, after making a $1.78 billion profit the year before. Revenue slipped 7% to $12.95 billion.
Meanwhile, the quarterly loss at the truck business, which accounted for about 70% of revenue, was $160 million. That unit had a $287 million profit in the year-earlier quarter.
Engine unit losses totaled $287 million after a profit of $58 million in the 2001 quarter. Parts profit slipped 13% to $76 million on $582 million in revenue.
The quarter included $149 million in warranty charges that were “significantly larger than historical experience,” the earnings report stated. For the full year, warranty expense was $895 million, nearly triple the total of $322 million in fiscal 2010.
Troy Clarke, president and chief operating officer, said warranty costs were related to the exhaust gas recirculation valves on 2010 and 2011 models and two related parts of that valve. Navistar didn’t say what those other parts were.
“Our trucks are getting better,” Clarke said. “We will do whatever it takes to keep our customers satisfied with the performance of our trucks.”
Speaking about the warranty costs, Campbell said, “I was not disheartened by this development. Our quality performance is improving. The few issues that remain are higher-cost items.”