Navistar gives Chatham plant a lifeline

CHATHAM, Ont. (June 20, 2003) — Navistar International, parent company of International Truck and Engine, announced yesterday it will delay the closing of its Canadian heavy-duty truck plant in hopes of obtaining financial aid from the Canadian government to keep the Chatham, Ont. facility open.

The company, which had planned to close the plant on July 18 and shift production to its factory in Escobedo, Mexico, decided in May to reconsider the move after striking a conditional deal with the Canadian Auto Workers union, who overwhelmingly voted to ratify a 3-1/2-year deal that includes $47.7 million in concessions. After a year of negotiations and threats from Navistar to close the plant, the union agreed to a temporary freeze to cost of living allowance, and to cut vacations and bonuses, among other concessions, which Navistar said it needed to keep the plant operational.

However, the deal still hinges on $10 million a year in financial assistance from the federal and Ontario governments. Navistar says it can save $63 million per year by shifting production of its 9000i Series tractors to Mexico, and would therefore need the government assistance to bridge the cost reduction gap. According to a letter Navistar sent to Canadian government officials in May, one of several ideas proposed would involve Navistar selling the plant to the government and then leasing it back.

The fact Navistar is willing to extend the closing date beyond July 18 indicates that the parties involved are optimistic that a settlement is imminent, Navistar spokesperson Roy Wiley told the Reuters news agency. Under Canadian law, the Chatham plant can remain open for up to an additional 13 weeks beyond the originally scheduled closing date while the negotiations continue.

The plant currently has about 800 active CAW workers, with about 1300 union employees on layoff because of a slump in truck sales due to the weak U.S. economy.