Navistar to move truck production out of Chatham?

CHICAGO — The chances that Navistar‘s Canadian truck plant is still operating beyond this month aren’t so hot all of a sudden.

Not only did the truckmaker issue layoff notices to all its remaining Chatham, Ont. plant workers (as it’s required to do so by Ontario law even if it is only considering layoffs), but The Wall Street Journal quotes chairman and CEO Daniel Ustian as saying the company is considering moving at least some of Chatham’s heavy-duty truck production to its Escobedo, Mexico plant.

"Many of our suppliers have moved from the Midwest down into the Southwest and even into Mexico and that poses a challenge to our cost structure in Chatham," said Ustian during a conference call with Wall Street analysts. "The logistics can cost as much or more than putting the vehicles together."

Also, Ustian notes that some more recent heavy-duty customers are largely situated in the South and Southwest U.S. He says, though, that he could see an arrangement where Chatham continues to build for delivery to Canada and the northeast U.S.

That production-distribution model, however, would likely leave the Chatham plant vulnerable to a permanent shutdown down the road.

The current contract between the company and Canadian Auto Workers expires on June 30.

Navistar spokesman Roy Wiley told todaystrucking.com in April that the layoff notices are "precautionary and procedural."
However, the company did follow through with layoffs the last two times it issued advance notices, letting go most of its 1,200 workforce.

A CAW spokesperson didn’t seem so confident. "The commitment to Chatham is clearly not there," he told the WSJ.

Navistar has been threatening to shift capacity to Mexico since 2003 when CAW workers went on a month-long strike. The plant was saved when Navistar was guaranteed $65 million from the federal and Ontario governments.

Ustian’s comments could be seen as posturing by the truckmaker as contracts talks between it and the CAW get underway. Or, as others predict, perhaps closing the plant is a forgone conclusion.