Fortunes for the company, which operates the Navistar plant in Springfield, are also uncertain if a trade war with China were to escalate.
“The good thing for Springfield is Navistar builds most of its medium-duty vehicles in Springfield and the outlook for the medium-duty market is much (better) than the collapse that we’re looking for in the heavy truck market,” he said.
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Navistar reported their revenue grew by 24 percent to $3 billion in the second quarter. Navistar President and CEO Troy Clarke reported last month that the results were driven by a demand for both heavy-duty trucks and the medium-duty trucks built at the Springfield location.
“Our class six through eight truck order share doubled to 28 percent. Additionally, the production ramp or acceleration of the new class 4 and 5 truck is almost complete,” he said.
The company has made a significant turnaround over the past several years. Navistar had as few as 300 workers in Springfield as recently as 2010, but has rebounded financially and now has approximately 2,000 workers in the facility. Thousands of the company’s retirees also live around Clark County. The company has invested millions in new equipment in Springfield over the past several years to revamp the interior of the facility and stream line its manufacturing processes.
Navistar expects to report continued success next month when leaders speak with investors about the company’s third-quarter results, Navistar International CFO Walter Borst said.
“2019 is shaping up to be a very strong year for Navistar,” he said. “The company is recapturing market share, growing revenue and taking actions to strengthen our balance sheet to prepare for the road ahead.”
Consumer confidence
Good consumer confidence throughout America directly impacts Springfield and the medium-duty industry, Vieth said. And right now confidence is strong.
“The unemployment rate is very low. The savings rate is strong and confidence is good,” he said. “Retail sales have been a little bit spongy but by and large consumers are in good shape. Medium-duty vehicles tend to be purchased to facilitate consumer-related businesses.”
The vehicles built in at the Springfield plant will be in demand so long as the consumers keep buying, Vieth said. He said all signs point to that happening.
“We have a little increase in the medium-duty market place on the base of the strength we see in the consumer related fundamentals,” he said.
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However, it’s worth keeping an eye on the economy moving forward, Vieth said.
“There is one risk that we do see and that’s the U.S. economy and a recession,” he said. “July marked the 121st consecutive month of economic growth and that’s somewhat important in that the previous longest economic expansion in the history of the United States went from 1991 to 2000 and that lasted 120 months.”
He said currently, evidence points to the economy staying out of a recession, but a trade war with China could make predicting the future that much tougher.
“Everything that we’re looking at suggesting the U.S. economy should continue to grow for the foreseeable future, but an unadvised trade war would be the one thing that could mess that up.”
Navistar’s future
Executive Vice President Persio Lisboa told investors last month he believes the company has set itself up to be successful into the future.
Navistar has acquired a meaningful backlog of orders, he said, and the company is confident the orders will result in future sales.
“We never really filled the backlog with orders that didn’t have a name,” he said. “We try to really give priority to customers that were real customers that would take the truck, and that’s the quality of our backlog.”
“So what we are seeing today, the backlog, that’s why we feel very good about what we have today, and new orders that are coming are the ones that we are seeing customers that want to replace their fleet, want to get into more modern trucks, and they are in the market for those new technologies.”
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He said he expects to see the company’s backlog to continue to grow.
“What we are seeing from customers is really … the opportunity to replace their fleets is something that is very meaningful,” Lisboa said. “We cannot discount the importance of that, so the backlog that we have today is pretty solid.”
Clarke said, as with any industry, an economy that continues to grow will be good for business.
“With regards to the economy, economic and business fundamentals are still very good, but a lot can happen in the next 12 to 14 months, and in some cases, order backlogs would indicate delivery,” he said. “Obviously orders today are for deliveries in basically 2020, so it does provide the opportunity for some customers to say, hey, let’s take a wait and see.”
“Now the freight market certainly seems to be moderating, but I think the question is, is it shifting to a lower gear or not? It’s really hard to tell because seasonal shipping, which typically happens between July and September time frame, actually has increased, so we’ll have to see how that works its way through the balance of the summer,” he said. “But again, I think the economic fundamentals are still there that support not only the backlogs, but I think some opportunities yet to be discovered in 2020.”
Lisboa also pointed to the companies products and pricing as a reason to be optimistic for 2020 and beyond.
“As we look at the product platform today, we have a lot of new customers and customers that are in the market for a new truck. They are looking for a new product, and they get that with International, so that’s one,” he said. “Because of that, I think pricing has been a positive story for us as well, so we can’t comment on the industry pricing but the fact that we have positive pricing in all segments is also an important data point for us.”
Facts and Figures:
2,000: Number of employees that work for Navistar in Springfield
300: Number of employees that worked for Navistar in 2010
$3 billion: Reported revenue by Navistar during the second quarter meeting
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