Is the end near (again) for Navistar in Brazil

[kscarbel2]

Scrambling for cash

In a bid to raise at least $500 million to keep its core North American business going, Navistar has been largely trying to liquidate its global operations with the exception of Australia and Russia*.

* Only 11 dealers in a vast country and an office in St. Petersburg. Sales are now limited to the ProStar, with 9800i distribution having been discontinued there. MAN is furious with Navistar for breaking their contract agreement and selling the license-built 12.4-liter MAN D26-based MaxxForce13 outside of the U.S. in Russia and other MAN markets.

In February 2013, Navistar sold its 49 percent stake in its Indian joint ventures (Mahindra Navistar Automotives Ltd. and Mahindra Navistar Engines Pvt. Ltd.) to partner Mahindra for a total of US$33 million, after having jointly invested in the design of a new heavy truck range (http://www.mahindratrucksandbuses.com/trucks.html).

Navistar also sold its Monaco recreational vehicle business, Garland, Texas severe-service truck plant (the former Marmon truck assembly facility - http://www.bigmacktrucks.com/index.php?/topic/28070-trucking-news-navistar-to-close-garland-truck-plant/),and this year the assets of it Continental Manufacturing subsidiary (the EZ-Pack refuse body and ready mix units - http://www.bigmacktrucks.com/index.php?/topic/37119-commercial-specialty-truck-holdings-acquires-continental-mfg/).

Now, Navistar is searching for interested parties to either partner with (and accept the major financial burden) or takeover the company’s Brazilian operations including truck sales and assembly, and the MWM diesel engine producing subsidiary.

The History of International in Brazil

International Harvester sold its Brazilian operation to Chrysler in 1966 and walked away from the market (Volkswagen took over Chrysler’s truck plant in 1980 and became the region’s leading truckmaker).

Renamed Navistar International in 1986, the truckmaker returned to Brazil in 1998.............and walked away again in 2002.

Navistar returned again in 2010 under the NC2 banner, which was planned as a CAT-Navistar joint venture that would be responsible for global truck sales. However for reasons yet to be disclosed, CAT and Navistar decided to dissolve NC2 just one year later in 2011.

From 2012, Navistar would become wholly responsible for producing the trucks, and they would be sold through respective CAT or Navistar global dealers. CAT would remain involved in the design of its self-branded truck models.

With a come and go tradition combined with confusion over the quickly evaporated NC2 brand, it’s no wonder that most Brazilian truck operators walk past the handful (eleven) of Navistar truck dealerships.

Navistar’s activity in Brazil includes the MWM diesel engine business and CKD assembly of 9800i and 4400i (DuraStar) series trucks. Now, Navistar is looking for a buyer.

MWM in Brazil (MWM Motores Diesel SA) was founded in1953 by WMF (Württembergische Metallwarenfabrik), Knorr-Bremse and MWM gmbH (Motoren-Werke Mannheim). This MWM, shall we say MWM Europe, was acquired by CAT in 2010.

MWM (Brazil) was purchased by Klöckner-Humboldt-Deutz AG (KHD) in 1985, and sold to Navistar International in 2005.

Brazilian truck market share:

Volkswagen (MAN) 27%

Mercedes-Benz 25%

Scania 13%

Volvo 13%

Ford Truck 13%

Iveco 7%

Other 2% (Includes Navistar, DAF, Agrale, Foton, JAC, Shacman and SinoTruk)

In 2012, Navistar moved 9800i COE production out of the Agrale plant in Caxias do Sul where it had been renting space since 1997, to save money and squeezed production into the company’s Canoas facility.

Canoas was originally built in 1999 at a cost of $25 million under the Maxion-Navistar joint-venture as an engine plant (Navistar bought out Brazilian engine maker Maxion in 2001). The factory produced 7.3 liter Powerstroke engines for U.S. market F-Series trucks

Currently, Canoas is a parts distribution center (PDC), cab, truck and small diesel engine assembly plant all squeezed into one.

To give you an idea of size, Navistar’s Canoas plant employs 700 people, while Volvo’s Sao Paulo facility has 4,500 people.

In addition to the Canoas plant, the main MWM-International engine plant is located in Sao Paulo, plus a small engine plant in Cordoba, Argentina.

Unlike other truck and component manufacturers including Cummins, M-B, Scania, Volvo and Volkswagen which wisely located their plants around the coastal ports cities of Sao Paulo and Rio de Janeiro because of their convenient logistics infrastructures, Navistar’s Canoas plant is essentially far out in the middle of nowhere.

FYI: The 9800e* and 9800i** are the predecessors of the U.S. market 9700 axle-back COE that, in addition to the 9600 axle-forward, was originally launched in 1981.

9800e 6x4 tractor ISX400 axle-back flat-roof http://www.internationaltrucks.co.za/files/NC2SouthAfrica/assets/pdf/9800e_Spec_Sheet.pdf

9800i 6x4 tractor ISX470 axle-back raised-roof http://www.internationaltrucks.co.za/files/NC2SouthAfrica/assets/pdf/9800i_Spec_Sheet.pdf

For the global market, Navistar was planning to replace the 9800 series with a refined version of their new Indian market Mahindra-Navistar model MN49* tractor (now renamed Mahindra Traco 40-260) and use the name AeroStar*.

Navistar announced plans to produce the Aerostar in Brazil by 2013, while telling South African customers in 2011 that the 9800 would remain in production until 2017.

Though the 9800 is dated, the low-end made-for-India MN49 was entirely inappropriate as a 9800 replacement for markets like Brazil and South Africa where it would have to compete with DAF, Iveco, Mercedes-Benz, MAN, Scania and Volvo. Trying to adapt the MN49 was a cheap way out for Navistar, rather than investing in a new world-class COE that could actually compete (Does Navistar even still have the engineering talent to design a premium COE?). Navistar’s sale of its Mahindra stake in 2013 terminated the Aerostar plan, so the 9800 will remain in production..........for now.

.

* http://www.mahindranavistar.com/Pager-PDF-two/MN49_brochure.pdf

http://www.mahindranavistar.com/corporate/Corporate%20Brochure.pdf

**