Navistar International is instituting temporary pay cuts, postponing big projects and delaying pension contributions to preserve cash as economic uncertainties tied to the coronavirus pandemic extend into more industries.
The Lisle-based manufacturer said U.S.-based salaried, nonunionized employees will take temporary pay cuts of 10% to 30%, beginning April 20 through Dec. 31, with the deferred pay reinstated with interest by March 15, 2021.
Navistar also will defer $162 million in pension contributions until 2021, reduce contractors’ work weeks by 20% and postpone 30% of capital expenditures, among other actions.
It also is extending the closure of its truck assembly plant in Springfield, Ohio, announced in March, through early May as a result of component supplier constraints. The moves, announced Tuesday, follow previous decisions to defer merit salary increases and 401(K) company match contributions until next year.
With increasing frequency, companies in industries other than those directly affected by the coronavirus pandemic — retail, hospitality and services — are preparing for financial hits to their bottom lines as workers lose jobs, spending is curtailed and people and companies have trouble paying their bills. Nationally, 6.6 million people filed initial claims for unemployment insurance benefits during the week ended April 4, on top of 6.8 million claims a week earlier.
Last week, JPMorgan Chase CEO Jamie Dimon predicted “a bad recession” in his widely read letter to shareholders. On Tuesday, the bank reported a plunge in first-quarter profits and said it was setting aside billions of dollars to cover potential loan losses from credit cards and loans to businesses.
On Monday, Ford Motor Co. said it expects a $600 million first-quarter loss.
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Navistar’s cutbacks will save roughly $300 million in cash through the end of its fiscal year on Oct. 31, the company said in a news release. It did not respond to requests for comment.
“Navistar is not immune to the reality of the COVID-19 pandemic,” Troy Clarke, Navistar CEO and president, said in the news release.
Clarke will have 35% of his base pay, which was $1.05 million in 2019, deferred until next year, when he will get it back with 6% interest, according to regulatory filings. Clarke’s total compensation in 2019, including performance-based incentives. was $7.8 million, according to regulatory filings.
In late March, Navistar withdrew its 2020 financial and industry guidance of revenues in the range of $9.25 billion to $9.75 billion. Also last month, the company reported a first-quarter net loss of $36 million.
Earlier this year, Volkswagen’s commercial truck unit, Traton, made an unsolicited $2.9 billion cash offer to take over Navistar.