Navistar International Corp. will build a $250 million truck factory in San Antonio, Texas, to help integrate manufacturing split between the U.S. and Mexico.
The plant will create 600 jobs in the San Antonio metropolitan area but is contingent on reaching an incentive package agreement with state and local authorities.
The factory will have a flexible assembly line. That will give Navistar the ability to build its International brand trucks in the Class 6-8 weight segments. It complements Navistar’s existing assembly manufacturing footprint, which includes truck assembly plants in Springfield, Ohio, and Escobedo, Mexico.
“This investment will create a benchmark assembly facility to improve quality, lower costs and provide capacity to support anticipated industry growth, as well as market share gains,” said Troy Clarke, Navistar’s chief executive officer.
The company’s market share in its core vehicle markets stood at 18.1 percent in its just-completed third fiscal quarter. That’s up from 15.6 percent in the same period a year earlier.
Navistar picked the Texas site along Interstate 35 because the corridor connects the truck manufacturer’s southern U.S. and Mexican supply bases. That will provide significant logistics improvements, cutting costs and improving profits, the company said.
“We are so proud to have a company like Navistar, a leader in vehicle innovation, in San Antonio,” said Ron Nirenberg, the city’s mayor. “It shows that our strategy to grow our advanced manufacturing sector is working.”
Navistar said it would begin construction of the factory later this year. The first trucks will roll off the assembly line about two years later.
The company also is making a series of critical investments to improve its supply chain and manufacturing.
It will transition to a single platform strategy for its truck architecture. That will optimize use of research and development resources and allow for common parts and tooling.
Earlier this year it announced plans to put $125 million into improvements at its Huntsville, Ala., engine plant. That will enable the factory to produce next-generation, big-bore powertrains Navistar is developing along with Traton Group, Volkswagen’s truck and bus company. Volkswagen is a major Navistar shareholder and the two companies have a development and procurement partnership.
“Our savings from the global alliance with Traton are on track to yield $500 million in the first five years, with $200 million in annual savings by year five,” said Walter Borst, Navistar’s chief financial officer.
Navistar announced the new factory during a presentation for investors on Thursday. The company provided industry and corporate financial guidance for 2020 during the presentation. It said:
- Industry retail deliveries of Class 6-8 trucks and buses in the U.S. and Canada will fall between 335,000 and 365,000 vehicles.
- Navistar annual revenues are expected to be $10 billion to $10.5 billion.
- The company’s adjusted annual EBITDA, an important measure of cash flow, will fall between $775 million and $825 million.
- Navistar plans to grow EBITDA margin from the 8 percent anticipated for 2019 to 10 percent by 2022. The gain will come from higher revenues and market share through new product offerings and market segmentation initiatives.