Navistar Says CAW Members Approve New Labor Pact For Chatham-Kent Heavy Truck Assembly Plant

New Contract Boosts Productivity, Provides 48-Hour Week Including Scheduled

Overtime; Lost Production, Engine Shortage Will Contribute to Anticipated 3rd

Quarter Loss

Jul 15, 2002, 01:00 ET from Navistar International Corporation

    WARRENVILLE, Ill., July 15 /PRNewswire-FirstCall/ -- International Truck
 and Engine Corporation announced today that members of Local 127 of the
 Canadian Auto Workers (CAW) have ratified a new two-year labor contract and
 that full production at the company's Chatham-Kent heavy truck assembly plant
 will resume on July 22.
     (Photo: )
     The new contract covers approximately 1,720 CAW-represented production and
 maintenance employees, including approximately 645 active workers and 1,080
 employees on layoff who are not likely to be recalled in the near term.
 International Truck and Engine is the operating company of Navistar
 International Corporation (NYSE:   NAV).
     Negotiations towards a new labor agreement began on April 26 and the CAW
 initiated a strike action when the old contract expired at 12:01 a.m. on
 June 1. Most recent negotiations began on July 13 and continued into the
 morning of July 14 when tentative agreement on a new contract was reached.
     This new contract positions the company to be market responsive over the
 business cycle with a more variable cost structure. While the new contract
 does not achieve all necessary cost savings sought by the company to make the
 assembly plant fully competitive, it increases productivity and provides for
 flexible work schedules. Under the contract, work weeks can be scheduled for
 up to 48 hours over six days, including scheduled overtime.
     Prior to the strike, production at Chatham had been averaging 39 trucks
 per day on one shift. The same number of employees will produce 46 trucks per
 day when they return to work. Under the new contract, the plant will be able
 to produce up to 57 trucks per day including overtime.
     The contract has a cost structure approximately equivalent to the previous
 contract.  The basic hourly wage rates and vacation time remain unchanged.
 There is a one-time increase in pension benefits that will be offset by the
 overtime productivity gains included in the contract. A portion of the
 increase in build rate from 39 trucks per day to 46 trucks per day will be a
 net gain.
     On April 5, a "consideration to close" letter was issued to the CAW. That
 letter, required under the contract that expired June 1, said that cost
 reductions totaling $28 million were needed to make the plant competitive and
 that the company had been able to identify $14 million. Although the goal of a
 $28 million cost decrease has not been achieved, the company and the CAW have
 committed to work together to identify the additional $14 million in cost
 savings that is required in addition to those actions that management has
 identified and is implementing.
     "This new contract gives greater productivity and allows the company the
 opportunity to benefit from the increased demand developing in the heavy
 sector of the market," said Steve Keate, president of the International truck
 group. "We have the flexibility to make the right business decisions for the
 heavy business as it relates to Chatham. If we can't get there, we have the
 flexibility to close the plant after June 1, 2003."
     Concurrent with the June 1 strike, production of heavy trucks was shifted
 to the company's plant in Escobedo, Mexico where production was in the process
 of being ramped up to 58 trucks per day on two shifts and will maintain a
 schedule at approximately 300 trucks per week for the next several months to
 continue to fulfill customer commitments.
     Keate also said that this manufacturing plan will allow International to
 build trucks in line with materials allocated from suppliers. To date,
 Caterpillar, one of International's two engine suppliers, has identified a
 shortfall of 1,200 October 2002 pre-emissions engines for fiscal 2002.
 Consequently, Keate said, heavy truck production will be approximately 1,000
 trucks lower in the third quarter ending July 31 and 200 trucks lower in the
 fourth quarter ending October 31 than previously estimated. As the loss of
 heavy units, a previously announced product recall, the Brazilian exchange
 rate and the cost of the CAW strike, the company expects a loss for the third
 quarter ending July 31 of ($0.25) to ($0.30) per share.
     In addition to heavy trucks, International Truck and Engine is a leading
 producer of mid-range diesel engines, medium trucks, severe service vehicles,
 and a provider of parts and service sold under the International(R) brand. IC
 Corporation, a wholly owned subsidiary, produces school buses.  The company
 also is a private label designer and manufacturer of diesel engines for the
 pickup truck, van and SUV markets.
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SOURCE Navistar International Corporation