Navistar's long road to growth
The historic Springfield facility is poised to reach its highest employment level in years, but only after a turbulent recent history
Navistar’s Springfield plant will add hundreds of jobs soon, but just a few years ago workers weathered turmoil that included top management changes, legal struggles, a recession and a failed engine technology.
The company's turnaround is a combination of a better relationship with the UAW, a focus on quality and tough choices to cut costs, company leaders and industry experts said.
The truckmaker announced a joint agreement with GM last month to build medium-duty trucks in Springfield, along with a pledge to add at least 300 jobs over the next three years. That would push the local site close to 1,800 workers, a dramatic shift from just a few years ago when several local leaders believed the plant might close.
The Springfield facility — which currently employs about 1,500 and has thousands of local retirees still in the region — has been in jeopardy at various times in its history, said retired U.S. Rep. David Hobson, a longtime advocate for the plant.
Much of that was the result of tension between the union and former management, he said. But Navistar’s new executives saw potential in Springfield, Hobson said, and both labor and company leaders have made compromises that are now paying off.
“There have been all kinds of threats to shut down this plant over the years,” Hobson said. “But it survived and I think that’s a tribute to the workforce and the community. There were some people in Chicago who were determined to get rid of this plant and they were never able to pull it off.”
Navistar officials disputed that the Springfield factory was targeted for closure, but said it’s in a better place after a new four-year labor agreement and the GM deal.
The company has also boosted production in Springfield and taken steps to improve efficiency, said Bill Osborne, Navistar’s senior vice president of global manufacturing and quality.
It has pledged to invest $12 million in Springfield while GM will invest another $20 million.
“We feel very positive about the future of the plant because we feel good about our core business and the product we see GM bringing to the market will be strong,” Osborne said. “Obviously with the reach and the dealer base that they have, it should create significant volume for Springfield.”
Ups and downs
Ron Rhine, a Navistar retiree and former UAW Local 402 president, saw his share of ups and downs in his 42-year career. The UAW represented about 6,200 workers during his term as president in the 1970s.
Any corporation with Navistar’s size and history goes through difficult periods of change, Rhine said.
In 1972, the company quit producing pickup trucks, leading to as many as 3,000 lay offs. And in 1979 and 1980 a contentious labor dispute led to a six-month work stoppage, he said.
But closing the site would have a devastating effect on Clark County’s economy, Rhine said, as well as its psyche.
“It would have been a disaster,” he said.
In more recent years, the Great Recession devastated most manufacturers. The industry had to claw its way through that period, Osborne said.
“Obviously during the economic downturn, volume just left the industry in general,” he said. “We were at a point where it was pretty difficult for all manufacturers back in the 2008 and 2009 time frame to maintain their production.”
As recently as 2010, the Springfield plant had as few as 300 workers, UAW Local 402 President Jason Barlow said.
And the company hit a particularly rough patch in 2012.
Navistar lost a big bet on new engines that didn’t meet emission standards and faced significant fines if it didn’t abandon the technology. The company gave up ground to competitors as it struggled to recover from that blow, eventually switching to Cummins engines.
The Securities and Exchange Commission began investigating whether Navistar violated federal laws by providing misleading statements as it tried to get approval for its engine technology.
That same year, the company lost out a $14 billion bid on a military contract to develop Humvees for the U.S. military. It also suffered a steep decline in company shares, and faced takeover threats from activist shareholders.
CEO Dan Ustian retired that year. Lewis Campbell took over as CEO and began to cut costs and make the company more efficient.
Then Troy Clarke, a former chief labor negotiator for GM, took over as CEO in 2013.
“There were lots of issues and most of those issues have slowly but surely been resolved,” said Steve Volkmann, an analyst from Jefferies who follows the company.
Despite that significant progress, he said Navistar still has challenges ahead.
Although he doesn’t believe the industry is headed for a downturn, Volkmann said some analysts do.
“Even though they have righted the ship and started to move forward again, if this truck cycle rolls over and becomes negative volumes in the next two or three years — and some people believe that’s going to happen — that is a problem,” he said. “These guys may have run out of time.”
Righting the ship
Navistar officials took significant steps to restructure the company and become more competitive, Volkmann said.
The company cut hundreds of jobs at its corporate offices and sold off parts of its business. It also closed manufacturing plants — a V8 engine plant in Huntsville, Ala.; a Garland, Texas, truck plant — and sold one foundry and shut down another.
“We obviously have also taken a look at our workforce over the years with some of those businesses exiting our portfolio,” Osborne said. “We didn’t need the same support structure at our headquarters. We’ve been very aggressive about right-sizing the business.”
Springfield’s workforce slowly grew as the economy recovered and some of the work from the shuttered plants came here. Its focus on medium-duty trucks and quality improvements also boosted work in Springfield, Osborne said.
“It’s all based on market share and customers buying products, they closed Garland, and we came out of the recession,” Barlow said of job growth in Springfield.
New leaders also took a fresh look at Springfield’s workforce after Navistar’s former CEO resigned, Hobson said.
One of the most significant signs, he said, was its decision to invest $15 million to improve the factory’s aging paint facility. The manufacturer also spent close to $13 million in infrastructure improvements, signaling that the company saw value in Springfield.
“When they came in, they didn’t have the same prejudice toward the people who worked in Springfield,” Hobson said of Navistar's new leadership. “But they did see a huge plant, underutilized and needing some modernization.”
They also saw that the location is well-suited for receiving supplies and distributing product, he said, and set out to improve the plant.
The relationship with the union also has been critical, Osborne said. Workers in Springfield have been willing to adapt to necessary changes, he said, such as finding ways to improve efficiency and quality.
“When you’re building a quality product, customers notice … We’ve had customers who may have at one time shied away from the Springfield plant who are now enthusiastically embracing product from Springfield because they’ve seen the improvements we’ve made in quality,” he said.
The union wants to see more work come, Barlow said.
“We’ve proven ourselves time after time in regards to getting the job done,” he said. “We’ve built every vehicle in their lineup at one time or another so they knew that Springfield was going to deliver on a good quality product.”
The four-year contract reached earlier this year is the clearest sign that Navistar and the UAW have a better partnership, said Mike McDorman, president of the Chamber of Greater Springfield.
That deal secured Springfield’s future for the next few years, he said, and set the stage for the GM agreement.
The contract might not have been possible just a few years ago.
“You had to have a strong relationship between management and the union,” McDorman said. “We didn’t have that 20 years ago. We didn’t have that even 10 years ago. But now, with Jason Barlow and his leadership, I think the union’s worked really hard to work with the company to not only maintain a presence but to expand their presence in Springfield and we’re seeing that happen now.”
Both sides knew it was going to be a tough negotiation, Osborne said, but they also wanted to continue with the progress made in recent years.
“Even though we went beyond the contract deadline, the reason you didn’t see a work stoppage was that both parties were committed to creating a viable future for Springfield,” he said.
Both the UAW and the truckmaker’s current leaders have the company headed in the right direction, Rhine said, although it was often a struggle to get there.
The challenge for both sides, he said, is knowing when to compromise to ensure the company remains afloat while providing good jobs for workers.
“Sometimes these hard times make both sides better negotiators because they know there’s a lot at stake and you have to work things out in order to keep that plant afloat,” Rhine said.
The recent growth has been a joint effort, Barlow said.
“Our bargaining chairman, our bargaining committee, as well as the membership are the reason why Springfield is succeeding,” he said.
The GM deal wouldn’t have been possible without the progress that has been made between Navistar and the UAW, Osborne said.
“GM was very pleased with what they saw coming out of Springfield,” he said. “That more than anything was a big catalyst to get this kind of deal done.”
And Osborne said its status as a center of excellence for medium-duty trucks — a important product for Navistar — is critical.
“Springfield’s always going to be a key facility for us,” he said.