Navistar reported a second quarter 2013 net loss of $374 million, compared to a second quarter 2012 net loss of $172 million. The loss is attributed to lower volumes and higher pre-existing warranty adjustments of $164 million, primarily related to EPA 2010 emissions level engines.
Manufacturing revenue in the quarter was $2.5 billion, down 23 percent from the second quarter of 2012. The decline reflects a 14 percent drop in overall industry demand and lower market share during the company's emissions strategy transition. This was partially offset by stronger volumes in the South America engine business.
Navistar's truck segment recorded a loss of $109 million, compared with a 2012 second quarter loss of $45 million. A decline in traditional truck volumes due to lower industry conditions and the market share impact of the company’s emissions transition, and $57 million in adjustments, drove the segment’s loss to pre-existing warranty costs. The loss was minimized by $60 million in lower SG&A and engineering expenses from 2012 cost-reduction initiatives. The segment also realized a $16 million dollar gain from the sale of the company's interests in its India joint ventures.
The engine segment recorded a loss of $138 million, compared with a 2012 second quarter loss of $108 million. The decline was predominantly due to higher warranty spend and lower volumes. The segment recorded $107 million in charges for adjustments to pre-existing warranties and $12 million in non-conformance penalties. The wider loss was partially offset by $24 million of profit improvement by the company's MWM engine business in Brazil, $19 million in lower engineering and product development spend, and a $12 million gain related to the sale of the company's interests in its India joint ventures.
The parts segment recorded profit of $91 million, compared with a year-ago second quarter profit of $41 million. The increase was primarily driven by margin improvements. The segment also realized $11 million in lower SG&A expenses reflecting the impact of 2012 cost-reduction initiatives.
"We are not satisfied with our overall financial results this quarter, but we are pleased with the continued progress we made in a number of areas on our turnaround plan," said Troy A. Clarke, Navistar president and CEO. "We still face some significant, yet solvable challenges, primarily in the areas of higher pre-existing warranty costs for our earlier EPA 2010 emissions level engines, as well as in rebuilding sales and restoring market share. However, we are already implementing the right leadership and business process changes to effectively address these priority issues."