Navistar International Corp. Thursday said it reached a $65 million settlement with the Pension Benefit Guaranty Corp. involving pension liability for the company`s former Wisconsin Steel division.
The settlement was charged against the company`s third-quarter earnings and contributed to a loss of $115 million, or 49 cents a share, for the quarter, Navistar said.
The company also declared a quarterly dividend of $1.50 per share on its $6 cumulative convertible preferred stock, Series G, to be paid Oct. 15 to shareholders of record Oct. 5.
Included in the latest loss was a charge of $24 million, or 10 cents a share, for a previously announced recall of all 185,000 Navistar school buses made after Sept. 1, 1978, to modify the steel cage around fuel tanks to prevent possible leakage in a crash.
Excluding the special charges, the company lost $26 million, or 13 cents a share, for the quarter. The company lost $31 million, or 15 cents a share, in the year-earlier period.
Chicago-based Navistar, the nation`s largest manufacturer of medium and heavy trucks, carries a heavy load of pension liability and faces rough going in its core businesses despite stronger sales.
Truck sales have shown strength this year after a three-year slump, and Navistar has held onto its leading 28 percent share of the U.S. market. But the company continues to labor under high costs stemming from the days when it was known as International Harvester Co.
Consolidated sales and revenue from Navistar`s manufacturing and financial-services operations in the third quarter rose 7 percent, to $920 million from $861 million a year earlier.
In the pension case, Navistar and the Pension Benefit Guaranty Corp., the government-backed entity that insures employee pension plans, arrived at a settlement under which Navistar will pay the agency $20 million in cash. Navistar also signed a secured note for $36.5 million, to be paid over 10 years, and committed about 3.5 million shares of its stock.
Navistar, known as International Harvester until 1986, sold its Wisconsin Steel division to Envirodyne Industries in July 1977. Subsequent to the sale to Envirodyne, Wisconsin Steel Co. filed for bankruptcy in 1980, and its pension plans were terminated by the Pension Benefit Guaranty Corp.
In 1988, Navistar was held responsible for pension liabilities before the sale of its Wisconsin Steel division. These liabilities were assumed by the purchaser as part of the purchase price for the Wisconsin Steel division but were reimposed on Navistar following the bankruptcy. The amount of the liability was not determined during those proceedings.
”We`ve been working closely in a collaborative effort with the (Pension Benefit Guaranty Corp.) for some time now to resolve this situation,” said Robert C. Lannert, executive vice president, chief financial officer and treasurer of Navistar International Transportation Corp. ”We`re pleased that the matter has been resolved in a mutually beneficial manner.
”The company has made it a priority to strengthen the funding of our pension plans to the fullest extent permitted without incurring tax penalties. ”We contributed more than $1 billion to our pension funds in the mid-1980s, the largest single investment this company has ever made,” Lannert added.
In July, Navistar said it planned to cut health-care benefits for about 40,000 retirees and their families starting later this year. The changes would save Navistar about $90 million a year.
James C. Cotting, Navistar chairman and chief executive officer, called the restructuring ”the only way for the company to survive and continue to provide jobs to our nearly 13,000 employees.”
For the first nine months of its fiscal year, Navistar posted a net loss of $117 million, or 55 cents a share, from continuing operations, including the $24 million charge for the school bus recall. Including the Pension Benefit Guaranty Corp. settlement, Navistar`s losses deepened to $182 million, or 81 cents a share.
Navistar reported a loss of $98 million, or 48 cents a share, for the first nine months of fiscal 1991. Sales for the first nine months of fiscal 1992 totaled $2.73 billion, up 3.4 percent from $2.64 billion a year earlier.
