Navistar International Corp. (NYSE: NAV) CEO Troy Clarke will lead the company until at least July 1 as the coronavirus pandemic delays action on a $2.9 billion buyout offer by Volkswagen AG’s trucking subsidiary TRATON Group.
Clarke’s contract was extended on April 11 beyond its scheduled expiration on April 22, according to a Navistar filing with the U.S. Securities and Exchange Commission (SEC). It is the third time his contract has been pushed out following extensions in 2018 and 2019.
The global health crisis is spurring truck manufacturers to conserve cash as they try to figure out how deeply they will be impacted by the inability to build new trucks and generate revenue.
Navistar plans to restart production at its Springfield, Ohio, plant on Monday. Operations at its plant in Escobedo, Mexico, have been running day to day based on parts availability.
Navistar, which makes International-branded heavy- and medium-duty trucks and buses, has cut capital spending by 30%, deferred 10% to 30% of pay for salaried employees depending on job level, and deferred $162 million in pension contributions to save $300 million.
The company also borrowed $600 million in a private placement of senior debt.
Likewise, TRATON, which purchased 16.6% of Navistar for $256 million in September 2016, “is reconsidering investment priorities and research and development projects,” Christian Schulz, TRATON chief financial officer, said earlier this week.
TRATON did not specifically mention its Jan. 30 offer of $35 a share in cash for the 83% of Navistar it did not already own. Traders bid up Navistar shares as high as $38.27 in mid-February before the coronavirus hammered the shares, which fell to a low of $14.68 on March 23.
Shares had recovered to $24.39 in NYSE trading on Friday, close to the $23.89 where they traded on the day of TRATON’s unsolicited offer. Publicly, Navistar has said only that it is reviewing the proposal.
TRATON is the holding company for the MAN and Scania brands and Brazilian truck and bus maker Caminhões e Ônibus. With most of its sales in Europe and South America, TRATON eyes Navistar and its dealer network as a way to compete with global truck makers Daimler AG and Volvo AB, both of which are well established in the United States.
In 2019 Navistar opened the door for Traton with a limited opportunity for the sale of Scania off-highway mining equipment in Canada. Navistar and TRATON also collaborate on engines and purchasing. Traton has significant input into a new plant Navistar is planning in San Antonio.
Clarke’s $1,050,000 annual salary remains the same during his contract extension. As part of Navistar’s cost cutting, 35% of his salary beginning April 20 was deferred and will be repaid in a lump sum with 6% interest no later than March 15, 2021. His 2020 fiscal year bonus target is $5.5 million.
Clarke, 64, has agreed to remain Navistar’s non-executive chairman for two years after his CEO term ends July 1.