Navistar set to slash staff, production in Canada

* Labor agreement at Chatham plant expires Tuesday

* Truck plant employed about 2,500 at its peak

* Fewer than 100 workers to remain

By John McCrank

TORONTO, June 29 (Reuters) - Navistar International Corp (NAV.N) is set to significantly reduce its presence in Canada as it shifts much of its heavy-duty truck production to more cost-competitive locations in the southwestern United States and Mexico.

The company, which has been producing vehicles in Chatham, Ontario, since 1923, is set to cut its staff there by about 90 percent, the Canadian Auto Workers union said on Monday.

"We're amazed that this company continues to do this," said Sonny Galea, who represents office workers and technicians for the CAW at the International Truck and Engine Corp plant.

At its peak in the late 1990s, the company employed about 2,500 people in Chatham, which is 290 km (180 miles) west of Toronto and has a population of about 100,000.

By late last year, there were a little over 1,000 people at the plant, and soon there will be fewer than 100. There are currently about 800 workers on layoff.

The labor agreement between the company and the union expires on Tuesday, clearing the way for Navistar to shift much of its production south.

"Many of our competitors have moved further south and many of the suppliers that supply them have moved their operations south, so it's much more expensive today to bring parts up to Canada than in was, say six, seven, eight years ago," said spokesman Roy Wiley in Chicago, where Navistar is based.

If the company goes ahead with its plan, the Chatham plant will be little more than a "kit shop," said CAW President Ken Lewenza.

"We wouldn't be doing much," he said. "If you want to really turn it into a kit assembly, well, most of the stuff will come in already assembled and we will put the parts together."

Craig Holmes, Navistar's plant manager in Chatham, said in a recorded message that while the facility will be smaller, it will still have a future, "and that's something employees at a lot of other companies no longer have these days."

Ontario's manufacturing sector has been devastated by the recession and the steep drop in vehicle production. Toward the end of last year, Daimler closed its Sterling heavy truck plant in St. Thomas, Ontario, killing off more than 1,300 jobs.

"The fact is... our plant needs to serve a different purpose for Navistar than we've had in the past," said Holmes. "It's smaller and different, but it's something I know we'll be very good at."