June 29, 2009 / 9:02 PM / 10 years ago

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.”

This is not the first time the company has looked at shifting production of its heavy duty ProStar and LoneStar trucks out of Chatham.

In 2003 Navistar said it was going to close the plant entirely and move production to Mexico.

But the CAW agreed to significant concessions to keep the plant in Ontario and the federal and provincial governments kicked in C$65 million ($56 million) to sweeten the pot.

The CAW said on Monday it has asked the company to continue bargaining past the expiry of its collective agreement on Tuesday, but that the company has not responded.

On top of trying to find other work at the plant to keep as many employees on as possible, the union has taken issue with the company over its plans to use some third-party, non-unionized workers, reduce new hire compensation and eliminate cost of living adjustments.

The union said it has no plans to call a strike and the company has said it will not lock the workers out.

$1=$1.16 Canadian Reporting by John McCrank; editing by Rob Wilson

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