Work with the UAW-represented employees to make competitive improvements that will help Navistar succeed in the long term.

Achieve a competitive wage and benefit package that allows employees and retirees to maintain a good quality of life.

To achieve these goals, our discussion includes these areas:

Lean and Flexible Work Rules | Competitive Costs – Pension | Competitive Costs Healthcare


Lean and Flexible Work Rules
To be competitive, Navistar must operate based on lean principles, which are standard practice among many manufacturers. Lean principles focus on eliminating waste (e.g., re-work, excessive movement, wasted materials, not fully using the time and skills of employees).
Did You Know:  Some of Navistar’s current work rules were established in the 1960s and 1970s – before lean operating principles became standard practice among many manufacturers.

Our Situation

  • Today, different Navistar facilities have different ways of operating. To deliver consistent quality in all our locations, we need to use the same processes and work rules across our facilities.
  • Work rules in some facilities limit Navistar’s ability to implement the team concept, a strong enabler of lean operations. Teams comprise a small group of people who are responsible for a certain function, have clearly defined goals/metrics, and collaborate and share expertise to continuously improve. To enable this team concept, we need:
    • Consistent Attendance – Our employees rely on each other for knowledge and expertise. When some employees don’t show up, it makes it more difficult for other employees to do their jobs and build quality products. In one case, when 15% of employees in a location were absent, there was a corresponding 25% increase in quality issues. These issues were addressed offline – but it added cost and waste to the process. We need a stronger attendance policy to ensure we can build quality products in a cost-effective way.
    • Team Stability ­– Under current work rules, when a job is filled, the newly available job must be offered to other employees based on seniority. On average, eight employees move as a result of a single job opening. This is disruptive to our teams and makes it difficult for them to build quality products.
    • Cross Training – Training employees on additional roles within the team helps maintain quality when there are occasional absences.It also provides ergonomic benefits, as employees are less likely to become injured by repeatedly using the same body part (e.g., carpel tunnel).

The Rest of the Industry

  • Other OEMs are further along in adopting lean and have more flexible work rules.  To be competitive, we must have the same flexibility.
  • An example of a company that has gone through a similar lean transformation is Harley Davidson.  It significantly streamlined operations while improving safety and quality.  In 2013, it was recognized as the Industry Week Best Plant winner.

Navistar’s Goal:   Achieve competitive improvements that will help Navistar fully embrace lean principles and succeed in the long term.


Competitive Costs
Navistar has always worked to provide a safe working environment and competitive compensation.  These negotiations aim to continue in that spirit while achieving necessary, competitive changes in our union contracts.

Pensions

Did You Know: Navistar has 5 pension recipients (employees, spouses and dependents) for every current Navistar employee. In 2010, the Social Security ratio of recipients to workers was 2.9 to 1.

Our Situation

  • Navistar’s pension obligations are significant and cost hundreds of millions of dollars annually.
  • Legal requirements for funding pension obligations have changed from 30 years to 15 years, significantly increasing Navistar’s annual pension contributions starting this year.
  • To help address this issue, Navistar froze pensions for non-represented employees last year.

The Rest of the Industry

  • Most of our competitors don’t have similar pension obligations, and as a result, they have lower operating costs.
  • Most companies have adopted 401(k) plans because funds are immediately set aside, the company’s obligation is met, and the employee is guaranteed the funds even if the company goes bankrupt.
  • Many companies that maintain union and non-union pension plans have frozen their pension benefits (e.g., Boeing, Goodyear).

Navistar’s Goal:   Keep the pension program viable while allowing the company to be competitive.


Healthcare

Did You Know:  In the U.S., approximately 40,000 retirees and dependents are supported on Navistar health plans by 8,000 Navistar U.S. employees.

Our Situation

  • Navistar is self funded, which means Navistar pays for all expenses associated with its health plans (e.g., doctor’s visits, surgeries, prescriptions).
  • Because of the 1:5 ratio of active employees to retirees and dependents supported on Navistar health plans, healthcare is a significant expense for Navistar.  As a result, it is more difficult for Navistar to compete with companies that have lower healthcare costs.

The Rest of the Industry

  • To manage healthcare costs:
    • Companies are increasing cost sharing with high-deductible plans.  Twenty six percent of employers have a high-deductible health plan as their highest enrolled medical plan in 2014 – the highest percentage ever. In fact, enrollment in high-deductible plans has tripled since 2009.  (Source: Medical Cost Trend: Behind the numbers 2015: PwC)
    • Eighty-five percent of employers have already implemented or are considering an increase in employee cost sharing through plan design changes such as increased premiums, co-pays and deductibles over the next three years.  (Source: Medical Cost Trend: Behind the numbers 2015: PwC)
    • One-third of U.S. employers plan to move their workers’ health-care coverage to a private exchange in the next few years following the lead of companies like Walgreens. While 95% of employers said they would continue to offer health care in the next three to five years, 33% may use a private exchange to provide the benefit, up from 5%  (Source:  Aon Plc survey).
  • Since 2011, the total share of health care costs that employees pay has risen from 34.4%to 37%. Put another way, it costs employees an extra $100 each month for health care compared with just three years ago (Source: AARP).

Navistar’s Goal:   Provide competitive compensation, including healthcare, to represented employees while allowing the company to be competitive.