(Adds Ford comment, analyst comment, other details background, closing stock price)
By Susan Kelly
CHICAGO, Oct 29 (Reuters) - Truck maker Navistar International Corp. warned on Tuesday it will take fourth-quarter restructuring charges of as much as $456 million as it struggles to return to profitability amid a sharp drop in truck demand.
Navistar shares fell $1.90, or 8.8 percent, to close at $19.75 on the New York Stock Exchange, after trading was halted for the news announcement.
Navistar said asset write-downs due to a delay in its V6 diesel engine program with Ford Motor Co. would result in a charge of $120 million to $130 million, or $190 million to $210 million pre-tax.
The company said Ford has delayed and may cancel a contract for V6 diesel engines Navistar had designed exclusively for some of Ford's smaller pickup trucks and sport utility vehicles starting with 2002 models.
"This is new news, and it is certainly not good news," said Banc of America Securities analyst Karl Mergenthaler.
Navistar sees its diesel business as a growth engine, and Ford is its main customer, said Mergenthaler, who initiated coverage of Navistar last month with a "market perform" rating and does not own shares in the company.
The V6 engines were to be built at Navistar's two-year-old Huntsville, Alabama, plant, which currently produces V8 engines for Navistar's International line of trucks as well as Ford's superduty pickup trucks. About 150 people work at the plant.
A Ford spokesman said plans for the V6 engine were no longer "viable" but would not elaborate as to why.
Ford and Navistar both said the V8 engine business and Blue Diamond joint truck venture, which produces medium-duty trucks in Mexico under the Ford name, were unaffected.
Navistar, based in Warrenville, Illinois, also said a decision to exit the Brazilian truck market effective Oct. 31 will result in a pre-tax charge of $70 million.
The charges include costs associated with an accelerated retirement program and other items in its new contract with the United Auto Workers union that was ratified over the weekend.
They also include job cuts related to the closing of its Chatham, Ontario, heavy truck plant, a Springfield, Ohio, body plant and an assembly line at a second Springfield truck facility.
Navistar in August announced it would cut 2,050 jobs as it retooled plants in Springfield and Indianapolis.
Earlier this month, it said it would close its Chatham, Ontario, heavy truck plant, early next summer, resulting in the loss of 2,200 jobs. Heavy truck production will be shifted to its facility in Escobedo, Mexico.
The company on Tuesday said its board has approved the sale of up to $175 million of stock to the company's various benefit plans. The sale is expected to be completed during the first quarter of 2003.
Navistar's board also has authorized a plan to refinance up to $200 million of debt primarily maturing in 2003.
Navistar said it may need to take a charge against shareholder equity of about $350 million for its underfunded pension fund if the stock market does not improve. Shareholder equity is a company's net worth.
The company said the pension-related charge is not part of the restructuring charge.
(Additional reporting by Karen Padley in Chicago.)