CHICAGO -- Navistar International Corp. said Thursday it has agreed to a $65 million settlement with the Pension Benefit Guarantee Corp. in a case involving pension fund liabilities for Navistar's now- defunct Wisconsin Steel division.
The company took a charge against its fiscal third quarter earnings to cover the cost of the settlement, and posted a loss of $115 million for the quarter, compared with a loss of $31 million a year ago.
The settlement agreement with the Pension Benefit Guarantee Corp. -- the federal agency that insures pension plans for some 40 million U.S. workers -- calls for Navistar to pay $20 million in cash.
In addition, Navistar -- a leading manufacturer of medium and heavy trucks and buses -- will provide the PBGC a secured note for $36.5 million -- to be paid off over 10 years -- and 3.5 million shares of Navistar common stock.
'As the Navistar case emphatically confirmed, employers are, and must remain, responsible for the pension promises they make to their employees,' PBGC Executive Director James B. Lockhart said. 'PBGC will not tolerate any attempts by employers to evade their pension obligations.'
The PBGC could not immediately provide figures on how many former Wisconsin Steel workers were covered by the pension plans.
The litigation arose from Navistar's 1977 sale of its financially ailing Wisconsin Steel division to Envirodyne Industries Inc.
At the time of the sale, Navistar -- then International Harvester -- transferred the division's underfunded pension plans to Envirodyne, which was to assume responsibility for the underfunding as part of their purchase price.
But Envirodyne, a high-tech company with a relatively weak financial base, went bankrupt in 1980 and terminated the Wisconsin Steel pension funds, which at the time were underfunded by about $60 million.
The PBGC said the amount of the underfunding has increased due to accrual of interest.
The PBGC filed suit against Navistar charging that Navistar's principal purposes in selling Wisconsin Steel included evading its pension-fund responsibility. A federal court ruled in 1988 that Navistar was liabile for the pension plans but did not determine the amount of liability.
'We've been working closely in a collaborative effort with the PBGC for some time now to resolve this situation,' said Navistar Executive Vice President Robert C. Lannert. 'We're pleased that the matter has been resolved in a mutually beneficial manner.'
Navistar Thursday reported a fiscal third-quarter loss of $119 million, compared with a loss of $31 million in th year-ago quarter. But the fiscal 1992 results included one-time charges totaling $89 million: the $65 million charge -- to discountinued operations -- for the FPGC settlement and a $24 million charge related to a recall of school-bus chassis.
Without those charges, Navistar posted a loss of $26 million on continuing operations for the third fiscal quarter.
And revenues for the quarter increased to $920 million from $861 million a year ago.
For the first nine months of the fiscal year, Navistar lost $182 million, including the one-time charges for the PBGC settlement and the bus chassis recall, compared with a loss of $98 million a year ago.
Revenues for the first three quarters were up -- to $2.59 billion from $2.49 billion a year ago.
