June 4, 2019 / 2:49 PM / 3 months ago

Navistar says too early to assess impact of proposed U.S. tariffs on Mexico

FILE PHOTO: Flags fly outside the Navistar Proving Grounds in New Carlisle, Indiana, U.S., October 12, 2016. REUTERS/Jim Young

(Reuters) - Truck maker Navistar International Corp said on Tuesday it was too early to assess the impact on its Mexico operations from possible U.S. tariffs on the country.

The company, which makes two-thirds of its trucks in Mexico, is working with trade associations and continues to monitor situation regarding tariffs, Chief Executive Officer Troy Clarke said on a post-earnings call with analysts.

Last week, President Donald Trump threatened to impose 5% tariffs on all Mexican imports starting June 10 if the country does not halt the flow of illegal immigration across the U.S.-Mexican border. The tariffs would increase monthly to up to 25% on Oct. 1.

This could hurt carmakers and auto parts suppliers, who have been making vehicles and parts in Mexico for years, taking advantage of the country’s cheap labor, trade deals and proximity to the United States, the world’s second largest auto market after China.

“Potential tariffs on Mexico would be a significant headwind,” said JP Morgan analyst Ann Duignan in a note, adding that about 57% of the company’s truck production in Mexico could be subject to tariffs.

Navistar, however, raised its 2019 revenue forecast to $11.25 billion-$11.75 billion from $10.75 billion-$11.25 billion. The outlook does not include the impact of the possible tariffs.

The company beat second quarter estimates for adjusted profit and revenue helped by higher sales of class 6-8 truck, buses in the United States and Canada.

Excluding items, Navistar earned $1.06 per share on revenue of $3 billion, beating the average analyst estimate of 89 cents per share on revenue of $2.7 billion, according to IBES data from Refinitiv.

Shares of the company, which rose as much as 9.2%, pared gains to trade up about 4% at $32.39 by late morning.

Reporting by Shanti S Nair and Sanjana Shivdas in Bengaluru; Editing by Anil D'Silva and Shinjini Ganguli

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