LISLE, Ill. — Navistar’s third quarter earnings have taken a major hit year-over-year, with a net income of $84 million compared to $1.4 billion in 2011. Results included an income tax benefit of $196 million – primarily because of a third quarter change in the company’s estimated annual effective tax rate – as well as the impact of $16 million in costs related to “engineering integration” – alluding to the company’s addition of selective catalytic reduction (SCR) exhaust aftertreatment to its engines after missing the mark in achieving the US EPA’s emissions – and $10 million in non-conformance penalties (NCPs) associated with falling short of those standards. The third quarter of 2011 included a $1.48 billion benefit from the release of a portion of the company’s income tax valuation allowance.

The company reported a pre-tax loss of $100 million in the third quarter versus a $54 million loss in the third quarter 2011. Revenues in the quarter were $3.3 billion, down 6% from the third quarter of 2011. Officials say the loss was driven by lower net sales in the company’s US and Canada truck and engine segments, primarily due to lower military sales and reduced engine volumes in South America, respectively.

“Clearly we are not pleased with these results,” said Lewis B. Campbell, Navistar chairman and CEO. “However, I was satisfied to learn on day one that Troy Clarke and his team were already working on a plan to deal with many of the important issues we face, most importantly restoring our core North American Truck, Engine and Parts businesses to their market leader positions. I believe we have good line of sight and a keen sense of urgency for moving forward.

“Navistar is a great company with great people and great brands,” added Campbell. “With a laser focus on getting our quality right and hitting our clean engine launch dates, combined with actions to maximize cash flow and improve our balance sheet, I believe we can accelerate the pace of progress to deliver significant improvements during the next 12 to 18 months.”

The company announced that it is completing a voluntary separation program and a reduction in force of its salaried workforce. It anticipates these actions will generate $70-$80 million in annual savings, which will contribute to Navistar’s overall goal to reduce costs by $150-$175 million year-over-year, starting in fiscal year 2013. Additionally, Navistar is increasing efforts to cut discretionary spending and further reduce its material costs as part of its overall cost reduction program.

The company also announced it has launched a review of all of its non-core businesses with the goal of improving its return on invested capital and driving long-term profitability. As a result of this, along with uncertain industry conditions, the company says it is not providing fourth quarter earnings guidance until industry volumes solidify and these potential actions are defined.