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Navistar will pay $742M to settle decades-old benefit cuts class action

Case with roots in 1980s cuts tentatively approved pending June hearing

Navistar will pay retirees $742 million to settle a class action lawsuit over cuts to medical benefits.

Editor’s note: Updates 6th paragraph with potential size of the class; rewrites 7th paragraph to conform.

Nearly three decades after Navistar International agreed to restore employee benefits cut in the 1980s, the truck and bus manufacturer has agreed to pay past and future retirees $742 million to settle a class-action lawsuit.

The case, Shy v. Navistar International Corp., has been in and out of courts since a 1993 consent agreement under which Navistar pledged annual payments to a fund to help pay retiree health and life insurance benefits for union and nonunion employees.

Navistar originally cut the health care and life insurance benefits in the 1980s, claiming it could not afford to pay them and stay in business.

In 2010, Navistar again hinted at filing for bankruptcy in interpreting the consent decree as allowing for coordination of its payments with retirees’ Medicare prescription benefits. The United Auto Workers and a Supplemental Benefit Committee overseeing the trust Navistar had been paying into objected.

According to a Navistar press release Friday, the settlement would eliminate the right to bring additional lawsuits concerning the current disputes in exchange for cash and other consideration, estimated at $742 million plus interest. The money would be used to increase the health care benefits received by union and salaried retirees of Navistar. 

No acknowledged wrongdoing

About 23,000 retirees and future retirees hired before 1995 are part of the class that would benefit from the money Navistar agreed to pay to end the legal wrangling and be found without responsibility for any wrongdoing, according to a Navistar spokeswoman.

U.S. District Judge Walter Rice in Dayton, Ohio, tentatively approved the settlement on Jan. 10. He set a fairness hearing on the settlement for June 9.

The hearing will determine whether the settlement is fair, reasonable and adequate and whether attorneys should receive $750,000 in fees to be paid by Navistar apart from the settlement. The judge also will hear any objections to the settlement and decide whether the Shy case should be modified in light of the settlement.

Navistar, which was purchased for $3.7 billion last year by Traton SE, the truck company holding company of Volkswagen AG, has settled several long-standing legal matters in the past couple of years, including a January 2020 $135 million class-action settlement with customers who owned defective MaxxForce engines.

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Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.