Navistar announced that it will cease all engine production at its plant in Melrose Park, Ill., by the second quarter of fiscal 2018. The company will continue the facility’s transformation into Navistar’s technical center, including truck and engine testing and validation as well as used truck sales and reconditioning.

The majority of engines produced at Melrose Park are medium-duty 9/10 liter engines used in International Class 6 and 7 vehicles, for which alternative engine options, such as 6.7 and 9-liter engines from Cummins, are currently offered in all applications. Once completed, the cessation of engine manufacturing at Melrose Park is expected to affect about 170 employees and reduce Navistar’s operating costs by approximately $12 million annually. The company will take an approximate $43 million charge as a result of this action, including approximately $8 million of cash-related charges.

“Ceasing production of engines at Melrose Park is a difficult decision, but represents another important step on our journey to strengthening the company’s competitiveness,” said Persio Lisboa, Navistar’s chief operating officer. “Our N9/10 engine family was updated in 2014 and since then has served as a competitive niche offering for specific medium-duty vehicles. As we approach future regulatory requirements, the low volume nature of the platform could not justify further product development investments on it.”

A significant portion of the hourly employees at Melrose Park are retirement-eligible, Navistar says, adding that assistance and opportunities for re-training will be offered.

“Ending production anywhere is a difficult decision because it affects employees,” Lisboa said. “We continue to be committed to investing in our Melrose Park facility as we complete its transformation into a technical center that is integral to our product design, engineering and sales teams. Given the investments we’ve made, we expect to have a significant presence in Melrose Park for years to come.”