Recent Slowdown Doesn't Scare Navistar
January 31, 2000
Despite a recent slowdown industry heavy truck orders, Navistar International Corp. stands by it's 405,000 medium and heavy duty forecast made late last year. It also hasn't changed its target 29.9% return on equity for fiscal 2000.
Navistar chairman, president and CEO John Horne recently told security analysts that they are too focused on heavy truck orders, some of which is related to seasonal demand and a shift in buying patterns.
"As I have said before, there has been a sea change in the demand for new trucks," he said.
"While heavy trucks once drove total truck tonnage, the explosive growth of e-commerce has increased the demand for medium trucks, where our International brand is the market share leader."
Horne said the company can achieve competitive and economic advantage through vertical rather than geographic expansion.
The company's next generation medium vehicle, to be introduced in early 2001, is being desinged so that there is a commonality in engineering, parts and manufacturing processes for all three of the International product lines -- medium and heavy trucks and school buses.
"Management is confident that our strategy can be successfully implemented and will add significant growth in sales and income over a period of time," he said.
Horne also said that the current emphasis on the next cyclical downturn in heavy truck demand doesn't reflect the progress Navistar has made in overall balance. "Our business is cyclical, but over the last few years the engine and medium truck business have grown and are likely to moderate the impact of the heavy truck cycle on our performace. Additionally, we have a more flexible cost structure than we had in past cycles."
Navistar has forecast industry sales of 405,000 units in its fiscal 2000, which ends October 31, down from 465,500 in fiscal 1999. The 2000 forecast includes 245,000 Class 8 trucks and 128,000 Class 5-7.