Fleet Management

Navistar's Clarke Talks Change, Opportunity, Turnaround

March 22, 2013

By Deborah Lockridge

SHARING TOOLS        | Print Subscribe

He said the next level of fuel economy regulations will force manufacturers and suppliers to think more holistically about the tractor-trailer as a whole unit, and that's going to require more cooperation among truck makers, trailer makers, and various component suppliers and suppliers than ever before.

4. Economics: 'The new normal'

Everyone keeps asking when truck sales will return to a normal level. Clarke, however, said the definition of "normal" may have changed.

"We've seen in the past decade an unprecedented period of change in our industry," he said. "The recession was a catalyst to expedite some changes that carriers have been evolving for more than a decade."

Large fleets are growing, he said, while the number of small fleets as a percentage of the total is dropping.

In addition, he said, "We may have experienced a permanent shift in the age of trucks on the road." The number of miles run annually is down, and trucks are simply lasting longer than they used to. "What many of us once considered to be significant pent-up demand might not be that at all."

The length of haul is changing, partly due to the rise of intermodal as an option for longer-haul freight, Clarke said, and events like expansion of the Panama Canal will continue to change freight patterns in North America.

"When you look at these factors together, the implications are significant," Clarke said. "Bigger customers with more trucks are looking for growth opportunities in places they haven't played in the past." Fleets have made great strides in productivity to help offset the increased costs of acquisition and operation, he said, and so far are letting those productivity increases absorb increasing freight levels without adding capacity.

Clarke's Bets

Clarke concluded with his projections for each of these areas, saying, "I would bet:"

  • Fuel prices will stabilize and experience less volatility over the next two decades, but the industry will continue to focus on improving fuel economy and looking to alternatives to reduce costs. "I would bet that natural gas is here to stay."
  • Given the driver shortage, manufacturers will press forward with features that make trucks much easier to drive. "Many of these features exist today, but as small penetration options," he said, citing examples such as automated transmissions, lane departure warning systems, blind spot cameras and parking assist systems, saying they are going to become more sophisticated. "Of course all these things are going to come at a cost."
  • Equipment prices are going up, "but I would bet we're at the beginning of a new cycle of regulations, so we need to work closely together to make sure we go about this the right ways."

"But I am optimistic about the future, because change brings opportunity," Clarke said. "Every future scenario you consider, it requires trucks, and at the end of the day we believe it requires a lot of them. 

"What has struck me more than anything about this business is the world economy rides on trucks."

Turning Around Navistar

Of course, what many in the audience wanted to hear was about Navistar itself. In a Q&A session after his address, Clarke answered some questions that had been previously submitted.

When asked what his most difficult task has been so far, Clarke cited last year's cuts and closings, including the Garland, Texas, plant. 

"Last summer we definitely found ourselves in a situation where problems were walking in the door one after the other," Clarke said. "The good news is, you didn't have to go far to find something to work on. The bad news is, we had to make some hard decisions.

"It never gets easier. You're impacting communities and families. You just make sure you do it with lots of compassion and get it done quick, get it behind you so you can build the company going forward. Unfortunately, early in my tenure in this position we were forced to have to do that. It is the kind of thing you lose sleep over."

Asked about its global presence, Troy noted that he was recruited to Navistar initially to expand the global portfolio. While it has successful operations in Brazil and other countries where American-style cabovers are used.

Navistar's joint venture in India, which it shut down as part of its cost cutting measures, was well-intended, Clarke said. Most of the trucks currently used in India and other developing countries are low-cost trucks that don't last long. Navistar believed a market would grow in India for higher-quality trucks that cost more up front but lasted longer, what Clarke called "productivity trucks," but that did not come to pass.

However, Clarke was optimistic about Navistar's prospects in China.

"I'm still kind of excited about the Chinese truck market," he said, where they are partnered with a company with a cabover truck configuration that should be well suited to the market. "I think that's really the opportunity for us," he said, noting if it takes a couple of years to get things right, that's OK. It's more important to take the time to gain a solid understanding of the market than to rush.

Asked about the top three issues at Navistar the company needs to address, Clarke said those were very clear in a turnaround situation like this.

"The first thing you do is give the organization real clear goals, real clear timetables and metrics. Our first goal this year is we're making a big move on quality. It's our intention to be the quality leader.

"The second thing is we've got to finish our transition to SCR. We need to hit those dates and launch at a high quality  level.

"And last but not least, we have to deliver our 'Drive to Deliver' plan. We have financial targets for the year.

"None of us gets out of bed thinking about, 'What else can I think of doing today.' If we have an extra hour of effort or time, we work on one of those three things."

Clarke wouldn't make a prediction on when the company will return to profitability. "If I did, you'd all be insider traders," he said. However, he said, if the truck market picks up the last half of the year as many are predicting, that will be good for the company, and he said by this time next year he expects things to be a lot better.

CORRECTED: Clarke is chief operating officer, not chief executive officer. 


« Previous  |  1  2  |  Next »

Comments

  1. 1. curtis todd [ March 25, 2013 @ 05:35AM ]

    as i said in my last comment if my experience in the new air friendly motors are any indication of the future we are in trouble my experience with the 2010 maxx force motor is 60,000 to80,000 lost in revenue plus payment and insurance truck has been in shop warranty is great but 2 months at one time this is unreal

 

Comment On This Story

Name:  
Email:  
Comment: (Maximum 2000 characters)  
Leave this field empty:
* Please note that every comment is moderated.

Newsletter

We offer e-newsletters that deliver targeted news and information for the entire fleet industry.



GotQuestions?

LUBRICANTS

The expert, Mark Betner from Citgo will answer your questions
Ask a question

Sponsored by

Magazine