Profitable Navistar Outlines Expansion Plans

Navistar International Corp. is making money, even in the toughest truck market in 50 years, and intends to make more by winning additional market share and introducing new products here and overseas

. Coming later this year to U.S. and Canadian markets are new medium and heavy truck models, an electric delivery van and perhaps an intercity bus, most using Navistar's own diesels, eventually including the 15-liter MaxxForce engine it's developing with Caterpillar Inc.

The builder's strategy of offering only EGR-based engines for 2010 and avoiding fluid-based aftertreatment is working, as sizable percentages of customers in all vocations have indicated that they prefer Navistar's Advanced Exhaust-Gas Recirculation to competitors' selective catalytic reduction, executives told financial specialists during an annual Investors and Analysts Day, Jan. 18 at its Engine Group's plant in Melrose Park, Ill.

Daniel Ustian, chairman and CEO, said he believes market-share gains made in the last few months of 2009 were due to American and Canadian customers' satisfaction with International trucks, and that they were signaling their preferences for Navistar's 2010 engine strategy. While sales remain depressed, the ProStar and LoneStar highway tractors helped International gain a 28 percent market share in the last four months of '09, up from 24 percent. Other models boosted its severe-service share to 44 percent, up from 34 percent, and its medium-duty share to 54 percent, up from 35 percent.

"We're sittin' on a billion dollars worth of cash," Ustian told an audience whose business it is to identify companies that are financially strong. And when the truck market recovers, which it's expected to do over the next two years, "we'll have $1.8 billion. We've made money in the toughest of times," he added. "The trucking industry is at a 50-year low."

Slow sales mean Navistar won't start producing trucks with 2010-legal diesels for another two to three months, he said. Meanwhile they'll get pre-'10 engines made before Jan. 1, including ISX engines from Cummins, said James Hebe, senior vice president for North American sales operations. This and high-output ratings of the MaxxForce 13 will suffice until the MaxxForce 15 is launched in October. Thus, there will be no "product gap" in the International lineup, Ustian said, and by later this year all International trucks will be powered exclusively with Navistar engines.

New truck models coming this year, said Jack Allen, Truck Group president, include:

* ProStar Plus, with enhanced aerodynamics and driver amenities, which will help long-haul operators with fuel economy and driver performance. It will be shown at the Louisville truck show in March.

* A Class 4-5 conventional based on the DuraStar and powered by the MaxxForce 7 V-8 diesel. To be unveiled at the NTEA's Work Truck Show in St. Louis in March, the lighter International will go after sales formerly captured by General Motors before it ended midrange production last summer. The CityStar low-cab-forward model and its MxF 5 V-6 diesel remain in limbo since production stopped late last year.

* Integrated concrete mixer chassis using International's Class 8 WorkStar and PayStar trucks with drums from recently acquired Continental Manufacturing Co. Rear-discharge models for axle-weight and bridge-formula states will be unveiled at the World of Concrete show in early February, while a front-discharge model is being considered. Continental bodies will continue to be offered separately on whatever chassis customers want, and Navistar will also market the mixer products overseas.

* Heavy LCF trash collection trucks, returning International to a segment of the refuse industry that it left more than two decades ago. It will probably use Condor chassis from American LaFrance, a partner in a joint venture announced last year. A Condor chassis with a Cummins engine was displayed at the Analysts Day meeting, but the intent is to use Navistar's own diesels.

Electric delivery vans will be sold under a partnership with an electric vehicle manufacturer, and one was displayed at the meeting. It has a short walk-in body and its batteries can be recharged in under eight hours using 205-volt current, a representative said. It has not yet been named and its introduction timeframe was unclear. Intercity coaches and other bus types powered by Navistar engines are under study; one, with a 40-foot body and chassis by Neobus of Brazil, was displayed at the analysts meeting.

New Business for Engines

Navistar will sell MaxxForce 7 V-8 diesels to Capacity of Texas for use in yard tractors, said Eric Tech, Engine Group's president. Another new outlet for Navistar engines will be Monaco Coach, a high-end motor home builder in Oregon that Navistar just bought. Engine Group will also seek business in niche markets, including fire trucks, buses, marine and power generation. This will help make up for loss of the high-volume business with Ford Motor Co., which concluded in late December, Tech said. A revised MxF 7 with a compacted graphite iron block and A-EGR advancements will enter the market soon.

Engine Group will have greater control over future products through Navistar's acquisition of Continental Diesel's fuel systems operations and Holley's advanced EGR valve production facilities, the latter announced the morning of the Analysts Day program. Navistar has set up a new company, Pure Power Technologies, to manage and co-ordinate development and production operations for Continental and Holley.

Also in Pure Power's scope will be Amminex, the Danish firm that's developing a non-fluid type of exhaust aftertreatment. The system uses ammonia-impregnated salt in a cannister; heat frees the ammonia, which then doses exhaust to further reduce oxides of nitrogen, or NOx. Dealers or fleet shops would change canisters at regular service intervals but drivers wouldn't be concerned with them. Navistar just bought into Amminex and hopes to use the system to complement A-EGR.

Navistar Defense Expands

Military business has grown since Navistar decided to go after it using existing engines and civilian truck chassis, said Archie Massicotte, president of Navistar Defense. It is producing trucks for American and allied armed forces and is seeking more contracts. He said the business now brings in about $2 billion annually, compared with virtually nothing in '04.

Production of an armored M-RAP (mine-resistant, ambush protected) vehicle for the U.S. Army and Marine Corps concluded in early 2009. The company now supports the WorkStar-based M-RAPs in Iraq and Afghanistan, and is retrofitting many of them with independent suspensions that allow the heavy 4x4 trucks to drive over rough terrain. The suspension was developed with Hendrickson International.

Partnerships Working

Development of the MxF 15 with Caterpillar Inc. is going well, and it will be ready after only three years -- "a fraction" of the time it would've taken had Navistar designed the engine solely on its own, Ustian said. This and the MxF 13, developed with MAN of Germany, are examples of how its strategy of forming partnerships with established companies enabled Navistar to expand and grow with a minimum of time and money.

Joint ventures with Mahindra in India and JAC in China are key to planned growth overseas in the next few years, said Dee Kapur, Truck Group's president. New truck models for those markets will use Navistar diesels assembled there with American know-how and parts, while Mahindra and JAC will provide market knowledge and sales outlets. A new range of cab-over-engine trucks and tractors for India will be expanded and sold in other countries in Asia and South America.

The NC2 joint venture with Cat will also give Navistar entree to foreign markets for sales of American-made trucks. The Cat-branded heavy vocational truck now being developed will s