Navistar's Engine Plans Include Cummins, but Its Financial Losses Continue

Navistar International Corp. said its switch to diesel exhaust aftreatment will include use of Cummins liquid urea injection equipment, and that it will offer the Cummins ISX15 engine in some truck models beginning in January.

Navistar also announced yesterday it expects to lose between $105 million and $145 million in its third quarter, following major losses in the first and second quarters, but the company is predicting a return to profitability in the fourth quarter.

Navistar's announcement focused on its financial picture, which has tarnished as reliability issues with its engines raised warranty costs, required the company to pay non-compliance penalties to the Environmental Protection Agency, and bred dissatisfaction among customers and investors, according to customer reports, news items and market analysts' statements.

Its Class 8 market share is now 17-18% and its Class 6-7 share is 35-35%, the company said.

Room to Grow

Navistar withdrew its 2012 income forecast and substituted the Q3 loss estimate. Its statement today said it would reissue a forecast upon releasing Q3 financial results in September.

"We expect to sustain our current market share through the balance of the year, and with the addition of ICT+ and an expanded model lineup, improve our market share in 2013," said Daniel Ustian, Navistar's chairman, president and CEO. "We expect to return to profitability in the fourth quarter and believe the company will be in a position to improve margins in 2013 as we realize the benefits of our integration and ongoing cost reduction initiatives."

Navistar has arranged a five-year $1 billion loan from several banks to shore up its manufacturing capital and improve its financial flexibility, the announcement said.

On July 5, Navistar announced it would abandon its sole reliance on exhaust-gas recirculation and add selective catalytic reduction, whose working component is liquid urea injection. It is calling its new system In-Cylinder Technology Plus, or ICT+.

"As previously announced, the introduction of ICT+ leverages the advances Navistar has made in clean engine technology, while also providing greater certainty for its customers, dealers, and other key constituents," the statement said.

"To accelerate delivery of ICT+, Navistar has entered into a non-binding memorandum of understanding, under which Cummins Emission Solutions would supply its proven urea-based aftertreatment system to Navistar. This would be combined with Navistar's advanced in-cylinder engine to create ICT+."

Production of medium- and heavy-duty trucks will continue as ICT+ is phased in on its engines, with the MaxxForce 13 getting it first.

As part of the expanded relationship with Cummins Inc., Navistar plans to offer the Cummins ISX15 engine in certain models [the company has not indicated which models], expanding the company's vehicle lineup and on-highway market opportunity. Navistar plans to introduce the Cummins ISX15 engine as a part of its North American on-highway truck line-up beginning in January 2013 and to begin the introduction of ICT+ in its MaxxForce 13-liter in early 2013.

"During the transition to ICT+, Navistar will continue to build and ship current model EPA-compliant trucks in all vehicle classes using appropriate combinations of earned emissions credits and/or non-conformance penalties," the statement said. "The company continues to have productive discussions with the EPA and the California Air Resources Board regarding its transition to ICT+."