Navistar International Corp. announced a second quarter net loss of $374 million, or $4.65 per diluted share, compared to a second quarter 2012 net loss of $172 million, or $2.50 per diluted share. At the same time, it said it has seen a strong increase in May Class 8 orders and announced it will start adding SCR aftertreatment to its medium-duty trucks.

The year-over-year decline was mainly due to lower volumes and higher pre-existing warranty adjustments of $164 million in the second quarter, primarily related to EPA 2010-emissions engines. This was partially offset by $60 million in lower SG&A expenses and $32 million in reduced engineering and product development costs.

Manufacturing revenue in the quarter was $2.5 billion, down 23% from the second quarter of 2012. The decline reflects a 14% drop in overall industry demand and lower market share during the company's emissions strategy transition, as it moves from an in-cylinder emissions solution to one using selective catalytic reduction.

This was partially offset by stronger volumes in the South America engine business.

"We are not satisfied with our overall financial results this quarter, but we are pleased with the continued progress we made in a number of areas on our turnaround plan," said Troy A. Clarke, Navistar president and chief executive officer. "We still face some significant, yet solvable challenges, primarily in the areas of higher pre-existing warranty costs for our earlier EPA 2010 emissions level engines, as well as in rebuilding sales and restoring market share. However, we are already implementing the right leadership and business process changes to effectively address these priority issues."

The company recently announced the hiring of industry veteran Bill Kozek to run its North America Truck and Parts group, and the naming of Bill Osborne, who spent more than 20 years in the automotive industry before joining Navistar in 2011, to head up global quality.

"We delivered on a number of our near-term priorities this quarter. We exceeded our cash guidance, continued to over-achieve on our structural cost reduction efforts, and obtained regulatory approval for our MaxxForce 13-liter engine with SCR, which we launched on time in our ProStar truck the last week of April," Clarke added. "We were also pleased with our ongoing progress in shedding non-core assets that are not providing adequate returns on investment."

In the second quarter Navistar completed the sale of its equity interests in its India truck and engine joint ventures; completed the sale of its Workhorse Custom Chassis brand; and subleased a portion of its Cherokee, Ala., manufacturing facility to a railcar manufacturing company. Already in the third quarter, the company has sold its RV business.

Jack Allen, Navistar's chief operating officer, notes that May orders were up 38% versus the average sales rate for the previous quarter, driven higher by strong interest in the MaxxForce 13-liter with SCR and the ProStar ISX.

With its heavy duty launches essentially completed, the company is turning its focus to adding SCR aftertreatment to its medium-duty products. Navistar announced it will use Cummins SCR on medium-duty engines, which it will begin to make available in the first quarter of calendar year 2014.