Navistar International Corp. posted net income of $2 million for its third fiscal quarter -- its second consecutive profitable quarter despite continued weakness in demand for new trucks.

Consolidated sales and revenues for the three months, which ended July 31, totaled $1.6 billion, compared with $1.9 billion for the same period in 2002. Net income a year ago was $96 million. Gross margins were 14.2%, up from 13.9% in second quarter and 11% in first quarter. Margins in the third quarter of 2000 were 17.5%.
"The quarter-to-quarter improvement in our gross margins on lower volume is a clear reflection of the improvements that we have made in our cost structure," said John Horne, chairman, president and CEO. "Our short-term goal is to show a profit for the full year, which would be an excellent performance for us. We continue to balance truck production with industry demand and work on improving our cost structure."
For the first nine months of fiscal 2001, Navistar reported a loss of $30 million, compared with net income of $264 million the first nine months of 2000. Consolidated sales and revenues for the first nine months of fiscal 2001 declined to $4.9 billion from $6.5 billion in the same period in 2000. Manufacturing gross margin for the nine months was 13.1% compared with 17.4% last year.
Worldwide shipments of International brand heavy and medium trucks and school buses during the third quarter totaled 20,600 units, compared with 27,600 units shipped in the third quarter of 2000. Shipments of mid-range diesel engines to other original equipment manufacturers totaled 80,200 compared with 72,200 units shipped in the third quarter of 2000. The increase in OEM engine shipments resulted from the inclusion of 9,300 engines from Maxion Motores, acquired earlier this year.
Horne said the truck market in North America continues to be weak and this trend is expected to continue for at least another 6-12 months. Pricing on new and used trucks remains very competitive and is a challenge for the industry, he said.
"As I have said before, while we cannot control market conditions, we can control how we respond, and we can continue to take costs out of our operations and manage our production schedules so that we will be a stronger company when the market turns up," Horne said.
The company’s recently announced plan to boost production of Class 8 heavy trucks at its Chatham, Ontario, assembly plant is an example of how the company is managing inventories in the downturn. Production will be increased to 60 units per day from the present 43 units per day effective Sept. 4 to put production at a level that more closely matches current retail demand, Horne explained. For the past year, the company has been producing below retail demand to reduce dealer inventories. Inventories have now reached a level that will allow the increase. Based on published production and sales figures, Navistar believes it has the lowest dealer inventory in Class 8 in the industry relative to its market share.
Horne said the new joint venture with Ford Motor Company, Blue Diamond Truck Co., is another example of how the company is building for the future. Blue Diamond will build commercial trucks on a common chassis, furnish truck and diesel engine service parts to dealers of both companies and explore other advanced diesel engine opportunities.
Calling it “one of the most significant events in the company's nearly 100-year history,” he said that by leveraging scale with Ford, Navistar “will be able to bring products to market more quickly, improve the cost of materials purchased and improve the utilization of our facility at Escobedo, Mexico. Additionally, this will enable us to significantly grow our engine business in the long term." (See "Blue Diamond Expected to Create Big Cost Savings," 8/8/01.)