Wednesday, 20 February 2013 - 00:52
Navistar CEO Sees Market-Share Gains From Revamped Engines
By Bob Tita
Navistar International Corp. (NAV) Chairman and Chief Executive Lewis Campbell predicted the damage to the commercial truck marker's share of the North American market will be short-lived, as Navistar moves away from a failed strategy for treating engine exhaust.
Navistar's average share of the heavy-duty truck market in the 12 months to the end of January was about 16.5%, down from about 21% in 2011, according to industry estimates. Mr. Campbell expects Navistar to regain the lost ground during 2014 with a revamped line of engines. Navistar is the third-largest seller of heavy-duty trucks in North America behind Daimler AG's (DAI.XE, DDAIY) Freightliner brand and Paccar Inc. (PCAR), maker of Peterbilt and Kenworth trucks.
Mr. Campbell anticipates the company's 13-liter engines featuring an exhaust-treatment system built by Cummins Inc. (CMI) will be a hit with buyers once the truck operators become familiar with the engines. The 13-liter engine is the centerpiece of the company's large diesel engine lineup. Moreover, he said demand for Navistar's International brand trucks should receive a boost from the completion of warranty-related engine repairs that have dogged heavy-duty trucks sold since 2010. Mr. Campbell said warranty claims this year will be significantly less than in 2012, adding that no new problems have been discovered.
"Once we get all those trucks converted, I think you'll be surprised at how quickly we regain share," Mr. Campbell said during an interview Tuesday with Dow Jones Newswires following the company's annual shareholders' meeting near Chicago.
Navistar is waiting for the U.S. Environmental Protection Agency to certify that the company's 13-liter engines meet the agency's latest standard for reducing smog-causing nitrogen oxide in diesel-engine exhaust. Navistar submitted its 13-liter engine for certification in early January. Mr. Campbell said the evaluation remains under way and reiterated his earlier forecasts that the certified engine could reach the market slightly ahead of schedule in late March.
Navistar's Pro-Star line of heavy-duty trucks was popular with truck-fleet operators before buyers pulled back on their purchases last year because of concerns about the performance of Navistar's 13-liter engines and the lack of a 15-liter engine in the company's engine lineup.
Mr. Campbell, who replaced CEO Daniel Ustian in August, remedied Navistar's lack of a 15-liter engine by purchasing 15-liter engines from Cummins and abandoning Navistar's program to develop its own 15-liter engine. Cummins's 15-liter engine has been available in Navistar trucks since December. Since then, Navistar has shipped about 700 trucks in the U.S. and Canada with 15-liter Cummins engines, Mr. Campbell said.
Mr. Campbell is hoping the use of Cummins-built exhaust-treatment components on Navistar's 13-liter will ease truck buyers' anxiety about the Navistar's 13-liter engines.
"Any time anybody brings out a new engine there's a wait-and-see" period," said Mr. Campbell, 66 years old and a former CEO of Textron Corp. (TXT) "But we think the experience is going to be great."
The Lisle, Ill.-based company tried for more than two years to meet the EPA's nitrogen oxide standard with a treatment process different from the rest of the North American truck industry. Former CEO Ustian, who retired from the company last year, believed Navistar could grab market share by pursuing an exhaust-treatment process that was less expensive than systems used by rivals.
But Navistar's inability to meet the EPA's requirement forced the company to abandon the strategy this summer. In the aftermath, Mr. Campbell vowed to improve the company's accountability for deadlines.
"We're ahead of schedule," he said. "We're on track."
Mr. Campbell is refocusing the company on its North American truck and engine businesses, and emphasizing higher margins through better product quality and lower expenses for materials, manufacturing and other overhead. The company recently sold its stakes in two joint ventures to make trucks and engines in India and intends to close a truck-assembly plant in Garland, Texas.
Navistar has not offered specific profit guidance for fiscal 2013, but expects to log losses for most of the year with most of the red ink coming in first half of the year.
Write to Bob Tita at email@example.com
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(END) Dow Jones Newswires
February 19, 2013 17:52 ET (22:52 GMT)
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