Navistar (NAV)
In a time when companies are seeking to reduce risks and slow growth, Navistar International Corporation is plunging ahead. It is a brave new world for companies who are involved in the transportation industry, especially companies who focus on heavy vehicles like over-the-road semi-trailers and military trucks. Navistar subsidiaries and affiliates include MaxxForce, Monaco, Safari, Workhorse and many more. Environmental regulations, shrinking demand for military vehicles, higher fuel prices and costs due to government policy changes all seem to be conspiring against companies like Navistar.
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Earlier this year, a disappointing earnings report showed a profit of only 23 cents a share, well under the analyst estimate of 85 cents a share in the Navistar fiscal Q1. Navistar debt is also a big concern as the fiscal year that closed in October of 2009 showed almost $2 billion in negative equity. On top of that, other industry leaders, such as Caterpillar (
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However, recent news might signal a change in Navistar fortunes. The first is an announcement in February that Navistar International Corporation was awarded a $751.5 million contract to produce MRAPs or Mine-Resistant Ambush-Protected trucks for the Department of Defense. The DOD hopes to eventually purchase over 10,000 of the armored vehicles. To date, Navistar owns the orders for as many as 7,500 vehicles for use in Afghanistan and other military operations. Other companies who have been awarded partial orders are Oshkosh Corporation (
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Another breakthrough for Navistar is in the arena of providing so-called “green” trucks for the domestic trucking industry. Truck makers are experimenting with battery powered 18-wheelers and hope to achieve some of the same successes enjoyed by hybrid passenger car manufacturers. However the power and distance requirements for semi tractors make progress slow on this front. Navistar is working on electric trucks while also finding ways to make the traditional diesel engine as efficient as possible. Last week, Navistar announced that it has received certification from the U.S. Environmental Protection Agency for its 2010 MaxxForce 13 Advanced EGR (exhaust gas recirculation) big bore diesel engines. The MaxxForce engine boasts many improvements including emissions compliance and a graphite iron cylinder block that reduces the weight of the engine by almost 700 pounds. When the cutting edge engine is paired with the International ProStar Plus state-of-the-art cab, the total tractor boasts a 1,300 total weight savings, increasing fuel mileage and payload potential.
Navistar is also aggressively looking to reduce costs by improving its global supply chain. In 2008, Navistar partnered with Menlo Worldwide Logistics to help with analysis, design and management services as part of a 5-year plan to improve supply chain performance. So far, the 18 month partnership has realized a five percent reduction in annual logistics costs, putting Navistar well on its way to its goal of a 25 percent supply chain savings by 2013.
Navistar has been around the block a few times. The holding company has been traded publicly for over 100 years and traces its heritage back as far as the invention of the mechanical reaper invented by Cyrus McCormick in 1830. The rules of the game have changed many times during Navistar’s journey and recent earnings news discouraging, but the company has a proven ability to adjust and keep on trucking.
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Joshua Caucutt is long-time market follower and finance writer. Debt management, entrepreneurship and government economic policy are areas of emphasis. He regularly contributes to the
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