Navistar Details SCR Strategy for Regaining Market Share
This story appears in the Aug. 27 print edition of Transport Topics.
LISLE, Ill. — Navistar International Corp. executives last week revealed their strategy for introducing a refocused product line with different engine emissions control technology in a bid to recapture market share.
Navistar will introduce a ProStar with a Cummins ISX 15-liter engine in January with selective catalytic reduction. A May rollout is planned for a modified 13-liter MaxxForce engine, with selective catalytic reduction aftertreatment, which Navistar calls In-Cylinder Technology+.
“We want to focus on going forward,” Jack Allen, president of Navistar’s North American truck group, told Transport Topics here on Aug. 21. “We want to get back into the position of having Navistar tell the Navistar story rather than the competition. We think this is the right solution at the right time.”
CEO Daniel Ustian added during a meeting in the company’s spacious headquarters complex that “the competition has done a pretty good job of putting doubt in people’s minds,” reiterating his comments in June, when Navistar reported a $172 million fiscal second-quarter loss (6-11, p. 3).
Allen and his colleagues outlined the new approach for TT in an interview at the company’s headquarters outside Chicago, where they stressed Navistar’s ability to keep selling EGR-equipped trucks this year using combination of emissions credits and noncompliance penalties.
The shift to SCR brought Navistar in line with other truck makers, after years of criticizing that approach.
Navistar last month said it was changing its emissions reduction approach to include SCR, while the U.S. Environmental Protection Agency mulled over whether to agree that the 13-liter MaxxForce engine with EGR met agency standards.
Navistar first applied in February for EPA certification of the 13-liter engine. Rather than immediately approving the Maxx-Force engine, EPA asked for more details in mid-May.
Earlier this month, Navistar said its market share for the three-month period ended July 31 was between 17% and 18%.
Through the first seven months of 2012, Navistar’s market share has slipped to 19.1% from 21.2% in the year-ago period while most competitors have gained, including Daimler Trucks North America’s Freightliner.
Navistar’s current competitive standing is well below the industry-leading 28% market share for the full year of 2009.
Allen disputed claims of major market-share erosion.
“No one is running away,” he said. “It is absolutely not true that we are losing customers right and left. Have our customers settled back and asked, ‘What will you do?’ Yes.”
Allen also said, “The market has taken a little pause,” as current uncertainty in the trucking market is pushing many fleets to postpone purchasing decisions.
The latest evidence of that delay was a drop of 31.1% in truck orders last month to 12,900, which was a two-year low, according to ACT Research. Truck orders have fallen for seven straight months on a year-over-year basis. (8-13, p. 1)
The recent weakening in orders can work in Navistar’s favor, Allen said, because 15-liter and 13-liter SCR-equipped models of the ProStar will be available soon, when demand could be stronger.
The Navistar officials also emphasized what they said was a close, long-standing relationship with Cummins.
“We are working hand-in-hand,” Allen said, adding that the company last year sold 11,345 tractors with Cummins engines around the world. “We’ve been doing business with them forever. Many people [at the two companies] are business associates and personal friends. That hasn’t changed.”
While the Navistar officials stressed their relationship with Cummins, there still is work to be done on multiple fronts.
One is the need to ensure that the MaxxForce 13-liter works smoothly with Cummins’ SCR aftertreament and to obtain EPA certification.
Adapting the 13-liter Maxx-Force engine to include SCR is just a matter of software changes in engine calibration because both the engine and aftertreatment system are proven, said Allen and Tim Shick, vice president of North American engine sales.
The other portion to be completed is a formal SCR use agreement between Navistar and Cummins, because the companies’ relationship is still at the memorandum of understanding phase.
Allen said he believed that formal agreement would be completed soon.
“We have orders in our system for Cummins engines,” said James Hebe, senior vice president of North American sales operations. He predicted the pace of orders will increase next month and in October.
None of the Navistar officials would discuss the financial effects of the new initiatives. The company is scheduled to announce earnings in early September.
Navistar also has taken other steps to buttress its market position.
Earlier this month, the company announced it has arranged for a $1 billion commitment of capital from major investment banks such as Goldman Sachs, to counter questions raised after fiscal second-quarter earnings were announced.
The company’s recently announced plan for a voluntary separation plan to cut the size of its management workforce will not have any effect on product development, spokeswoman Karen Denning said.
