Navistar Has $12 Mln. Loss

This story appears in the Sept. 14 print edition of Transport Topics.

Navistar International Corp. reported a $12 million loss in its fiscal third quarter, but top executive Daniel Ustian said he expects modest improvement in truck orders this quarter and next year, fueled by major fleets’ purchases.

Ustian, Navistar’s chief executive officer, said in a Sept. 10 conference call that he expected a market improvement to the fourth quarter from the third quarter, which is typically the company’s weakest.

In the current quarter, Ustian said, “truck volumes are substantially higher, engines are substantially higher and parts are substantially higher.”

Navistar said it expected to manufacture 22,000 trucks of all types in the fourth quarter, up 5,000 from the third quarter. The “modest increase” in 2010 orders excluded smaller fleets, Ustian said. “Only the big guys are buying,” he said, attributing 80% of the orders to larger fleets. “That is all that is out there.”

In the third quarter of last year, Navistar earned $331 million, or $4.47 a share, the company said Sept. 10. Revenue dipped 36% to $2.51 billion. The loss for the third quarter of 2009 that ended July 31 was equal to 16 cents a share. Over the first three quarters, Navistar had net income of $234 million, or $3.27 a share, a drop of about 50% from $477 million, or $6.52 a share, in the prior year period.

The truck manufacturer projected industry sales of Classes 6-8 trucks next year at 175,000 to 215,000 units, an improvement from the range of 165,000 to 185,000 forecast for 2009. Just three years ago, that total topped 450,000.

Since that peak, truck sales have plummeted and hit 25-year lows earlier in 2009.

One of the key issues for next year is financing, Ustian said.

 “We’ve got to find a way to help them,” he said. “The ones that do [buy], we are going to try to help.”

Ustian said Navistar’s 2010 market share forecast is being held down by the question of financing for fleets, which have been hurt by the recession.

Navistar lowered its earnings forecast for the fourth quarter to a range of $182 million to $207 million, or $2.55 to $2.85 a share, because it expects to pay higher taxes. The previous forecast range was 25 cents a share higher.

Navistar said its truck unit lost $28 million, compared with a $417 million profit in the prior year period that was linked to military sales. Navistar also said its market share grew by 10 percentage points in the third quarter from the third quarter of last year.

However, profit on engines increased to $45 million from $5 million a year ago, even as volumes of engines sold fell 15,700 units from the year-earlier period to trail the first nine months of last year by 89,200 units.

Parts profit increased to $93 million from $51 million, which the company said was “strengthened by continued strong sales to the U.S. military,” the company said. Revenue rose 11% to $491 million in that business.

Financial services profit was $20 million, compared with a $1 million loss in the year-earlier period.

The third quarter included two gains and a charge.

Higher taxes were cited as the reason for a $30 million third-quarter charge that was tied to production and performance of foreign businesses.

A gain of $23 million was recorded because inventory was acquired at a lower price than market value when Navistar bought the manufacturing business of recreational vehicle maker Monaco Coach Corp.

Navistar also gained $18 million from a settlement with Ford Motor Co. related to the discontinuation of engine making for the automaker’s pickup trucks.