Navistar Overhauls Lineup of Products and Executives

This story appears in the Oct. 15 print edition of Transport Topics.

The extensive overhaul of Navistar’s product and corporate lineup continued last week as top sales executive Jim Hebe retired, more details emerged about new models, and the company agreed to replace three directors to avoid a proxy battle.

The retirement of Hebe, senior vice president of North America Sales Operations, was announced last week during American Trucking Associations’ Management Conference & Exhibition in Las Vegas. Also at that meeting, Navistar Vice President Steve Gilligan said full production of a Cummins 15-liter ISX engine for the ProStar model will be achieved in January, followed by the 13-liter MaxxForce engine in April.

Meanwhile, Navistar executives announced a deal with major investors Carl Icahn and Mark Rachesky to take one board seat each and select a third nominee acceptable to both investors.

The result means that the investors will have three of 10, or 30%, of Navistar’s board seats. That matches the two investors’ combined share ownership of nearly 30%.

As part of the agreement, Icahn and Rachesky agreed to refrain from more share purchases that would have triggered a so-called “poison pill” designed to block takeovers.

Each step takes Navistar farther away from the business stance it held when Daniel Ustian, former chairman, president and CEO, was in charge. When Ustian left on Aug. 27, Navistar was struggling, with operating losses of $616 million over nine months, reduced Class 8 market share and a 13-liter engine using exhaust gas recirculation (EGR) aftertreatment that failed to win certification from the Environmental Protection Agency.

Since Lewis Campbell was named CEO upon Ustian’s retirement, Navistar’s management ranks were thinned by Hebe’s announcement and the retirement of Dee Kapur, once president of Navistar’s truck group.

When Kapur was moved to a new post of vice chairman and chief product officer in June, Troy Clarke was brought in from the Asian unit to head a combined truck and engine unit. In August, Clarke was elevated to become president and chief operating officer.

Navistar didn’t announce a replacement for Hebe. Company spokesman Steve Schrier told Transport Topics that Hebe would remain “in an advisory role, consulting on key strategic accounts” during the transition. He didn’t say how long that would take.

The well-known Hebe has had a career that spanned more than four decades, starting in 1971 with International Harvester, Navistar’s predecessor. He later moved to other companies, including Kenworth Truck Co., and became CEO of Freightliner in 1992.

He rejoined Navistar in 2008.

“We have benefited greatly from [Hebe’s] many contributions, perhaps none more important than Jim’s passion for developing deep customer relationships,” said Jack Allen, president, Navistar North America Truck & Parts.

As its senior-executive ranks were changing, Navistar also was working to spruce up its product line by moving to re-establish its ties with Cummins — and adding selective catalytic reduction, or SCR, to reduce emissions of the 13-liter and 15-liter models that are the workhorses of its Class 8 lineup.

Speaking on the exhibit floor during the ATA meeting, Gilligan, who is vice president of product and vocational marketing, said full production of the 15-liter Cummins ISX engine for Navistar trucks will begin in January. Initial builds totaling 300 units are slated to begin next month, with accelerated testing in December.

Schrier said there is “strong interest” in the new models, although specific numbers weren’t available.

The ProStar test model on display in Las Vegas included a lighter roof, new navigation system and trailer skirts, among other features. A LoneStar model with the 13-liter, 500-horsepower engine also was showcased.

Both trucks are compliant with current EPA emissions regulations, Navistar said.

Gilligan said orders already were flowing in for the new models. He added that the ProStar with ISX will boost prices by an estimated $3,900 over a comparably equipped ProStar with Navi-star’s proprietary MaxxForce 13.

Meanwhile in the boardroom, Navistar on Oct. 8 announced the agreement with Rachesky and Icahn, a month after Icahn threatened a proxy fight and litigation to win four board seats.

The truck maker’s statement said Vincent Intrieri would be Icahn’s representative and that Rachesky himself would be a board member.

An Oct. 9 regulatory filing outlined the terms of the deal, saying the third representative would be chosen by Dec. 15 and that the company would recommend election of all three new directors at its Feb. 28 annual meeting.

Eugenio Clariond and Steven Klinger have left the board. The third person who will leave has not been identified.

“We are pleased to have reached an agreement with Icahn and MHR, as we believe it is in the best interest of the company and all of its shareholders,” said Michael Hammes, Navi-star’s independent lead director.