Navistar Posts Loss, Notes May Orders Looking Strong

LISLE, Ill., — Navistar saw a second quarter net loss of $374 million, the company shared yesterday.

While they are unhappy with that result, the company said it has seen a strong increase in May Class 8 orders and announced it will start adding SCR after-treatment to its medium-duty trucks.

“We are not satisfied with our overall financial results this quarter, but we are pleased with the continued progress we made in a number of areas on our turnaround plan,” said Troy Clarke, Navistar president and chief executive officer. “We still face some significant, yet solvable challenges, primarily in the areas of higher pre-existing warranty costs for our earlier EPA 2010 emissions level engines, as well as in rebuilding sales and restoring market share.”

The year-over-year decline was mainly due to lower volumes and higher pre-existing warranty adjustments of $164 million in the second quarter, primarily related to EPA 2010-emissions engines. This was partially offset by $60 million in lower SG&A expenses and $32 million in reduced engineering and product development costs, the company said.

Manufacturing revenue in the quarter was $2.5 billion, down 23 percent from the second quarter of 2012. The decline reflects a 14 percent drop in overall industry demand and lower market share during the company’s emissions strategy transition, as it moves from an in-cylinder emissions solution to one using selective catalytic reduction. Stronger volumes in their South America engine business helped to offset this, Navistar noted.

Clarke pointed to recent leadership changes and business process that he said would address many of these “priority issues,” specifically the hiring of Bill Kozek to head up its North America Truck and Parts division.

“We delivered on a number of our near-term priorities this quarter. We exceeded our cash guidance, continued to over-achieve on our structural cost reduction efforts, and obtained regulatory approval for our MaxxForce 13-liter engine with SCR, which we launched on time in our ProStar truck the last week of April,” Clarke added. “We were also pleased with our ongoing progress in shedding non-core assets that are not providing adequate returns on investment.”

Navistar COO Jack Allen said that May was off to good start. “May orders were up 38 percent versus the average sales rate for the previous quarter.” Those orders were driven higher by strong interest in the MaxxForce 13-liter with SCR and the ProStar ISX, Allen said.

Navistar is now beginning to give attention to their medium-duty products by adding SCR aftertreatment that line. Cummins SCR will be used on medium-duty engines, which it will begin to make available in the first quarter of calendar year 2014.