Navistar Installs First Cummins ISX15 In ProStar Plus Tractor Featuring SCR

This story appears in the Nov. 19 print edition of Transport Topics.

WASHINGTON — Navistar International Corp. installed its first Cummins ISX15 engine in a ProStar Plus tractor on Nov. 15, with Chairman and CEO Lewis Campbell attending at the company’s Escobedo, Mexico, factory.

The installation represents the official adoption of selective catalytic reduction technology by Navistar and marks a major event in Campbell’s efforts to turn around the Lisle, Ill., manufacturer, which has lost market share in the wake of its attempt to develop an alternative emissions-control system.

“Before I accepted this job, I did my due diligence to see can the company be fixed, and are my skill sets right for the task,” Campbell said to Transport Topics editors in a Nov. 13 interview.

“I’m kind of a guy in a hurry. The people at Navistar are proud of the company and who they are and are sort of embarrassed to find themselves in this situation,” he said.

Navistar’s market share for Class 8 U.S. retail sales is 18.6% for the first 10 months of this year, down from 21.7% during the same time in 2011 (see story, p. 1).

“An 18% market share is not consistent with our expectations or history,” said Jack Allen, president of North America trucks and parts, also during the interview. In 2010, the company had a 25.1% share of the U.S. heavy-duty truck market.

Allen said that the decline in share has stabilized, that customers now know Navistar has an engine plan that is compliant with federal emissions regulations, and that the company can offer 11-, 13- and 15-liter engines.

“On market share, our opportunity is for nothing but upside,” Allen said.

“We’ve taken a lot of risk off the table and I think the regulators are on our side now,” Campbell said, referring to the Environmental Protection Agency.

Navistar’s newly instituted alliance with Cummins Inc. (10-29, p. 5) will expand to natural-gas engines. Chief Operating Officer Troy Clarke, interviewed at the company’s Washington office, said Navistar will offer the Cummins Westport ISX 12G in 2014. Production of that engine is scheduled to begin in the spring of 2013.

The company already offers the ISL-G, an 8.9-liter model. Potential future options include a dual-fuel, compression-ignited engine that uses natural gas with some diesel and a Cummins ISX 15-liter model with natural gas that is not yet on the market.

Clarke was in Washington to visit senators and representatives whose states or districts contain Navistar employees, including House Speaker John Boehner (R-Ohio), whose district includes Navistar’s Springfield, Ohio, plant.

Navistar’s board of directors could change before the end of this year, Campbell said. Among the 10 current members are investor Mark Rachesky and Vincent Intrieri, an associate of Carl Icahn. Those two directors have the right to pick a new director to replace a current member of the board before the end of this year, assuming that Rachesky and Intrieri can agree on a candidate, Campbell said.

Icahn and Rachesky each own almost 15% of Navistar’s shares and they have been critical of the stock’s performance. In the spring of 2011, Navistar’s shares topped $70 a share, but lately they have traded between $18 and $26 a share.

Daniel Ustian, former Navistar chairman and CEO, left the company in late August with Campbell succeeding him in both positions.

Campbell said he has talked a lot with Icahn, Intrieri and Rachesky, and their current relationship is not antagonistic.

“I came onto the board with the same eyes as [Icahn and Rachesky] did. I think we’re already doing all of the things they talked about,” Campbell said, adding, “From my standpoint, this has resolved itself.”

Navistar’s current fiscal year started Nov. 1 and it will report in December on the quarter ended Oct. 31. For the nine months ended July 31, the company had a net loss of $241 million, with revenue of $9.67 billion.

Campbell said he wants to return Navistar to profitability within 12 to 18 months of his start. He has declared North American trucks and engines to be the company’s core business, and said that any other subsidiary must justify its place by demonstrating an appealing return on invested capital.

He called Navistar “an American icon” and endorsed the efforts of Clarke and Chief Financial Officer Andrew Cederoth, who were working on recovery plans before Campbell joined the company. Campbell had been chairman and CEO of Textron Inc., retiring from the diversified manufacturer in August 2010.

During his first 2½ months on the job, Campbell said, his most important moves have been completing the engine deal with Cummins, settling the board dispute with Icahn and Rachesky, matching capacity to demand by closing the Garland, Texas, plant, and strengthening the balance sheet with a secondary offering of common stock.

“Now we’re getting on down the path with great products, including the ProStar Plus tractor, the best in the industry,” Campbell said.