Wednesday 20 March 2013

Clarke to head Navistar as CEO

Troy Clarke has been appointed chairman and chief executive officer (CEO) of Navistar International Corporation.

Clarke assumes responsibility on 15 April when he replaces Lewis Campbell, 66, chairman and interim CEO since last August. Clarke has been president and chief operating officer of Navistar.

Campbell withdrew from retirement from Textron Inc. to assume the senior post at Navistar. Campbell’s role has been to define a new course for the company and Clarke’s role has been to implement these changes.

Clarke, 57, joined Navistar in January 2010 having spent 35 years at General Motors. He will also join the board of Navistar International Corporation, based in Lisle, Illinois.

In a further move, James Keyes is appointed as the company’s new chairman.

The shake-up in Navistar’s top management team was prompted by the sudden departure last year of Daniel Ustian, Navistar’s former long-time leader.

Clarke and Campbell between them have already begun to transform Navistar’s operations, improve efficiencies and reduce costs. So far they appear to have stemmed Navistar’s losses.

Most notably, Campbell and Clarke have turned to Cummins both for technology and product to address the company’s diesel engine issues, and more recently have withdrawn Navistar from its joint venture with Mahindra & Mahindra of India. They have also revealed plans to sell off the Monaco Coach recreational vehicle business as well as the Workhorse Custom Chassis activities.

                                 Failing strategy

Ustian left Navistar when it became obvious the company was failing in its strategy to meet EPA10, the Federal Government’s January 2010 change in emission standards.

Ustian seemingly had remained doggedly resolute for years in his determination to adopt exhaust gas recirculation (EGR) as the only means by which the company’s engineers could and should meet the upcoming Federal regulations.

Single-minded in his approach in driving Navistar forward, Ustian seemingly not only was able to convince himself that EGR was the correct and only approach, but also he managed to convince his board members, and presumably the company’s most senior technical engineers too.

It might be assumed that senior engineers, acutely aware of the manner in which Navistar’s principal competitors tackled the problem of meeting US emissions regulations, would also be familiar with the chemistry and mechanics of dealing satisfactorily with diesel engine exhaust emissions. That they were unable to convince their chief suggests that the ‘correct’ technology was not always seen as being ‘correct’.  

That Ustian was able to convince everyone in the company with any executive standing, by one means or another, as to the correctness of Navistar’s ‘way forward’, says as much of his powerful powers of persuasion as it does to those on the receiving end – and presumably their conviction and strategy to overturn his ideas. 

One day, perhaps the full story will be told of how Navistar International Corporation came, for a period of time, to lose it way in the high strata of diesel engine design and commercial vehicle manufacture.

In the meantime, was Navistar’s downfall attributable to Ustian’s view that by adopting ‘EGR only’, he could ‘buy’ market share? If so, did he propose that Navistar would save its customers money by eliminating their need to purchase expensive urea fluid or DEF - diesel exhaust fluid – as it is known in the US?

Typically, DEF consumption runs out at around three per cent for a vehicle fitted with EGR and SCR. In the case of vehicles which have adopted SCR only the figure might be double. Without SCR, but using EGR only, there would be no need for Navistar vehicles regularly to replenish their DEF tanks.

Not only that, but did Ustian argue that Navistar’s vehicles might be cheaper to buy in the first place? For with EGR-only its vehicles would not require the expensive selective catalytic converters other North American heavy commercial vehicle builders had elected to adopt.

Certainly, Ustian took pride in being able to declare Navistar able to offer its customers “urea-free Big Bore engines”. However, when Navistar chose to adopt its EGR-only route, it also elected to give one of its leading engine suppliers the marching orders.

For its then partner, Cummins had selected EGR and SCR as its route forward, thanks mainly to experience gained in Europe. In Europe, Cummins had had to meet other engine builders, like Daf, head on. It was that European market experience that partly helped Cummins engineers in the US realise they could no longer ignore SCR as a solution to their own problem. And they did not.

In the circumstances, Ustian and Navistar could not contemplate (tolerate?) a situation where it offered in-house EGR-only engines to meet EPA10, while at the same time offering customers engines alternative engines from a rival (in the form of Cummins ) which used both EGR and SCR to meet EPA10. There was no uniform logic. Something had to give.

In the light of this dichotomy, Ustian (and Navistar) presumably felt they had little alternative but to give Cummins ‘the elbow’.

The EGR/SCR debate screw tightened further during Ustian’s leadership. Rival truck makers, most notably Daimler’s Freightliner, also chose to go down the route of using both EGR and SCR to meet EPA10. The mighty German-owned Daimler could not be wrong.

As more and more truck diesel engine makers turned to the combination of EGR and SCR to meet EPA10 requirements (and Euro 6 in Europe), the top brass at Navistar found they could no longer ignore the obvious.

By that time, some loyal customers had switched allegiance and began for the first time to sample vehicles made by Navistar’s competitors. Those customers will be hard to win back – and certainly not in the short term.

Significantly, perhaps, following its links with MAN in Germany that led to the development of MaxxForce 11 and 13 engines, Navistar chose to adopt compacted graphite iron (CGI) as a cylinder block material for some of its own engines. Cummins has yet to adopt CGI even though it has been researching this material for years. Why has it taken Cummins so long to take action on a material widely recognised by other diesel engine makers as the 'future' in engine design?

More recently, in the wake of Ustian’s departure, the Illinois-based truck maker had to eat humble pie and offer its customers the option of the 15-litre Cummins ISX15 until Navistar can get its own house in order, most notably with respect to the MaxxForce 11 and MaxxForce 13 engines. Seeking Cummins’ assistance was one of Campbell’s first tasks.


Several questions could be asked. For example, what really prompted Navistar to seek help from Cummins for crucial SCR technology that Navistar could add to its MAN-derived MaxxForce 11 and 13 engines? And does this imply that relations between Navistar and MAN have ‘cooled’? After all, Navistar decided to make significant engineering changes (in order to accommodate its EGR technology on its Big Bore engines) to the layout of the air management system that the German company had so carefully engineered for its 11- and 13-litre units.

Might the answer to the first question partly lay in one of Campbell’s own comments?  He hoped use of Cummins-built exhaust treatment components in the MaxxForce 11 and MaxxForce 13 would “ease truck buyers’ anxiety” about Navistar’s 13-litre engine.

Also there have been comments that while Navistar’s Pro-Star line of heavy-duty trucks was popular with truck fleet operators, buyers held back their purchases in 2012 because of a lack of 15-litre engine. The first Pro-Star Class 8 on-highway tractor with a Cummins ISX15 and SCR-based Cummins Emissions Solutions after-treatment system rolled off the production line in Escobedo in November 2012.

Navistar has curtailed work on its own 15-litre engine – another of Campbell’s actions. He described the engine a “distraction” for the company’s engineering staff, draining resources from the development of Navistar’s 11-litre and 13-litre engines – engines it views as the primary options for its heavy-duty trucks in the coming years. In March 2011, Navistar had described its MaxxForce 15 as the 'most powerful' engine the company builds at 550bhp and 1,850lbft torque..

In parallel with this, Campbell implied that Navistar engineers will be able to devote more attention to complying with Federal emissions standards for the company’s smaller engines.

Campbell is retaining also Navistar’s joint venture with Caterpillar that produces dump trucks and other trucks for construction-related work. The Illinois-based company has enjoyed close links with Caterpillar for several years.

Likewise, Caterpillar dealers will continue selling Navistar-built trucks in a handful of overseas markets where the two firms are partners in the off-highway sector. For example, in Australia Navistar fits Caterpillar 15-litre engines to its off-highway trucks.
Navistar is akin to a giant oil tanker. It will take some time to change course and win back customers.  In the meantime, it seems that Cummins and Navistar are friends once more; but with the added bonus perhaps that Ustian is no longer at Navistar’s helm.

At the same time, engineers within Cummins and Navistar are once more talking to one another. In some cases, in the tightly knit world of diesel engine design and manufacture, they never lost contact even though their bosses were at war.

Meanwhile, Navistar awaits Federal approval for its ‘revised’ MaxxForce engines that adopt Cummins SCR technology. Then it can begin the real business of selling International trucks again.