Navistar has woes but Clarke remains bullish

Navistar International Corporation has announced a first quarter 2017 net loss of $62 million, compared to a first quarter 2016 net loss of $33 million.

Revenues in the quarter were $1.7 billion, a decline of six per cent compared to $1.8 billion in the first quarter last year.

The decrease primarily reflects lower truck volumes due to soft Class 8 heavy industry conditions and lower global sales. First quarter 2017 EBITDA was $63 million, compared to first quarter 2016 EBITDA of $82 million.

“Our results are on track with our plan for the year, and demonstrate our ability to effectively manage costs at a time of persistent Class 8 industry headwinds,” said Troy Clarke, chairman, president and chief executive officer. “Our order share continues to outpace our market share, which confirms our confidence in the retail share improvement to come. At the same time, we are rolling out a steady stream of new product introductions that are helping us generate new sales opportunities, and position us to take advantage of the anticipated Class 8 rebound in the second half.”

Navistar finished the first quarter 2017 with $771 million in consolidated cash, cash equivalents and marketable securities and $697 million in manufacturing cash, cash equivalents and marketable securities.

In the first quarter, Navistar began customer deliveries of its new International LT Series Class 8, long-haul truck featuring advanced technologies that deliver “unrivalled fuel efficiency, best-in-class uptime and unparalleled driver appeal”.

                              A26 based on  VW’s MAN D26

Navistar has launched its A26 engine, which it expects will be “the catalyst that drives improved share in the 13-litre segment”, when it is launched mid-year in the LT Series.

Navistar admits the A26 is driven from the “proven MAN D26 engine platform”. This new 12.4-litre engine retains the compacted graphite iron (CGI) I6 block and is designed to deliver “superior fuel efficiency and provide industry-leading uptime”.

Navistar says it plans to continue to introduce new products every four to six months through the end of 2018, refreshing its entire product portfolio, while also expanding it with its re-entry into Class 4/5 vehicles through its collaboration with General Motors. While giving mention of GM, the company makes not reference to Cummins Inc.

Last month, the company went into production on its other major project with this automaker, when it began manufacturing General Motors’ cutaway G van at its Springfield, Ohio plant. In addition to generating additional revenues, it will also help enhance the company’s manufacturing capacity utilization.

Navistar adds that its “wide-ranging strategic alliance” with Volkswagen Truck & Bus, which included a $256 million equity investment in Navistar by that company and the creation of a procurement joint venture and a strategic technology and supply collaboration, are “already up and running”.

The company reiterated it expects the cumulative synergies for Navistar will ramp up to at least $500 million over the first five years.

“Now that the transaction has closed, we can start collaborating with Volkswagen Truck & Bus to increase our global scale, strengthen our competitiveness, and provide our customers with expanded access to cutting-edge products, technology and services,” Clarke said. “This marks an exciting new chapter in Navistar’s history, and another step in our journey to becoming a stronger, more profitable company.”

The company expects 2017 retail deliveries of Class 6-8 trucks and buses in the US and Canada are forecast to be in the range of 305,000 units to 335,000 units. 

COMMENT. On 13 March, Transport Topics reported remarks by Stephen Volkmann of Jefferies Securities, in which he said with respect to Navistar International Corporation: "We believe the strategic alliance with VW provides a blueprint for eventual full ownership by VW, though this is likely years away, rather than measured in quarters."