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Truly sustainable solution to transporting cattle Scania Group Press Release / April 1, 2015 Lateral thinking on the subject of transporting livestock has inspired Scania to make use of energy from a surprising source – the cattle themselves. Tens of millions of head of cattle are transported by road every day, requiring the consumption of many millions of litres of fossil fuel. But what if the methane that the animals produce while on the road could be captured and used to power the vehicles used to transport them? Scania has taken this intriguing idea and used it to produce its new Mobile Gas Generation (MGG) system, a breakthrough technology that uses the methane generated in livestock transport to power Scania gas engines. “While it’s not viable for all forms of road transport, this technology could make a significant contribution to reducing greenhouse gas emissions,” says Björn Dung, Head of Powertrain Development at Scania. Huge potential Scania sees huge potential for using the methane (CH4) generated by human activity to fuel its wide range of gas-powered engines. It is estimated that each cow annually releases between 70 and 120 kilograms of methane. According the climate experts, agriculture is responsible for 18 percent of the total release of greenhouse gases worldwide, more than the entire transport sector. Scania took these facts to heart and following extensive testing has developed the technology to capture methane and use it in its proven gas engine. The engine has through smart, but surprisingly simple, measures been adapted for using excess methane as fuel. The methane generated by the MGG system is stored in rooftop tanks and from here it is filtered through an intricate piping system and fed directly into the Otto gas engine’s injection system. Results from trials suggest an energy efficiency of 49 percent, which is well in line with normal natural and biogas operations. Safe for livestock The specially designed livestock trailer used with the MGG technology has a closed ventilation system, with an exhaust system channelling methane to the tanks on the trailer roof. Unlike present-day livestock trailers, the space is insulated and wholly sealed. Large windows provide an adequately light and airy environment for the cattle. A ventilation system ensures continuous air circulation and the intake of fresh air. “Initially, there were concerns over animal welfare, but these have been fully addressed,” says Dung. Scania is increasingly seeking more sustainable solutions in transport and is presently piloting biogas-fuelled buses in Brazil and Colombia. In Brazil, the biogas is generated using farmland manure, making good use of waste products. European pilot study The MGG concept will initially be piloted in two, as yet to determined, European countries. Following a full-scale assessment, Scania is confident that this new product will be adopted by the livestock industry. .

The two leading Class 6 trucks by sales are the Freightliner M2 106 and the international M<V Series (DuraStar. replacement. Both are available with the competent fleet-minded Cummins ISB/Allison drivetrain that the Ford F-650 is lacking. But why does the M2 have to look like a droopy "Eeyore" of a truck that only a mother (or bean counter0 could love. I'd buy the International. .

Daimler Delivers Electric eM2 Truck to Penske Truck Leasing Steven Martinez, Heavy Duty Trucking (HDT) / December 20, 2018 Daimler Trucks North America on Dec. 20 delivered the first vehicle in its new Electric Innovation Fleet to Penske Truck Leasing in Carson, California, the result of a nine-month collaboration between the two companies to produce and test electric commercial trucks in real-world applications. The vehicle is an electric version of the Freightliner M2 106 medium-duty truck, dubbed the Freightliner eM2. The event marked the culmination of a year of work for Daimler, partially funded by a $16 million grant from California's South Coast Air Quality Management District, an agency focused on improving air quality in the ports region of Los Angeles. DTNA President and CEO Roger Nielsen called it, “a historic step in the real-world application of electric vehicles. With increased hauling demands and regulatory pressures, combined with ongoing concerns over energy resource depletion, it is more important than ever that DTNA continues to rigorously test and research electric vehicle solutions together with our customers,” said Nielsen, who was on hand to deliver the keys to Penske CEO Brian Hard. Penske plans to take on an additional nine eM2 trucks as well as 10 of the Class 8 Freightliner eCascadia model, which will be launched next year. The company will offer the electric trucks to customers to use in regular service for one to two years. The electric trucks won’t be available to all Penske customers, only those that have an "actual use case" for them. Hard didn’t disclose which of Penske’s customers were interested in the truck, but said the company has “a good handle on whom the first customers will be” and that they represent a broad spectrum of applications. The reason for the limited offering is that the rollout is not a full launch of the technology. Daimler referred to the trucks as "Gen 1 vehicles." As part of Daimler’s e-Mobility initiative, announced earlier this year, the company intends to use this limited deployment as a real-world testing ground, with all of the ups and downs of a product that is still very much in beta phase. A One-Year Startup Project within Daimler The Freightliner eM2 project was headed by senior eMobility lead Andreas Juretzka, who brought together a crack team of engineers to take the concept of an electric heavy- and medium-duty truck from drawing board to reality in just a year’s time – an incredibly short period compared to the company’s usual five-year development time for vehicles. The eM2 has three large battery packs that straddle the bottom of the vehicle, providing an expected range of 200 miles. The batteries can be charged to 80% of capacity within an hour, but need an overnight charge to completely top off. Rather than selling chargers to each customer, Penske will have the chargers at its facilities and will provide technicians to work on the unique vehicles. Juretzka told HDT that the trucks will be ready to perform and have been thoroughly tested for safety. He said his team used knowledge they had coupled with what other companies had done with their electric vehicles – "We can steal with pride," he told HDT – to produce something that was more thought-out than just strapping an electric powertrain to an existing truck. They had to consider all of the components and technologies that tie all the pieces together – the chassis, the electric motor, the batteries, the air compressor – to come up with a system that could be as usable as a traditional truck in certain applications. The engine was spec'd to meet the power needs of a typical medium-duty truck in pickup and delivery, local distribution, and food and beverage delivery service, with 480 peak hp, according to the specs Daimler gave at the vehicle's announcement in June. But the batteries are the key component, Juretzka said. The company will be using batteries from multiple manufacturers to see which performs the best during this two-year deployment. At the end of two years, Daimler plans to launch its Gen 2 version of the truck. Daimler assembled a group called the Freightliner Electric Vehicle Council, composed of 30 customers with strong use cases for an electric commercial truck. The company is working with council members on the launch of these trucks. Members of the council will benefit from co-development of deployment strategies for electric trucks, including applicable use cases, current legislation and requirements for facilities, charging infrastructure and service support. It's still early days for commercial electric vehicle technology and costs are still three or four times that of a comparable diesel model, Nielsen told HDT. While component costs are coming down Juretzka said it is likely too expensive to completely replace diesel trucks without government incentives. "The industry is right at the tipping point," he said of commercial electric trucks. "But it still needs funding." The event concluded with Daimler and Penske honoring the eM2 team, all dressed in green and wearing green Santa hats. They loaded small trees into the back of one of the eM2s for delivery to a company called TreePeople. As the first customer of the Freightliner eM2, TreePeople will use the seedlings to help replant the areas in California that were burned in the recent wildfires. The eM2 was driven off Penske's lot by a man dressed in a green Santa suit. It moved with complete silence, in stark contrast to the constant noise eminating from the nearby highway, a reminder that the coming electric-vehicle future could also cut down on noise pollution considerably. After the festivities ended, Juretzka said he was glad to finally deliver the first eM2 just before the end of 2018, a goal of his and Daimler's. "If I could dance in front of you, I would do a dance," he said. .

I'm a deep admirer and scholar of history. I'd argue that the situation today is different from our 1930s posture, apples and oranges. We should be "known" as strong with a global reach, but doing a good bit less reaching. We need to stop trying to be the world's policeman. Clearly, that path has failed, again and again. Where did we succeed? Iraq? Somalia? Europe collapsed in the face of German aggression because nobody would stand up to them. Japan was starved for raw materials. Japan should have been chased out of China by a League of Nations army, but it was gutless and the western world didn't care that Asians were dying. There was a huge problem brewing, but in those days, Asia was regarded as a place far, far away. Today with real-time news via the internet and 9-12 hour flights, Asia is just a step away. I've long felt that we need to fix our own problems before we run around the world lecturing other sovereign countries on how they should change. We were taught that principle as children. Until we prevent illegal immigrants from entering the country (and milking our tax money), until we eradicate foreign (and domestic) drug cartels in our country (and schools), until we fix our "cultural decay and declining standards of behavior", we obviously are in no position to be a global role model.

So Mattis has resigned.....big news. (but hey, we now have a FOX News presenter, Heather Nauert, as our new UN ambassador) From a distance, Mattis seemed okay. I'm all for our troops coming home. It's not our neighborhood. It's up to the locals to stand up and fix their homeland, rather than run away to Europe and the US as economic migrants. It appears that we partnered with many questionable groups in the war on terror, including the one squad that decapitates young boys on the back of pickup trucks. The Soviet Union couldn't sort out Afghanistan.....we thought we could? The French couldn't sort out Vietnam.....we thought we could? And we were marvelous with the Iraq show.....what a costly mess. What have we gained by trying to be the world's policeman? Over the last 20 years or so, our reputation around the world has crashed (recall how good our reputation was post-WW2). We had a chance to work with Russia against ISIS and improve the relationship. We shared a common goal, but threw that opportunity out the window.

Truck emissions rules get green light from EU capitals, tough talks loom Sam Morgan, Euractive / December 20, 2018 EU environment ministers agreed on heavy-duty vehicle CO2 emission rules on Thursday (20 December), teeing up difficult talks with the European Parliament in January. The EU has never regulated carbon dioxide emissions from heavy vehicles before but took a big step towards doing so at a meeting of environment ministers in Brussels yesterday. Member state representatives agreed on a joint negotiating position and will now lock horns with MEPs and the European Commission behind closed doors in the new year. As part of their agreement, the EU Council of Ministers decided to tweak the Commission’s initial proposal. Although sticking with the EU executive’s 15% and 30% reduction targets for 2025 and 2030, the Council decided to make the latter a binding benchmark. Only the 2025 target was binding until now. In order to help tackle the transport sector’s problematic contribution to climate change, the EU’s heavy-duty vehicle fleets will have to make emission cuts compared to a baseline level to be taken next year. Austrian sustainability minister Elisabeth Köstinger, whose nation’s chairing of the rotating EU presidency draws to a close this week, said that the rules will cut 54 million tonnes of CO2 in the next decade, “which corresponds to the total yearly CO2 emissions of Sweden”. The Council acknowledged the risk of regulating trucks and buses for the first time by agreeing that the rules should be reviewed in 2022. Not only could the ambition of the overall targets be altered at that time but the 2030 goal could also be downgraded to an indicative-only mark if progress is deemed insufficient. The International Road Transport Union (IRU) welcomed the Council’s “sensible approach”. In a statement, it said “setting the target before knowing which technologies can meet this ambition is unrealistic”. IRU added that the 30% target can only be met by using a “well-to-wheel (WTW) approach that takes into account the role of advanced renewable and synthetic liquid and gaseous fuels used in internal combustion engines”. The association called on the EU to make sure that WTW is implemented during the 2022 revision. But the Council’s common position was given short shrift elsewhere, with the European Automobile Manufacturers’ Association (ACEA) voicing their concerns about the timeline and strictness of the overall targets. ACEA boss Erik Jonnaert insisted that “what is possible for cars is often not an option for trucks”, citing this regulation’s light-vehicles equivalent, which was belatedly finalised by negotiators earlier this week. Jonnaert also warned that the use of 2019 as a baseline does not give manufacturers an early enough indication of what targets they will have to work towards and added that refuelling points for alternatively-powered vehicles are still not sufficiently in place. “Truck makers are willing to further cut carbon emissions but this should happen at a pace that is realistic, as it will not be possible with today’s technology alone,” Jonnaert said in a statement. ACEA has lobbied for far lower reduction targets for trucks of 7% by 2025 and 16% by 2030. Its main argument is that the potential for electrifying truck fleets is far lower than for cars and that it would only really work for short trips within cities, but not for long-haul transit. ‘Supercredits’ to be scrapped in 2024 Green mobility NGO Transport & Environment also took issue with the Council’s work, saying it is an important step in agreeing the EU’s first-ever CO2 reduction targets for trucks but warning that it is not enough to live up to the EU’s Paris Agreement commitments. “A majority of countries, including key truck manufacturing nations such us France, Sweden and the Netherlands, called for more ambition and incentives for zero and low-emission trucks but accepted this compromise to avoid a blocking minority led by Germany,” T&E said in a statement. T&E also denounced the Council’s backing of a ‘super-credit’ system, whereby sales of zero-emission trucks are counted double towards meeting the CO2 targets. But it did acknowledge that ministers agreed to review it in 2024 and replace the system with sales targets for zero and low-emission as of 2025. “T&E welcomes that supercredits will be deleted because they are an accounting trick,” it said, adding: “The sales target is also supported by big businesses including IKEA, Unilever, Carrefour and Nestlé, as well as logistics companies and hauliers, because it will expand the supply and bring down costs of these vehicles.” Truck expert Stef Cornelis said “the upcoming [Romanian] Presidency should now move towards the European Parliament position and adopt higher CO2 targets and sales targets for zero-emission trucks”. MEPs already agreed on their negotiating position in mid-November, signing off on a report penned by Greens lawmaker Bas Eickhout. Parliament and Council on a collision course Parliament went for reduction goals of 20% and 35%, as well as sales targets for zero and low-emissions vehicles (ZLEV) of 5% and 20% for 2025 and 2030, putting MEPs on a collision course with the Council and even the Commission. MEPs initially wanted to exclude buses and coaches from the ZLEV targets but the amendment was struck down in a final vote. Ministers did manage to preclude them from their super-credit system though. Eickhout told EURACTIV that he is “looking forward to the negotiations”, suggesting that more progressive member states held back during the Council horse-trading, in order to circumvent a blocking minority helmed by Germany. After a short Christmas break, the file will be back on the table during trilateral talks penciled in for 8 January. Given that the Parliament goes on unofficial recess in April due to the upcoming European elections, it could be a hard ask for the regulation to be done and dusted under the Romanian Presidency.

Philip Blenkinsop, Reuters / December 20, 2018 Ministers from European Union countries agreed on Thursday to reduce carbon dioxide (CO2) emissions from trucks and buses by 30 percent by 2030, albeit with the potential to review this in 2022, the EU’s Austrian presidency said. Environment ministers struck the deal, balancing the interests of Germany and the continent’s largest auto sector with other countries, such as Sweden, which pushed for a sharper cut. The countries, collectively known as the Council, will still have to negotiate next year with the European Parliament, which envisages a tougher 2030 target of a 35 percent cut. The government representatives also agreed on Thursday to an interim target of a 15 percent reduction by 2025, relative to 2019 levels. The parliament is pushing for 20 percent. The EU currently has no limits on emissions from heavy-duty vehicles, unlike other countries such as the United States, China, Japan and Canada. Trucks account for almost one quarter of the bloc’s transport-related emissions. Curbs on the transport sector, the only one in which emissions are still rising, aim to help the bloc meet its overall goal of reducing greenhouse gases by at least 40 percent below 1990 levels by 2030 under the Paris climate accord. The EU agreed on Monday on targets for cutting emissions from cars and vans. The European Automobile Manufacturers’ Association (ACEA) has lobbied for far lower reduction targets for trucks of 7 percent by 2025 and 16 percent by 2030. ACEA has said that the potential for electrifying truck fleets is far lower than for cars and that it would only really work for short trips within cities, but not for long-haul transit. Volkswagen’s truck brand MAN has warned the new CO2 limits could cost tens of thousands of jobs.

https://www.bigmacktrucks.com/topic/19433-another-company-developing-fuel-efficient-opposed-piston-engine/?tab=comments#comment-79822

DTNA delivers first battery-electric commercial truck to Penske Trailer-Body Builder / December 20, 2018 Making good on its promise to put an electric commercial truck in customer hands in 2018, Daimler Trucks North America (DTNA) on Thursday delivered the first vehicle in its Freightliner Electric Innovation Fleet – a Freightliner eM2 – to Penske Truck Leasing. This delivery is a milestone in the real-world application of battery-electric commercial vehicles, as well as an important step towards emissions-free mobility, according to DTNA. Also noteworthy, the introduction of the eM2 into Penske’s fleet is a first in DTNA’s “co-creation” approach with customers as it co-develops technology to shape the future of transportation. In June, Daimler executives presented the eM2 and the Freightliner eCascadia to investment analysts and business media, and announced plans to deliver an Electric Innovation Fleet of 30 vehicles to customers this year for further testing under real-world operating conditions. In Thursday’s ceremony, Roger Nielsen, president and CEO of DTNA, handed over the eM2 key to Brian Hard, president and CEO of Penske Truck Leasing, during an event in Carson, CA. “With increased hauling demands and regulatory pressures, combined with ongoing concerns over energy resource depletion, it is more important than ever that DTNA continues to rigorously test and research electric vehicle solutions together with our customers,” said Nielsen. “Electric commercial vehicles present a real opportunity to advance the ideal of emissions-free mobility while improving our customers’ real cost of ownership (RCO).” The eM2 has up to 480 peak horsepower. The batteries provide 325 Kwh of usable capacity, a range of up to 230 miles and can charge up to 80% (providing a range of 184 miles) in about 60 minutes. The eM2 is Freightliner’s electrified solution for local distribution, pickup and delivery, food and beverage delivery, and last-mile logistics applications. “Penske is honored to be the first company to put this new medium-duty electric truck into service,” said Hard. “I commend and thank Roger Nielsen and his team at Daimler Trucks North America for their outstanding collaboration and spirit of co-creation with us over the last nine months to bring this innovative technology to market. Penske is committed to providing the most effective vehicle technologies to our customers and driving innovation and sustainability when it comes to mobility.” As the first step in its infrastructure deployment, Penske Truck Leasing will install 20 high-power charging stations across five of its California locations starting this month. Next year, Penske will put an additional nine medium-duty electric eM2 trucks and 10 heavy-duty eCascadia electric trucks into targeted service in California and the Pacific Northwest. Penske will place the electric vehicles into service within its expansive logistics, truck leasing and truck rental fleets. Also participating in the ceremony was Judy Mitchell, a governing board member at the South Coast Air Quality Management District (SCAQMD), which focuses on improving air quality in the South Coast Basin. The Freightliner Electric Innovation Fleet is partially funded with a nearly $16 million grant from SCAQMD. The U.S. Environmental Protection Agency and the ports of Los Angeles and Long Beach also contributed to the grant. “SCAQMD is using every tool in its tool box to bring cleaner and more efficient technology to the marketplace to reduce harmful mobile and stationary source emissions to our region,” said SCAQMD Governing Board Member Judy Mitchell. “SCAQMD is proud to be a part of this innovative and ground-breaking project and we look forward to seeing some positive results from these efforts in the coming year.” Following the ceremony, the keys to the eM2 were turned over to Santa Claus to make a holiday delivery of native plant seedlings to help restore communities that continue to suffer from devastating wildfire damage. Along with the seedling delivery, DTNA and Penske Truck Leasing made a joint $50,000 donation to the TreePeople, a local non-profit organization that plants and cares for trees throughout Los Angeles County and nearby mountain forests. “Trees truly make Los Angeles livable,” said Cindy Montañez, CEO of TreePeople. “Through the generosity of Daimler Trucks North America and Penske Truck Leasing, we can create climate-resilient neighborhoods lined with trees, which produce healthy, clean air.”

Big Silverados on their way to dealers Fleet Owner / December 20, 2018 Slide Show - https://www.fleetowner.com/trucks/big-silverados-their-way-dealers/gallery?slide=1

Commercial Carrier Journal (CCJ) / December 20, 2018 Daimler Trucks North America (DTNA) on Thursday delivered the first vehicle in its Freightliner Electric Innovation Fleet – a Freightliner eM2 – to Penske Truck Leasing, fulfilling the truck maker’s commitment to put an electric commercial truck in customer hands in 2018. DTNA President and CEO Roger Nielsen handed over the eM2 key to Penske Truck Leasing President and CEO Brian Hard during an event in Carson, Calif. The two companies collaborated over nine months in the effort to bring this technology to market. The introduction of the eM2 into Penske’s fleet is also a first in DTNA’s co-creation approach with customers as it co-develops technology to shape the future of transportation. “With increased hauling demands and regulatory pressures, combined with ongoing concerns over energy resource depletion, it is more important than ever that DTNA continues to rigorously test and research electric vehicle solutions together with our customers,” Nielsen says. “Electric commercial vehicles present a real opportunity to advance the ideal of emissions-free mobility while improving our customers’ real cost of ownership (RCO).” As the first step in its infrastructure deployment, Penske Truck Leasing will install 20 high-power charging stations across five of its California locations beginning this month. Next year, Penske will put an additional nine medium-duty electric eM2 trucks and 10 heavy-duty eCascadia electric trucks into targeted service in California and the Pacific Northwest. Penske will place the electric vehicles into service within its expansive logistics, truck leasing and truck rental fleets. Also participating in the ceremony was Judy Mitchell, a governing board member at the South Coast Air Quality Management District (SCAQMD), which focuses on improving air quality in the South Coast Basin. The Freightliner Electric Innovation Fleet is partially funded with a nearly $16 million grant from SCAQMD. The U.S. Environmental Protection Agency and the ports of Los Angeles and Long Beach also contributed to the grant. “SCAQMD is using every tool in its tool box to bring cleaner and more efficient technology to the marketplace to reduce harmful mobile and stationary source emissions to our region,” says SCAQMD Governing Board Member Judy Mitchell. “SCAQMD is proud to be a part of this innovative and ground-breaking project and we look forward to seeing some positive results from these efforts in the coming year.” Following the handover ceremony, the keys to the eM2 were turned over to Santa Claus to make its first holiday delivery of native plant seedlings to help restore communities that continue to suffer from devastating wildfire damage. Along with the seedling delivery, DTNA and Penske Truck Leasing made a joint $50,000 donation to the TreePeople, a local non-profit organization that plants and cares for trees throughout Los Angeles County and nearby mountain forests. This holiday delivery brings much needed resources for cleaning the air, creating green spaces, and cooling the city. Earlier this year, DTNA formed the Freightliner Electric Vehicle Council composed of 30 customers with strong use-cases for electric trucks, including Penske Truck Leasing, to further drive its sustainable transportation program. The company is working with the council members to ensure a holistic approach to launching electric trucks. Members of the customer council benefit from co-development of deployment strategies for battery electric vehicles including applicable use cases, current legislation and requirements for facilities, charging infrastructure and service support. The Freightliner eM2 truck is an electrified solution for local distribution, pickup and delivery, food and beverage delivery, and last-mile logistics applications. The Freightliner eCascadia is a Class 8 tractor designed for local and regional distribution and drayage. Both trucks enter series production in 2021. The Freightliner eCascadia and eM2 are part of Daimler Trucks’ global electrified truck initiative, joining the company’s Thomas Built Buses all-electric Saf-T-Liner eC2 school bus, the FUSO eCanter, and the Mercedes-Benz eActros.

Bob, why does a US state have to source from an Austrian company? (however good AVL may be) Not a single American company can meet CARB's requirements? Has US Inc.'s expertise portfolio sunken that low.

MarketWatch / December 20, 2018 “I’m watching the U.S. economy implode,” says Euro Pacific Capital head Peter Schiff. “We’re in a lot of trouble,” he said. “This isn’t a bear market, we’re in a house of cards that the Fed built,” he said. Indeed, despite recent attempts to rebound, the Dow Jones Industrial Average is on track for its worst year since 2008 — down by about 3.5% — when the financial crisis brought global markets to their knees. The same goes for the S&P 500 index which would also notch its worst year in a decade, if its roughly 4% decline thus far this year hold. Schiff is a polarizing figure on Wall Street, a man that critics say has harbored a persistent and unrealized post-crisis narrative for the Fed’s monetary policy, with predictions of soaring inflation and a dollar collapse. However, the prominent investor should be worthy of investors’ attention, on the back of his prescient calls ahead of the 2008 financial crisis, which earned him plaudits as one of the few able to spot a global economic crisis emanating from the housing market. Signs of inflation in the broad economy have been elusive still, but Schiff says inflation has taken hold in the lofty prices of stocks and other assets and predicts that they will gradually shift to higher prices for consumers. Meanwhile, the most recent reading showed that the 12-month rate of inflation was flat at 2%, as measured by Federal Reserve’s preferred PCE, or personal consumption expenditures, gauge. Schiff says that this time the crisis part deux will be worse and that policy makers have essentially papered over problems and set the stage for an economy that is unable to cope with higher interest rates after a decade of easy-money policies. “Markets are starting to crack as this debt is getting more expensive to service,” he said. “We built this gigantic bubble on this unprecedented amount of cheap money and quantitative easing, and now the hangover will be much worse,” Schiff said. The Wall Street Journal’s editorial board on Tuesday made the case that the Fed needs to pause its interest rates hikes. Schiff says it won’t matter what the Fed does Wednesday (policy makers tightened as expected), with a rate increase of a quarter percentage point anticipated. “I think what’s going to happen is the Fed is ultimately going to take rates back to zero,” he said. Schiff thinks the Fed isn’t just making policy mistakes, he thinks that Powell & Co. doesn’t appreciate how fragile the economy currently is: “They don’t realize how bad the economy is just like they didn’t realize how bad it was in 2007.”

Richard Truett, Automotive News / December 19, 2018 AVL Test Systems Inc., the U.S. arm of Austria's AVL List, will provide the hardware and software test equipment for a huge emissions testing lab being constructed by the California Air Resources Board (CARB). The $368 million lab, scheduled to open in the first quarter of 2021 in Riverside, Calif., will have 18 dynamometers for chassis, engine and powertrain testing and more than 90 emissions measurement devices and systems -- along with areas for evaporative emissions testing, AVL said. The lab combines work that has been done at multiple CARB locations. CARB officials said they believe the lab will be one of the world's most advanced. Not only will engineers there test internal combustion engines used in cars and trucks, but also gasoline-electric hybrid powertrains and battery-electric vehicles. "Developing clean, efficient propulsion technology is the driving force behind everything we do," said Kyle Kimel, president of AVL Test Systems, which is headquartered in Plymouth, Michigan, west of Detroit. Although vehicles powered by gasoline and diesel engines are likely to account for much of the lab's work, testing of electrified vehicles will grow in the coming years. CARB last week mandated that the state's bus fleet must be all electric by 2040. And although electric vehicles don't emit carbon dioxide or other harmful pollutants, they must still be tested for range, battery performance and durability. CARB says the lab will have about 450 employees. .

DAF Trucks Press Release / December 18, 2018 DAF Trucks has today delivered its first fully electric truck to Dutch supermarket chain, Jumbo. The CF Electric has been developed in a joint venture between DAF and VDL, and will be used by Jumbo to supply its supermarkets in the south of the Netherlands. Jumbo CEO Frits van Eerd was handed the keys to the DAF CF Electric by DAF Trucks President Harry Wolters alongside Willem van der Leegte, President and CEO of VDL Groep. The first DAF CF Electric to enter in-service operations represents a significant milestone for DAF Trucks, VDL and Jumbo. Delivery of the fully electric DAF commercial vehicle marks the start of a series of long-term field tests using both fully electric and hybrid trucks. Electric trucks for urban areas "The transport sector is about to undergo a major transformation, " says Harry Wolters, "Electric trucks look set to become the norm for deliveries in urban areas. Not today and not next year, but definitely within the foreseeable future. I am particularly proud that today marks the beginning of a large-scale field testing project that will see DAF working in collaboration with VDL and Jumbo. This project, "he adds, "will allow us to gather useful data and experience in relation to both the technology and the operational aspects. We can then use our findings to ensure that the final series-production model provides the ideal solution to future market requirements." The next step towards sustainability "Introducing this new electric truck is the next step towards our goal of implementing a sustainable strategy for our vehicle fleet", says Frits van Eerd. "Our business puts us right at the heart of the community, and our ultimate goal is to be using electric vehicles to supply 45% of our shops. By 2020, we hope to have reduced CO2 emissions from Jumbo's vehicle fleet by 50% compared with 2008." Emission-free and low-noise Willem van der Leegte from VDL Groep explains, "It is truly wonderful to see three companies from the Brabant region come together in this way. Today's events put Jumbo, DAF and VDL at the forefront of work to develop emission-free transport and reduce noise levels. We are working on the basis that this approach will become the norm in urban areas. The DAF CF Electric featuring E-Power Technology from VDL provides transporters with the ideal solution to their needs and represents a major step forward in terms of achieving sustainability in goods transport and distribution." VDL and TNO assess potential for green charging The DAF CF Electric is capable of deliveries within a radius of about 50 kilometres with zero local emissions and with minimal noise pollution. A charging station to charge the truck has been installed at the Jumbo distribution centre in Veghel. V-Storage, a joint venture between VDL Groep and Scholt Energy Control, is working with Dutch research body, TNO, to assess the feasibility of fitting solar panels to power the charging station. The DAF CF Electric The DAF CF Electric is a 4x2 tractor unit developed for road haulage at up to 37 tonnes in urban areas, for which single-axle or dual-axle trailers are standard. The vehicle is based on the DAF CF—named ‘International Truck of the Year 2018’—and is electrically operated using VDL's E-Power Technology. The centre of this intelligent powertrain is a 210-kW electric motor powered by a lithium-ion battery pack with a current total capacity of 170 kWh. The CF Electric has a range of approximately 100 kilometres, making it suitable for high-volume transport in the urban distribution market. The battery has a 30-minute quick-charge feature and a full charge takes just 1.5 hours. DAF CF Electric — Technical specifications Tractor weight 9,700 kg Electric motor 210 kW Torque 2,000 Nm Battery capacity 170 kW Range of fully charged truck 100 km Battery quick-charge 30 minutes Full charge 1.5 hours .

Scania Group Press Release / December 19, 2018 Scania is testing a new generation autonomous transport system at Rio Tinto’s Dampier Salt operations in Western Australia. The first phase of the trial started in August 2018 and involves a Scania XT 8×4 autonomous tipper truck working separately from Dampier’s active operations. During this initial stage, a safety driver rides in the vehicle to observe the truck’s performance and, if necessary, intervenes. In subsequent phases, additional autonomous Scania trucks will be added to develop vehicle-vehicle awareness and intelligent fleet supervisory controls. Rio Tinto head of Productivity & Technical Support, Rob Atkinson said, “We’re pleased to be trialling this technology in trucks that are smaller than our traditional haul trucks. This has the potential to give us more flexibility in the way we operate in a number of areas across Rio Tinto. We have seen automation create safer and more efficient operations in our business and this is a next step in evaluating options for delivering further improvements through the use of technology.” Björn Winblad, Head of Scania Mining said, “Mining sites given their high vehicle utilisation rates are ideal for testing new autonomous technology. The industry can reap the safety and productivity benefits of automation, and the experience gained here will be instrumental in developing fully autonomous solutions for other transport applications. It is very encouraging to note that the truck has been performing in a safe manner and in accordance with expectations with regards to the operations.” Rio Tinto has pioneered the use of automation in the mining industry, with the largest fleet of driverless trucks, the world’s first fully-autonomous heavy haul, long distance rail network, and fully autonomous production drills. .

First Medium-Duty Chevy Silverado Trucks Ship to Dealers Heavy Duty Trucking (HDT) / December 19, 2018 The Chevrolet Silverado 4500HD, 5500HD, and 6500HD chassis cab trucks — the first-ever medium-duty Silverado trucks — are in production and on their way to dealerships starting Dec. 19. The trucks were first shown to the public at the 2018 NTEA Work Truck Show. “When we decided to get back into the medium-duty segment, we were determined to build the truck our customers have been asking for,” said Ed Peper, U.S. vice president, GM Fleet. “We listened to the needs of fleet managers, truck drivers, technicians and dealers to design a truck that’s easy to upfit, easy to drive, easy to service and easy to own.” The new Silverado trucks feature clean, straight frame rail design with no rivets, brackets, or welds. Additionally, the seven cab-to-axle lengths can work for a variety of upfits. Some of the strongest interest has come from the housing and highway construction, landscaping, and utility industries, according GM. .

Part number is correct. Did you call Chicago Mack? http://chicagomackinfo.tripod.com/emblems.htm

Q4 2018 Navistar International Corp Earnings Call WARRENVILLE Dec 19, 2018 (Thomson StreetEvents) -- Edited Transcript of Navistar International Corp earnings conference call or presentation Tuesday, December 18, 2018 at 2:00:00pm GMT ================================================================================ Corporate Participants ================================================================================ * Martin P. Ketelaar Navistar International Corporation - VP of IR * Michael Cancelliere Navistar International Corporation - President of Truck & Parts * Persio V. Lisboa Navistar International Corporation - Executive VP & COO * Philip J. Christman Navistar International Corporation - President of Operations * Troy A. Clarke Navistar International Corporation - Chairman, President & CEO * Walter G. Borst Navistar International Corporation - Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Abdulrahman S. Tambal JP Morgan Chase & Co, Research Division - Analyst * Brian C. Sponheimer G. Research, LLC - Research Analyst * Chirag M. Patel Jefferies LLC, Research Division - Equity Associate * Christopher G. Laserinko Wells Fargo Securities, LLC, Research Division - Associate Analyst * David Jon Leiker Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst * Emily Gretchen McLaughlin RBC Capital Markets, LLC, Research Division - Associate VP * Erika Mary Jackson UBS Investment Bank, Research Division - Equity Research Associate and Generalist * Jerry David Revich Goldman Sachs Group Inc., Research Division - VP * John Sykes Nomura Securities Co. Ltd., Research Division - Analyst * Michael James Baudendistel Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst * Robert Hudson Salmon Wolfe Research, LLC - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, ladies and gentlemen, and welcome to the Navistar's Fourth Quarter 2018 Earnings Results Conference Call. (Operator Instructions) And as a reminder, today's conference call is being recorded. And now I'd turn the conference over to Marty Ketelaar, Vice President, Investor Relations. Please go ahead. -------------------------------------------------------------------------------- Martin P. Ketelaar, Navistar International Corporation - VP of IR [2] -------------------------------------------------------------------------------- Thanks, Candace. Good morning, everyone, and thank you for joining us for Navistar's Fourth Quarter and Year-End 2018 Conference Call. Today, we'll discuss the financial performance of Navistar International Corporation for the fiscal period ended October 31, 2018. With me today are Troy Clarke, our Chairman, President and Chief Executive Officer; and Walter Borst, our Executive Vice President and Chief Financial Officer. After concluding our prepared remarks, we'll take questions from participants. In addition to Troy and Walter, joining us today, for the Q&A session, are Persio Lisboa, Executive Vice President and Chief Operating Officer; Michael Cancelliere, President of Truck and Parts; and Phil Christman, President of Operations. Before we begin, I'd like to cover a few items. A copy of this morning's press release and the presentation slides has been posted to the Investor Relations page of our website for reference. The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP equivalent and can be found in the press release that we issued this morning, as well as in the appendix of the presentation slide deck. Today's presentation includes some forward-looking statements about our expectations for future performance, and the company expressly disclaims any obligation to update these statements. Actual results could differ materially from those suggested by our comments made here. For additional information concerning factors that could cause actual results to differ materially from those included in today's presentation, please refer to our most recent SEC filings. We also refer you to the safe harbor statement and other cautionary notes disclaimer presented in today's material for more information on the subject. With that, I'll turn the call over to Troy Clarke for opening comments. Troy? -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [3] -------------------------------------------------------------------------------- Hey, thanks, Marty, and good morning, everyone. I'll provide a brief overview of the quarter and the full year. And then Walter will walk you through the financials and our 2019 guidance. And then we'll take your questions. Q4 was a great end to a very good year, thanks to the Navistar team and our dealer partners for their hard work and contributions. During the quarter, chargeouts increased by 45%. We also grew market share in every vehicle segment both sequentially and year-over-year. We paid off our October convertible notes with cash on hand, and we concluded 2018 with a strong cash balance, which will help us address the April 2019 convertible maturities as well. And thanks to steps taken earlier in the year, no other debt maturities are scheduled before 2025. For the full year, there was significant improvement on nearly every key metric. All 4 segments, Truck, Parts, Global and Financial, posted higher revenue for the year and also chargeouts, adjusted EBITDA and net income. Positive free cash flow was achieved on a full year basis for the first time since 2011. During the year, we also significantly reduced our pension and OPEB liabilities, warranty liability balance and gross used truck inventories. There is strong momentum on market share. Overall market share in core markets increased for this second consecutive year. Class 8 share, for the year, was 13.5% compared with 11.8% in 2017. And Navistar was the only truck OEM to grow Class 8 share during 2018. And with strong marketplace preference for the LT Series and the A26 engine, our Class 8 heavy market share increased by 2.5 percentage points. We also grew school bus share by 1.3 percentage points. The recently launched truck products, the vocational HV Series and medium MV Series helped grow backlogs in the medium-duty and vocational segments. Entering 2019, these backlogs are 3x as large as the year before. We are moving forward rapidly with our alliance with the TRATON Group, saving money through our procurement joint venture and pressing forward in a number of key areas of technology collaboration. These accomplishments position us well to enter 2019, and we anticipate this will be another year of significant progress. From an industry perspective, 2019 is shaping up as another very good year. Freight demand and carrier profit are both strong, and current forecasts indicate Class 8 sales will remain well above replacement demand through the year. Class 6 and 7 sales will also remain strong due to high replacement demand and growth in key economic sectors. Consumer confidence, a leading indicator of the consumer economy, has increased in each of the last few months. The ISM Manufacturing Index, a leading indicator for the trucking industry, still indicates expansion. Construction spending is forecast to grow by 4.5% next year. And small business optimism continues a 2-year string of record highs. We are calling the market at a range between 395,000 and 425,000 units Class 6 through 8 plus bus. Entering the year, our backlog is 3x higher than it was this time last year. In response to this demand, we have increased production, yet again, by adding a shift -- a second shift at the Escobedo plant. In addition to the strong market, we have taken a number of additional steps in building a new Navistar. In November, the new CV Series was launched, our reentry into the Class 4 and 5 market. In December, we entered into an arrangement to sell 70% of the defense business to Cerberus Capital Management. This transaction provides Navistar Defense with a well-established, long-term partner. Also this month, Navistar announced the creation of a new eMobility business unit led by Gary Horvat, formerly the Chief Technology Officer at Proterra, the industry's leading electric city bus supplier. The investment in this new business unit highlights the importance that Navistar places on emerging technologies and supports future, electric-powered product development. 2018 was special for another reason as well. It's the year when we no -- are no longer preoccupied with the past. We are facing forward, addressing the challenges and opportunities of 2019 and the years to come. And our improvements over the past 5 years have established a strong foundation, and we're in a position to generate superior shareholder value. Since shareholder value based on stock price appreciation is a function of future earnings and cash flow growth, no other truck OEM has a better opportunity to grow earnings and cash flow than Navistar. We have upside potential that's superior to that of the industry based on several factors. First, there's market share. We have only begun to regain the market share that we lost earlier in this decade, giving us greater upside opportunity. A large part of this opportunity comes from having the newest product lineup in the industry, which is part of an overall solution that emphasizes superior uptime and lower total cost of ownership for current and prospective customers. Navistar also has unique potential to benefit from Parts revenue growth. Our vehicle part will grow with market share gain. And its new proprietary powertrains developed with the TRATON Group provide improved parts opportunities in our trucks and buses. And our alliance with TRATON positions Navistar to make more progress in lowering material cost and growing margins. Leveraging the global scale of the procurement joint venture will allow Navistar to offset commodity and supplier cost increases. And there's also upside on pricing. With the legacy issues largely behind us, Navistar can increasingly take price to reflect improved quality in our products and services and higher value to our customers. And as free cash flow is available to pay down the company's debt load, interest expense will come down, and net income will improve substantially. Other OEMs do not have as significant an opportunity for relative improvement. So to recap, while we expect 2019 to be another strong year for Navistar and the industry, it's important to recognize that Navistar is an investment as much more than a cycle play. As our ongoing improvements indicate, the company also has strong opportunities to benefit by recapturing market share, growing Parts revenue, improving margins, generating free cash flow and further de-risking and delevering the balance sheet. We're very pleased with the gains that we made in 2018. 2019 is shaping up as another very strong year, and we have a clear road map to sustained future progress. And so with that, let me turn it over to Walter. -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thank you, Troy, good morning, everyone. In 2018, Navistar took another big step forward as it moved from turnaround to growth. During the year, the company grew annual revenue in all segments, increased Class 8 market share 1.7 points, generated significant free cash flow from manufacturing operations and strengthened the balance sheet. In 2019, Navistar looks to build on its successes with additional growth in revenues, market share and margins in its core Truck, bus and Parts businesses. This morning, I'll review the 2018 Q4 results and provide 2019 financial guidance. In the fourth quarter, revenue grew 28% year-over-year to $3.3 billion. The improvement was driven by a 45% increase in core truck and bus chargeouts. Moreover, Class 8 truck volumes grew 60%, greater than the industry growth rate of 36%. Gross margin for the quarter was 18.5%. During the quarter, the company continued to face higher freight costs and commodity prices, particularly for steel. The supplier constraints discussed on last quarter's call have eased, but due to the high order activity, stress in the supply chain remains. For the year, gross margin increased 100 basis points to 18.9%. Warranty expense, including preexisting, fell to 1.7% of revenue compared to 2.4% last Q4, as the strong quality and reliability of our new products continues to positively impact the financial results. Structural costs as a percentage of revenue declined to 9.4% this quarter versus 11% last year. Structural costs increased $25 million year-over-year, largely from higher investments in the development of next-generation powertrains and profit-sharing accruals. Net income for the quarter grew nearly 40% to $188 million or $1.89 versus $135 million or $1.36 per diluted share last year. Fourth quarter adjusted EBITDA increased 20% to $322 million versus $268 million in 2017. 2018 marks the sixth consecutive year of growth in adjusted EBITDA, on both a dollar and percentage basis. Full year adjusted EBITDA was up 42% year-over-year to $826 million or 8.1% of revenue. Turning to the segment results. In the Truck segment, chargeouts grew in all core product segments. Sales grew 41% in the quarter to $2.6 billion, reflecting higher volumes, particularly of Class 8 trucks. Truck segment profitability grew 76% to $197 million in the quarter from $112 million a year ago. The increase in profits resulted from growth in truck volumes and cost-savings initiatives, including those from the procurement JV with the TRATON Group. Navistar Defense profitability also grew substantially in the quarter. In addition to strong government sales, the defense business realized receipts of $26 million from 2 requests for equitable adjustment claims and prior government contracts. Headwinds in the quarter for the Truck segment included higher commodity and structural costs as well as the impact of supplier constraints. Parts segment quarterly revenues grew to $633 million as double-digit growth in Fleetrite branded components contributed to the continued shift in volumes to more private-label sales from proprietary and Blue Diamond Parts sales. Segment profits were flat year-over-year as the increase in revenues were offset by higher freight expenses and internal allocation of development, engineering and SG&A costs. In the Global Operations segment, revenue was $93 million, and this segment was profitable in the quarter. Brazilian operations benefited from prior restructuring actions and improved economic conditions. The Global Operations segment was profitable for the full year for the first time since 2011. The Financial Services segment grew average portfolio balances due to financing originations, with revenues increasing 11% to $70 million. Segment profit was $26 million this quarter comparable to last year as higher revenue was offset by higher borrowing costs driven by larger average loan originations and rising interest rates. Moving to the balance sheet. Navistar had another quarter with $1.36 billion in manufacturing cash. For the year, Navistar generated positive manufacturing free cash flow of $307 million and strong EBITDA results and net working capital performance from higher truck volumes that more than offset capital expenditures, interest payments, warranty payments and pension and OPEB funding. The company is in a strong cash position to weather its seasonal cash usage in fiscal Q1 and address the $411 million of convertible notes that mature in April 2019. In 2018, the company's balance sheet improved in several areas. In October, the company repaid its $200 million convertible notes issued in October 2013 with cash on hand. The underfunded status of the pension and OPEB liabilities declined by over $400 million to $2.1 billion due to cash contributions, an increase in the discount rate and favorable OPEB claim experience. This decline is on top of a $550 million reduction in 2017. The warranty liability balance fell to $529 million compared to $629 million at the end of 2017, well off its peak of $1.35 billion in 2013. And with inventory. Gross used-truck inventory fell to $154 million at fiscal year-end compared to $206 million in October 2017, representing 1/3 of its peak balance of nearly $450 million back in April of 2016. Earlier this month, the company entered into a definitive agreement with Cerberus Capital Management, under which they will acquire a 70% interest in Navistar Defense. Navistar expects to realize approximately $140 million of total value for the defense business including a 30% equity stake, cash and earnout proceeds and the transfer of certain liabilities. The deal is expected to close this month, subject to regulatory approval. Additionally, the company will benefit from a long-term exclusive supply agreement to build and supply chassis and parts to Navistar Defense. The proceeds from the transaction will further bolster Navistar's balance sheet, while better positioning the defense business for future growth opportunities. Now let's turn to 2019. The following guidance includes the fully consolidated financial impact of the Navistar Defense business. Once the transaction with Cerberus closes, the company will provide an update to its 2019 expectations to reflect its minority ownership in the defense business going forward. 2019 industry volumes are expected to, again, be strong, largely driven by Class 8 volumes. The company is increasing its expectations of Class 6 through 8 plus bus industry volumes by 10,000 units to 395,000 to 425,000 units. Navistar volumes in 2019 are expected to increase due to share growth and the ramp-up of Class 4/5 volumes. This should enable the company to grow 2019 revenues to $10.75 billion to $11.25 billion. Gross margins are expected to grow next year despite unfavorable profit mix from higher expected truck sales growth relative to parts sales growth. Pricing and material cost savings from the procurement joint venture are expected to more than offset the impact of tariffs and higher commodity prices. All in, gross margins are expected to increase to between 19% and 19.5% of revenue. In 2019, structural costs, defined as engineering and SG&A expenses together with certain periodic post-retirement benefit costs that will be reported in other income and expense going forward, are expected to range between $1.25 billion and $1.3 billion. This is expected to be higher than in 2018 as the company increases funding of ongoing engineering projects as part of the TRATON alliance; makes investments to upgrade IT infrastructure and funds sales and service growth initiatives. In total, the company expects 2019 adjusted EBITDA to be $850 million to $900 million. In summary, 2018 was a breakout year for Navistar and marks the end of the company's turnaround and the beginning of a new phase of long-term growth. In 2019, the company will continue to grow revenue, market share and margins and strengthen its balance sheet. These are very exciting times for Navistar, and as Troy mentioned, the company is well positioned to be the best truck OEM investment opportunity in the sector. With that, I'll turn it back to the operator to begin the Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question comes from David Leiker of Baird. -------------------------------------------------------------------------------- David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [2] -------------------------------------------------------------------------------- So I wanted to talk about high-class problems, what your balance sheet is, where the cash flow is. You're in a position now to essentially have some excess cash. What are your thoughts on what you do with that and what the structure of the balance sheet looks like going forward? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [3] -------------------------------------------------------------------------------- Yes, David, it's Walter. The first thing that we plan to do is to pay off the convertible notes that come due in April of next year. So that's a little over $400 million, and we're extremely well positioned to take care of that with the year-end cash balances that we have. Beyond that, we'll continue to invest in the product. We've got a number of growth initiatives, including with the TRATON Group, as we've discussed before, and that puts us in a good position to continue to invest in the business as well. -------------------------------------------------------------------------------- David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [4] -------------------------------------------------------------------------------- Okay. And then I -- a question on the margins. The Truck margin -- I guess, how much headwinds are you seeing in there right now operationally? And where do you think the upside is of that, if you got to a point of just kind of a normal manufacturing environment? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [5] -------------------------------------------------------------------------------- Yes. Well, we have seen headwinds because the hedges that we had on had rolled off. More recently, we've seen some commodity prices moving in the right direction for us so that potentially that provides some upside opportunity for us into the future. -------------------------------------------------------------------------------- David Jon Leiker, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [6] -------------------------------------------------------------------------------- And then just one last item. On the Global Operations. What's the strategy for that? I mean, we've spent all the time talking about the truck side of the business and bus and revitalizing that portfolio. We haven't really spent much time on that part of the business. What are your thoughts there? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [7] -------------------------------------------------------------------------------- Yes, I'll start and maybe some of my other colleagues want to jump in. First of all, we're back to profitability, which -- and we expect to grow profitability further in 2019 in our Global Operations, which are principally our Brazilian operations. We do -- our biggest customer there is MAN, and it's part of the TRATON Group, so we do see additional opportunities there to work together with them going forward. -------------------------------------------------------------------------------- Persio V. Lisboa, Navistar International Corporation - Executive VP & COO [8] -------------------------------------------------------------------------------- This is Persio, David. I -- just complementing what Walter said. Also there we have some new products that we are launching in the market that we will hit probably 2019. So we are continuing to invest in the business in a moderate way and make sure that we take advantage of the recovery of the local market in South America. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [9] -------------------------------------------------------------------------------- And I think what Persio is really referencing, this is Troy, is that we need to do a better job leveraging some of the technology that we have down there into other Latin American markets to include Mexico, where those products in those power ranges really give us an opportunity to gain some incremental market share and some additional margin there as well. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- And our next question comes from Chirag Patel of Jefferies. -------------------------------------------------------------------------------- Chirag M. Patel, Jefferies LLC, Research Division - Equity Associate [11] -------------------------------------------------------------------------------- Just wanted to kind of talk through a little bit about the defense side of the business. I saw in the K that there is about $534 million associated with defense sales for 2018. Just trying to get a sense for how much of the EBITDA contribution was from defense? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [12] -------------------------------------------------------------------------------- Yes. We haven't broken that out separately. But the margins for the defense business are slightly higher than the margins that we have in the Truck segment overall. So that can probably point you in the right direction. We will provide some additional information on the defense sale once it closes. So I think you'll get a better sense of what the revenues and profits for that sector looked like in '18 at that time. -------------------------------------------------------------------------------- Chirag M. Patel, Jefferies LLC, Research Division - Equity Associate [13] -------------------------------------------------------------------------------- Okay, that's fair... -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [14] -------------------------------------------------------------------------------- As we look forward to '19, we do expect those revenues to decline probably a little less than half of the numbers that you mentioned. So less than half of that $534 million as we -- we had a couple of big contracts in 2018 that rolled through our results, in particular a contract for UAE and another one in Pakistan that we've talked about previously on these calls. -------------------------------------------------------------------------------- Chirag M. Patel, Jefferies LLC, Research Division - Equity Associate [15] -------------------------------------------------------------------------------- Okay. And then, I guess, what I'm trying to also understand a little bit is just the margin profile of the Truck business x defense as we move forward. If I strip out a few of the items that were onetime in nature, one being the $70 million in the third quarter that was associated with a benefit there. And then the $26 million you just kind of called out here on the defense side that you kind of got there. I get to a Truck margin for the full year of 2018 that's closer to about 4% or so. Just want to get a sense for, one, how you think that moves as we go forward. What kind of volume expectations you need in order to see that kind of ramp a little bit to a higher degree? And if there is some cost initiatives that can be further taken here to kind of reduce that? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [16] -------------------------------------------------------------------------------- Yes. Truck margins have been increasing here with the stronger volumes and the cost initiatives that we've taken, and we expect those to improve, again, in 2019. We're surely not done on the cost initiatives side. In particular, we continue to look at product costs as we look for additional efficiencies in our material costs by working with the procurement joint venture that we have with the TRATON Group. So we continue to believe that will provide us significant opportunities into the future that will help us grow our EBITDA margins overall over the next few years. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [17] -------------------------------------------------------------------------------- This is Troy means, I mean, maybe taking a -- maybe how I look at it, building on Walter's comments, is the couple of pieces that impact, I think, Truck margins going forward, first off, is the increase in commodity costs. But if you think about increased commodity costs, what's remaining of that should be almost a onetime 2019 type of event. And then we'll continue to kind of -- we'll continue to improve material costs largely through the procurement joint venture than we have with TRATON Group and get into global -- and getting more global scale. And then the third piece of that is then, in a couple of years, the advent or the introduction of integrated powertrains, to a much higher level than this company has ever experienced before, really powering better than some of our competitors. And so you see this in a couple of steps, I think, as we walk out over the next couple of years, you'll see a steady margin build on trucks largely due to those 3 things. -------------------------------------------------------------------------------- Chirag M. Patel, Jefferies LLC, Research Division - Equity Associate [18] -------------------------------------------------------------------------------- And the TRATON piece was -- I think we had called it out in 2016, when you guys initially signed up -- combined. Was the idea that there'll be $500 million or so in potential savings with a $200 million run rate? Is there any sort of dollar amount that we can associate with the amount that you've already kind of achieved? And some sort of a level of cadence that we can imply? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [19] -------------------------------------------------------------------------------- Yes. So those estimates that we had provided back then are still relevant over time. We had indicated $500 million accumulative savings with a $200 million run rate in the fifth year. For the first couple of years, we're on track or slightly better than what we had anticipated going into the JV a couple of years ago. And that -- you see that reflected in our results. I also want to come back to a comment you made earlier about the $70 million adjustment that we had in -- back in Q3. That does run through the Truck segment, but it doesn't run through the gross margins, which you tend to see on the face of our presentation deck here. -------------------------------------------------------------------------------- Chirag M. Patel, Jefferies LLC, Research Division - Equity Associate [20] -------------------------------------------------------------------------------- Right. So that'll just be on the (inaudible). -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [21] -------------------------------------------------------------------------------- (inaudible). Other income. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- And our next question comes from Ann Duignan of JP Morgan. -------------------------------------------------------------------------------- Abdulrahman S. Tambal, JP Morgan Chase & Co, Research Division - Analyst [23] -------------------------------------------------------------------------------- This is Abdul Tambal on behalf of Ann. Just a quick question regarding the Cummins engine representation from your engine shipment in Q4. I notice it's up around 580 bps year-over-year. I'm just wondering if you can kind of explain what drove this increase. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [24] -------------------------------------------------------------------------------- Yes. Michael, do you want to go head and touch that real quick? -------------------------------------------------------------------------------- Michael Cancelliere, Navistar International Corporation - President of Truck & Parts [25] -------------------------------------------------------------------------------- Yes, thank you. So this is a production mix question. And, really, it's driven by 2 things. Primarily, we had Navistar offering our N9/N10, at the same period in our vocational products, last year, which we don't have this year. That was the primary driver. And then also it's a bit of a customer mix depending upon the customer fleet mix and their engine preference during that period of time. It could swing numbers one way or the other. I really wouldn't overreact to that theory, the 90-day period. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [26] -------------------------------------------------------------------------------- Yes. And so just in summary, we had our own 9,10 engine. We've replaced that with the Cummins ISL. So it's 100% Cummins ISL in that particular segment right now. And then Michael's comment, a handful of these large fleets that we've conquested or re-conquested, one fleet takes X15s, really starts to skew the numbers just in terms of volume. I think kind of an under-told story here is the gains we continue to make with the A26. I think that the A26 is -- we've indicated in the past, every A26 we sell is incremental market share, and that's what we've seen. It really doesn't attract from selling X15s as much as it's back into a segment in its own right, that's in that 12- and 13-liter segment. And we continue to make significant gains in both the number of A26s we sell, but in addition to that, the satisfaction and the feedback we're getting from our customers on how much they like the product. So couldn't leave that particular question without also commenting what a great job the A26 is doing for us in the market. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- And our next question comes from Christopher Laserinko of Wells Fargo Securities. -------------------------------------------------------------------------------- Christopher G. Laserinko, Wells Fargo Securities, LLC, Research Division - Associate Analyst [28] -------------------------------------------------------------------------------- I'm on for Andy Casey this morning. Just to kind of continue in that vein. I knew that NAV is the only OEM to gain market share for the year. But any idea what that stickiness looks like going forward once supply chain constraints start to loosen up around the industry? -------------------------------------------------------------------------------- Michael Cancelliere, Navistar International Corporation - President of Truck & Parts [29] -------------------------------------------------------------------------------- Yes, this is Michael. So -- yes, we look at our order board and the share gains we've made in 2018 and the customer preference of our products. What's important to customers is fuel economy, weight, uptime, driver preference. And that really speaks well for our LT and A26. Our order board is up significantly, and we really moved into a phase where customers went, from about a year ago or so, to trying the product to experience it firsthand to now really enjoying the performance and benefits they get. Keep in mind one of the biggest challenges the industry has is drivers. So it's important for fleets to buy a product that their drivers like, as an attraction and a recruitment retaining tool. In fact, I just got a call yesterday from a fleet with over -- he's got over 1,000 trucks and recently purchased as many of our trucks and just to quote him -- he referenced that he had a couple of veteran drivers call him and said, "Boy, these trucks are phenomenal." The LT with the A26 are the quietest trucks they've ever driven. And that he felt very positive about the impact that would have on the business. So in summary, we're optimistic about continued share gains in that segment. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [30] -------------------------------------------------------------------------------- Yes, let me -- it's Troy. Let me just put it another way. I had Michael go back and look at some numbers. This is really only the third time in the history of the company that we have gained 2 percentage points or more in the heavy segment. And I would tell you it's the first time the company has ever done it, and they did it profitably. The previous 2 times, the company did not do it profitably for a handful of reasons. And the irony of the whole situation -- and I think you were actually pushing on this, Christopher, is if it wasn't for the supplier constraints that we ran into in the Q3, it would have been higher than 2 points of -- 2.5 points of market share gain in the heavy segment. It would have been in addition to that. So it would have been the highest single-year gain that this company has ever had. We can only read -- and again, with this anecdotal information that Michael says, which is one of dozens of comments that we get, we can only read that we really have a product that has the ability to get real traction in the market. And we're very excited about what 2019 portends for us in that regard. -------------------------------------------------------------------------------- Christopher G. Laserinko, Wells Fargo Securities, LLC, Research Division - Associate Analyst [31] -------------------------------------------------------------------------------- Okay. I wonder if I could ask a couple kind of housekeeping questions and then get back to the market share. The housekeeping questions I have: Any guidance that you're willing to provide for 2019 manufacturing cash balance? And the second one is, you're exiting this year with 30% incrementals give or take. Is it reasonable to expect that level of incremental going forward? Also anything that you're willing to share in terms of decrementals if volumes start to decrease? And then on the market share side. If you do start to see those industry downturns, is there anything to prevent market share leakage, like you've had, in the past, downturns, and really kind of cement those gains, other than kind of the understanding of new product launches, the reception of the A26, et cetera? -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [32] -------------------------------------------------------------------------------- Yes, well, -- so let me hit the last one head on. I mean, there's kind of the -- there's the quantity of backlog, and there's the quality of the backlog. And certainly, in light of the fact that this is an important subject for all of you and, I think, an important subject for the industry, I would say over the last 6 to 8 weeks, we've spent a lot more time really understanding the nature of our backlog to ensure that, number one, it's not being overstated in any way; but number two, how can we reflect to you the confidence that we have. Our cancellation rates are relatively low compared to the industry. And the fact of the matter is we can tie a name to over 85% of our backlog. And this isn't just John Doe, these are names of the -- some of the largest and most important customers in the trucking industry that we've worked hard to create a different kind of relationship with. So we have 2 things. One, we have a lot of confidence in the backlog, and we don't believe that we face massive cancellations, which could be one cause for market share erosion as you've noted. And then I think the second thing is that given the fact that the majority of the market share came from large customers, it is not impossible, as a matter of fact it is highly probable, that in any market softening, our market share would nominally strengthen, given the larger customer profile that our backlog is constructed of at this particular point in time. So that's just a comment on that. I'm looking to Michael. He's nodding his head. So I think I'm portraying it accurately. Let me pass over the incrementals to Walter. -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [33] -------------------------------------------------------------------------------- Yes, let me start with the cash first, which is, we provided manufacturing cash guidance during the turnaround. That was appropriate at that time. With $1.36 billion of cash at year-end, this is not, I think, the most relevant metric going forward. So we've provided a fair amount of additional guidance that you'll see in the presentation deck. But we're starting to pay down debt with our cash, and we'll continue to make sure that we retain enough cash to run the business and make the investments in the future. On incrementals, just kind of stick with the comments that we made earlier, which is that we do expect our truck margins to grow again in 2019. In my prepared remarks, I mentioned that we expect price increases plus additional cost savings we'll get out from the procurement JV to more than offset the commodity headwinds and some of the other cost that we're seeing in the market right now. So I'm not going to comment on specific incrementals other than to say that both in the Truck and in the Parts segments, we expect margins to continue to be higher in '19. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- And our next question comes from Brian Sponheimer of Gabelli. -------------------------------------------------------------------------------- Brian C. Sponheimer, G. Research, LLC - Research Analyst [35] -------------------------------------------------------------------------------- Just a question on the defense business. It's a nice little business for you and so clearly there are some trade-offs with you selling it. I'm just curious whether this business was a hurdle in any way to increase collaboration with TRATON, either through engineering, through tech development or even through increased ownership by them above the 20% hurdle. -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [36] -------------------------------------------------------------------------------- Yes, Brian, I mean the reason we did the transaction is we've had a very good run in defense. You see that in our 2018 results. We're really kind of at a point now where incremental investments need to be made in the defense business, and we've chosen to work together with Cerberus in that regard. And we think that portends to a very good future for NAV defense over time. But we'll split those investments with them and have additional cash that we'll take out of the transaction to put towards our core operations going forward. So we'll continue to participate in the upside of defense with a 30% interest. We continue to have a exclusive supply arrangement to that entity, and we're partnered up with, we think an excellent partner going forward. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- (Operator Instructions) And our next question comes from Mike Baudendistel of Stifel. -------------------------------------------------------------------------------- Michael James Baudendistel, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [38] -------------------------------------------------------------------------------- Just wanted to ask you about this Slide 14, the U.S. and dealer stock inventory and that seems to be creeping up. And I just wanted to get some context of how much of that is the Class 8 versus the medium-duty and just any other sort of context. Is that some of the newer product that dealers are stocking? Or just sort of any other context there. -------------------------------------------------------------------------------- Michael Cancelliere, Navistar International Corporation - President of Truck & Parts [39] -------------------------------------------------------------------------------- Yes -- this is Michael. So really the dealer inventory is just growing at levels that we consider more normalized levels. Throughout the year, the strength in the market demand has caused the inventory -- dealer inventories to dramatically decline. And what we've been doing throughout the year due to the challenges we had earlier in the year on supply constraints, we were prioritizing customer deliveries over dealer stock units. So they're now returning to normalized levels, as we work through the backlog, dealers are excited about our new product line. They are selling to more conquest customers than ever before, not only number of units but number of customers. And they're moving out their old inventory and stocking up with the new product. It's -- they recognize how important it is to have inventory on the ground. They look forward to a positive 2019. And you can't sell what you don't have. So they're comfortable with those inventory levels. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [40] -------------------------------------------------------------------------------- Yes. I think the inventory levels that we're looking at, as Michael indicated, we had to short the dealers almost for a period of time to make sure we were delivering to customers who had ordered units rather than putting the units on the lot. To your point, a lot of the medium-duty stuff and some of the vocational stuff do go through dealers and so you see a very nice mix of products on their lots, not exclusively those. They do also have heavy and other Class 8 products. And you know, we're kind of looking to keep them in a range. And they're looking to keep in a range of 60 days of inventory, given the current sales rates, and that's kind of the ballpark that we're in. -------------------------------------------------------------------------------- Persio V. Lisboa, Navistar International Corporation - Executive VP & COO [41] -------------------------------------------------------------------------------- Yes. And Troy if I may add. The other important think of the quality of the inventory the dealers is that we completed a transition for the new products. So now, the inventory that is on the ground is off new -- all the new models, the new MV, the new HV with A26, all the launches that we completed in the second half of last -- of this year. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [42] -------------------------------------------------------------------------------- Yes. So it's pretty good -- so it's a pretty good -- quite frankly, we're very pleased with where that inventory is right now. And I think the dealers are as well. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- And our next question comes from Erika Jackson of UBS. -------------------------------------------------------------------------------- Erika Mary Jackson, UBS Investment Bank, Research Division - Equity Research Associate and Generalist [44] -------------------------------------------------------------------------------- I was just wondering if you can touch just a little bit on the supplier constraints that you called out in Q4. I know it's a strong industry, and it's mostly (inaudible) that. But I guess, just specifically wondering, if you are able to clear all the shipments that were missed in Q3 that I think you expected to push into Q4? And I guess to what extent you expect supplier constraints continue in 2019? -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [45] -------------------------------------------------------------------------------- Yes. What happened was as we and the rest of the industry ramped up their volumes much, much earlier in the year. We, as well as our contemporaries in the industry, ran into a handful of supply issues from just a handful of suppliers. We worked very hard with those to eliminate these bottlenecks. Some of which were very structural in terms of tooling capacity and things like that. By and large, as we entered the fourth quarter those issues were resolved. Given though that the market is up, the supply chain is really just pulled very, very tight right now. And what would be traditional levels of buffers between suppliers and ourselves, they're just not there. And so any type of disruption, we had a couple of hurricanes, for instance tend, to put stress on supply chain. What that does now, we're in a mode, it's not so much that we'll lose units, it's that we have to incur premium freight so that we can expedite parts to keep the line running. So we're not in a position today where we lose units as such. We've added a second shift to one of our lines in Escobedo. Where we really are is, we are in a position where the cost, because of force majeure, so to speak, or acts of nature can be a little higher than we planned. But those costs continue to improve as the -- I think as the supply chain continues to stabilize. The holiday period would be a great time, to be very honest, for some of our suppliers to refill those buffers and make sure that the, not just ourselves, but the balance in the industry is more normal when we go forward. Phil? -------------------------------------------------------------------------------- Philip J. Christman, Navistar International Corporation - President of Operations [46] -------------------------------------------------------------------------------- No. I think that you covered exactly right. Look, we're confident in the strength of order board and supplier capacity, put on additional shift in Mexico, and we're excited to build more units for our customers. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [47] -------------------------------------------------------------------------------- Great. -------------------------------------------------------------------------------- Erika Mary Jackson, UBS Investment Bank, Research Division - Equity Research Associate and Generalist [48] -------------------------------------------------------------------------------- Got it. And then also just wondering if you have any expectations that you can share for the Class 4/5 product. Have you given any like market share targets or how that -- you expect that to ramp up over this year? -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [49] -------------------------------------------------------------------------------- Yes. Well, you know we just introduced it in November, and it's a great product. The more I'm around it, the more I like it. And of course, I guess, I'm kind of biased. But we had a launch event where we -- I'm going to turn it over to Michael he'll give you the specific of it. But a tremendous enthusiasm around this product. It's a -- I think it's going to do very well. -------------------------------------------------------------------------------- Michael Cancelliere, Navistar International Corporation - President of Truck & Parts [50] -------------------------------------------------------------------------------- Yes. Troy, exactly right. The launch event customers -- the product was extremely well received. What they like is that there is finally a product offering by a true commercial truck manufacturer, one that that understands the business and knows how to build a robust product, give the customer flexibility and have the dealer network to support that product. So the receptivity has been really terrific by customers. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [51] -------------------------------------------------------------------------------- Yes. We have about 300 customers there. And quite frankly, I think, we split the production with General Motors. We won't go into the details on those numbers right yet, because not fully aware of what General Motor's order profiles are. But I think we're quickly approaching that we'll be kind of, I don't want to say sold out, but we're quickly subscribing the portion of the volume that we have allocated to ourselves. We find it's a very unique product, right? I mean, it's got a 23,500 GVW, and I think a normal Class 4/5 truck in that particular segment might be a 19,500 GVW. So it definitely has some additional capability that lets it play up. And this, by the way, is a growing segment. So we haven't participated here for a while. We're really excited to get into it. And I think we're going to surprise ourselves with how well we can do. But we'll have to learn a little bit because it's a different set of customers in some cases, but we're pretty pleased. -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [52] -------------------------------------------------------------------------------- Yes. Maybe Troy, if I can just add. Because this is a new product and kind of a reentry of a segment for us. But the Class 4/5 segment is about 85,000 units, and the part of it that we'll compete in is about half of that amount. So that's 40,000 to 45,000 units there that we can go after our fair share of. So just to kind of size the opportunity, I think, both GM and Navistar have put their pricing out. It's a little over $40,000 a unit, I think, is where the MSRPs are, $40,000 to $45,000. So that'll help you gauge this a little bit. And then for us, it's 2 things. It's one, it's the sales of our units, which our customers are relishing to, to get into their hands is -- was mentioned here. But then secondly, it's also assembling those vehicles for GM under our contract manufacturing arrangement, which will help then some of the fixed cost in our manufacturing facilities, in particular, in Springfield. -------------------------------------------------------------------------------- Operator [53] -------------------------------------------------------------------------------- And our next question comes from Seth Weber of RBC Capital Markets. -------------------------------------------------------------------------------- Emily Gretchen McLaughlin, RBC Capital Markets, LLC, Research Division - Associate VP [54] -------------------------------------------------------------------------------- This is Emily McLaughlin on for Seth. On the 1% share improvement embedded in the 2019 outlook, do you expect improvement across all core products or is there more of a pickup expected in certain vehicle classes? -------------------------------------------------------------------------------- Michael Cancelliere, Navistar International Corporation - President of Truck & Parts [55] -------------------------------------------------------------------------------- Yes. Emily, this is Michael. So it would be a combination of all the vehicle classes. Again, we have the industry's newest product line and customer receptivity has been terrific throughout the product. In fact, in November, while the industry shrunk 20% on heavy orders, our orders were up 102% year-over-year. So, yes. And on the medium side as well, we're seeing a -- we recently launched the MV Series, and our order share was up over 3 points on year-over-year basis. In fact, our chargeouts were in excess of the industry growth last year. However, we weren't able to get them all through due to delays in supply chain as well as backup at body companies. But since we've launched the MV Series, the industry's largest buyers have responded well to. And of course, a lot of customers were waiting for it because they wanted to make sure that they have the latest product and models, particularly, in the leasing industry where resale value is important. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [56] -------------------------------------------------------------------------------- So we have a backlog that basically supports increased market share, we think, across all of our product line up. It will be a little choppy because of the fact that some of this stuff has to go through bodies -- through body manufactures, and it'll take longer for them to get registered. So the right thing to look at is basically our chargeouts and kind of year-over-year improvements in chargeouts. -------------------------------------------------------------------------------- Emily Gretchen McLaughlin, RBC Capital Markets, LLC, Research Division - Associate VP [57] -------------------------------------------------------------------------------- Okay, that make sense. And then just a follow-up. Do you have any thoughts on the spike in industry of Class 8 cancellations in recent month and new orders? Are you hearing anything from dealers in terms of the quality of new orders? -------------------------------------------------------------------------------- Michael Cancelliere, Navistar International Corporation - President of Truck & Parts [58] -------------------------------------------------------------------------------- Yes. So -- I think as we stated earlier, we believe our backlog is firm. The majority of our orders are sold. They're for -- they're by customers, we've, in many cases, done business with before, and we're confident that they'll take the product. Our dealers don't put trucks on order unless they've got firm orders from customers on it. As well as our dealers' stock orders, we believe are firm as well. We hadn't create an environment where we're asking dealers to put orders in for a 12-month period or so, they pretty much put orders in on a short-term basis. They're very bullish about the business as well as their customers are optimistic about 2019, and the need to have new fuel-efficient trucks that drivers like, that gives them -- that impacts their bottom line, helps them make -- become more profitable. So dealers want to have trucks to sell and customers are looking to buy trucks, particularly, with the safety equipment on it to protect the driver and attract drivers as well. So we don't see -- we're not overly concerned about cancellations on our order board. -------------------------------------------------------------------------------- Operator [59] -------------------------------------------------------------------------------- And our next question comes from Rob Salmon of Wolfe Research. -------------------------------------------------------------------------------- Robert Hudson Salmon, Wolfe Research, LLC - Research Analyst [60] -------------------------------------------------------------------------------- A quick follow up with regard to the long-term supply agreement you guys signed alongside the Navistar Defense kind of partial sale. How should we be thinking about the revenue impact of this agreement? And if pieces of the business are shifting from Truck into the Parts businesses as we look forward once it's completed? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [61] -------------------------------------------------------------------------------- Yes. So, I think what you'll see, and again, we'll provide some additional details around this after the transaction closes. But I think, you'll see 2 pieces, one, as I mentioned earlier in the call, defense revenues will be down in '19 versus '18, given the outsized year that we had in in 2018. And then secondly, once we go down to a 30% stake, we won't be reporting the revenues from NAV defense, we'll just be reporting our equity interest there. But we will continue to have the MilCOTS sales to the venture and that will run through our numbers, but that's a fraction of the $534 million of revenue that you saw in '19. -------------------------------------------------------------------------------- Robert Hudson Salmon, Wolfe Research, LLC - Research Analyst [62] -------------------------------------------------------------------------------- Right. And then Walter, just as a kind of follow-up to that. I'm assuming you guys are going to add back the 30% to the adjusted EBITDA number from the minority interest. Am I thinking about that right or will that be excluded from the EBITDA, prospectively? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [63] -------------------------------------------------------------------------------- No. The 30% of the future earnings will be in the adjusted EBITDA number, will be included, yes. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- And our next question comes from John Sykes of Nomura. -------------------------------------------------------------------------------- John Sykes, Nomura Securities Co. Ltd., Research Division - Analyst [65] -------------------------------------------------------------------------------- One question I had was, what's the contribution that Class 6 and 7 make to revenues in EBITDA? Do you guys disclose that? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [66] -------------------------------------------------------------------------------- I don't think we've broken that out separately. But you can, I think, you can get a good sense of what our volumes are in the back of the K. -------------------------------------------------------------------------------- John Sykes, Nomura Securities Co. Ltd., Research Division - Analyst [67] -------------------------------------------------------------------------------- Okay. The next one is electrification. When do you really see that becoming a meaningful part of the business? -------------------------------------------------------------------------------- Persio V. Lisboa, Navistar International Corporation - Executive VP & COO [68] -------------------------------------------------------------------------------- Well, John, I don't know if you saw but today we just announced that we are creating a new mobility business unit I think Troy alluded that on his remarks. We -- that is a reality right now for us. We've been working the technology for now some time. Actually, Navistar was one of the first commercial vehicle companies to introduce our eStar back in 2010. So we have a lot of experience in the field and one of the things that we decided to do right now is really to expand our reach in the business more -- beyond the technology. We are really -- we are needing to get into the what we call this procurement experience for eMobility, which is really about the specs that the customers will help specing vehicles, will help developing vehicles, will help actually with financing of vehicles and now more available brands. The idea is that we will work on infrastructure and service network to support those vehicles, that's what this business unit is about. And to lead that business unit, we just brought to the company today, now one of the most reputable executives in the market, Gary Horvat. He was the CTO for Proterra, and he really now kind of joining the team right now. So more to come. So that's the reality for us is one of our priorities for the future. -------------------------------------------------------------------------------- John Sykes, Nomura Securities Co. Ltd., Research Division - Analyst [69] -------------------------------------------------------------------------------- So what is the -- so the game plan is to sort of start with this eMobility business, get kind of an infrastructure type of business in place? And -- I mean, I'm assuming like the product itself, so it's easy for you guys to make an EV truck, right? -------------------------------------------------------------------------------- Persio V. Lisboa, Navistar International Corporation - Executive VP & COO [70] -------------------------------------------------------------------------------- Well, I think it starts with the product but no, really. I think the fact that we have the largest dealer network available in the market. And the fact that we are in contact with customers that also want to buy diesel products today. So we are really focusing on enabling the electrification in the segment beyond the product, I would say. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [71] -------------------------------------------------------------------------------- I mean, I think, what we -- here's how we're looking at it. It really starts with the customer, right? So we're going to go out -- we -- so we have customers -- we know customers who -- they have an interest in the technology, and we believe the technology will work for them in such a way as to be manageable and/or improving their TCO at some particular point in time. And so those are the customers that we really have to kind of lean toward -- forward in our solutions. And we've indicated previously that the place where we think this most makes sense are school buses, okay, which (inaudible) and medium-duty trucks because in both cases the charging infrastructure is less significant than it is with, so to speak, an on-highway tractor. We've said previously, we'll have trucks on the road next year, and we'll have trucks in customers' hands the year after. But what Persio really referenced is, look, there's a lot of cycles of learning here, right? I mean, this is a field that you can spend a lot of money and there could be a lot of upset customers when -- they decide, "Wow, the electrical vehicle that I just spent a lot of money for really doesn't satisfy my needs." Quite frankly, we're looking to have very successful experiences for us and our customers, and we think our approach will lead us in that direction. Again, as Persio, indicated, we've been working on this stuff since much earlier in the decade. So we have some pretty developed thoughts. -------------------------------------------------------------------------------- John Sykes, Nomura Securities Co. Ltd., Research Division - Analyst [72] -------------------------------------------------------------------------------- Yes, I mean -- I guess, the kind of genesis of my question is, suppose regulations change in certain states, right? I mean, start saying you can't bring a diesel truck into the city limits, it's got to be EV at that point. So then that -- can you guys -- are you guys ready if that happens to, boom, we have a product? -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [73] -------------------------------------------------------------------------------- That's our goal. I mean, you know, that's our goal. I mean, the strategic flexibility, right? That's what -- we don't see that exact circumstance today. But if we're nothing here with Navistar, we are ready with alternatives. -------------------------------------------------------------------------------- John Sykes, Nomura Securities Co. Ltd., Research Division - Analyst [74] -------------------------------------------------------------------------------- Okay. Now that's -- And then I guess lastly, it sounds like 2019 is going to be a decent year, right? And I know, we don't want to look too far forward. But how do you sort of -- I mean, you're doing a good job with the balance sheet. So you're taking out kind of a lot of volatility in the balance sheet. But how do you really take out volatility in the business just given it's a cyclical business that -- like the parts business is never going to be enough, I don't think, to compensate for the Class 8 business, for example. So how do you really smooth that out and make it less cyclical over time? -------------------------------------------------------------------------------- Michael Cancelliere, Navistar International Corporation - President of Truck & Parts [75] -------------------------------------------------------------------------------- Yes. Well, first of all, 2019 is going to be a great year, okay? So not a good year, it's going to be another great year, and we're going to have to share -- yes, I think, you did. We're planning to put up better results as you see in our guidance. We've got the newest product lineup in the business. We've got a lot of market share that we can still grow. And so, I mean, if you look to the future, we're doing a couple of things and these are not new things. But really, we see upside on revenue growth, and then we see the ability to further improve our margins by reducing our cost, taking advantage of the alliance. Both the global scale that the alliance brings as well as the integrated powertrains that we'll be introducing into our product. So our goal as a management team continues to be profitable at all points of the cycle. And continue this positive free cash flow that we experienced here in '18 and will continue into '19 and the future so that we can continue to improve even further on those balance sheet actions that you've referenced. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [76] -------------------------------------------------------------------------------- I mean, we think it's pretty straightforward. And we think we're very compelling, something other than a cycle play, because we've already done so much to improve our margins, okay? And we have more opportunity, again, through 2 strategies, primarily, one, is global scale through the procurement joint venture, and the second, is getting into the integrated powertrain. And then ultimately, the parts revenues that basically comes -- that basically come out of that. And then we have this tremendous opportunity for upside market share. When you look at our historical market share and the success that we're having in the market today. So we control revenue against that, okay? That -- and then that spins off cash that lets us put the balance sheet in order. And when you look at that and you say, "Wow, those are the 3 things that are really important, not the cycle." Okay? Because of the fact that we have this ability to function in a profitable range at all points of the cycle. That's the way I would tell the story, obviously. -------------------------------------------------------------------------------- John Sykes, Nomura Securities Co. Ltd., Research Division - Analyst [77] -------------------------------------------------------------------------------- Okay. Yes, I mean, it seems like 4 through 7, that never seems to be that overly cyclical versus Class 8, right? So... -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [78] -------------------------------------------------------------------------------- Yes. That's true. And we have big footprint in that 6 and 7 space. Now we have the opportunity to increase that footprint. All right, we probably should move on to the next question. But thank you, John, for your interest. -------------------------------------------------------------------------------- Operator [79] -------------------------------------------------------------------------------- And our next question comes from Jerry Revich of Goldman Sachs. -------------------------------------------------------------------------------- Jerry David Revich, Goldman Sachs Group Inc., Research Division - VP [80] -------------------------------------------------------------------------------- Walter, I'm wondering if you could just spend a little bit more time stepping through the moving pieces around the EBITDA guidance, based on the top line guidance, it looks like you're only guiding for 7% incremental margin, but earlier in the call, you folks talked about price -- cost is positive and so can you just step us through any headwinds through incremental margins in '19 or are you folks just giving yourselves room to execute? Any pieces that you want to flush out, better headwinds that we're maybe missing? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [81] -------------------------------------------------------------------------------- Sure. So let's just go through the pieces again. We expect gross margins to be higher in '19. We indicated 19% to 19.5%, so that's up about 0.5 point from what we saw in '18 and it's the things that you mentioned, pricing, we expect to be favorable. We expect to realize further benefits from our procurement activities, including from the JV and that will help offset some of the headwinds that we're seeing in commodity prices and freight cost. Commodity prices were to come down, as we're starting to see them decline a little bit, then that could be a positive comps. The EBITDA margins are flat, I think, this is what we've kind of guided to at the midpoint year-over-year, because we are making some investments in our future, in particular, in future product engineering investments. So we've mentioned, previously, in our calls that while our engineering spend will be more efficient going forward as part of the alliance with the TRATON Group, that doesn't necessarily mean that they will be lower going forward as we invest in these integrated powertrains, which will then drive our results in the future. So the initial guidance is relatively flat on EBITDA margins, but that's going to set us up for the success, in the future, in the few years out, we still want to be getting our EBITDA margins up to 10%. -------------------------------------------------------------------------------- Jerry David Revich, Goldman Sachs Group Inc., Research Division - VP [82] -------------------------------------------------------------------------------- Okay. And then in terms of -- I know it's not the base case, but if the market were to turn negative exiting '19, I think, typically for OEMs, we see mid-teens type decremental margins throwing out and you folks obviously have a lot of irons in the fire, in terms of what you folks are working on. What would you expect your decremental margins to look like compared to the mid-teens that we typically see once the cycle moves the other way. And I appreciate that's not your base case in '19, but would love to understand how are you thinking about the dynamic whenever the cycle does turn? -------------------------------------------------------------------------------- Walter G. Borst, Navistar International Corporation - Executive VP & CFO [83] -------------------------------------------------------------------------------- Yes. That's probably a little bit too much specificity today, maybe that's a good question for a analyst meeting or something sometime. But I think the key drivers for us, Jerry, will continue to be what we referenced a couple of times on the call. We're bullish on our ability to grow revenues. And we're bullish on our ability to continue to reduce our costs, in particular, on the -- through the procurement JV that we have. So that will help weather any downturn as well. In fact, in a downturn that you're alluding to, we probably wouldn't have some of the headwinds that we currently have on commodity prices, for example. So that wouldn't be replicated in a subsequent year after '19 as we see it as a headwind here in the current fiscal year. So our focus is going to be on those 2 things, growing our revenues, even in the down market, we should be able to grow market share and continue with our cost initiatives. And that should allow us to be profitable at all points of the cycle. -------------------------------------------------------------------------------- Operator [84] -------------------------------------------------------------------------------- And that concludes our question-and-answer session for today. I'd like to turn the conference back over to Mr. Troy Clarke for closing remarks. -------------------------------------------------------------------------------- Troy A. Clarke, Navistar International Corporation - Chairman, President & CEO [85] -------------------------------------------------------------------------------- Okay. Hey, thanks to everyone. Look, I apologize, I have a little head cold. So if it was a difficult to hear me earlier in the call, I apologize for that. Look, we have been talking to some of you, several of you, every quarter for the last 6 years. And quite frankly, we appreciate your interest and your understanding of the issues and steps that we've taken on our journey. And questions you've asked are certainly welcome and insightful. And in many ways has helped us become a better company, and we appreciate that. And I certainly hope that my nasally voice doesn't mute the enthusiasm that I have personally for not only the progress that this company has made but the progress that we can make starting with 2019. 2019 is going to be, as Walter indicated in one of the final questions there, a great year for the industry and a tremendous year for us to make additional progress. And we're very enthused about it, and again we appreciate your understanding of our industry. Want to wish all of you a happy and joyful holiday season. Look forward to talking you at least in March and as Walter indicated, maybe we'll look for an opportunity to have another communication event that we can manage somehow during the course of the year. -------------------------------------------------------------------------------- Operator [86] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.

MarketWatch / December 19, 2018 Treasury Secretary Steven Mnuchin has weighed and measured the recent destruction that put the Dow Jones Industrial Average on track for its worst December since 1931, and he appears to have drawn his own conclusions as to the impetus. Mnuchin during a Tuesday interview with Bloomberg News in Washington said that the effect of the financial-crisis-era Volcker rule and high-frequency trading have combined to sap liquidity in the market and insert an unprecedented measure of volatility in assets. The Volcker rule refers to the controversial standards put in place to prohibit banks from trading for their own accounts, in the wake of the 2007-09 financial crisis, while high-frequency trading refers to super-powered computers engineered to execute transactions at lightning-quick speeds, which has become arguably the dominant force in the market over the years since its advent. Fed Gov. Lael Brainard in a speech earlier this month said computer-driven trading in the Treasury market may also be fueling erratic swings, sometimes referred to as flash crashes. Brainard, in contrast to President Donald Trump’s Treasury secretary, said the post-crisis banking laws have not contributed to liquidity problems.

Scania Group Press Release / December 18, 2018 For Scania, it’s always about the details. Even when it comes to Swedish Christmas traditions. That is why we asked one of our skilled engineers craft a new generation Scania truck out of gingerbread. Watch it happen at our research and development lab. .

Jim Park, Today's Trucking / December 11, 2018 TORONTO, Ont. — All the power in the world won’t get you anywhere if your transmission can’t manage it properly. Startability and gradeability are the two key factors in powertrain spec’ing, which means getting the power to the wheels safely — without wrecking the driveline — and having several ratios to keep the truck moving while climbing. In applications where the grades aren’t too severe, 10- and 12-speed transmissions can work even with the heaviest legal loads. When you start pulling 7, 8 and 9% grades with more than 62,500 kg in tow, you simply need more gears. In bygone days, this was the realm of the 5×4 and 6×4 duplex transmission. These were necessary before we had 2,050 lb-ft engines and 18-speed high/low splitter transmissions. The main gearbox had large steps between the gears, and the auxiliary transmission provided the incremental steps between the main gears. The modern 18-speed transmission, manual or automated, offers closer steps between the gears as well as high and low range shifts and a direct and overdrive split in each gear. The result is a transmission with fewer ratios overall — with more even steps between the gears — but much easier to operate. We can get by with fewer gears today thanks to the way engines have evolved, specifically when it comes to changes in their torque curves. Prior to 2000, most engines had distinct peaks to their torque curves, which limited peak torque to a pretty narrow range, sometimes less than 100 rpm. To allow the engine to operate at peak output, we needed lots of gears to keep the engine speed at or close to peak output. Gradually those curves flattened out and torque output increased so trucks could stay in certain gears longer. Today’s torque curves are more like plateaus — flat and broad, often extending through a range of 400 or 500 rpm and sitting way down low in the rpm range. Rather than downshifting through two or three gears when climbing a grade to stay at or close to peak torque, we now need only one or two gears. In Canada, the preferred multi-speed transmission for heavy haulers seems to the Eaton 18 speed. But of you want a high-horsepower engine, you’ll need to go with either Detroit’s DD16 or the Cummins X15 performance variant. For those engines, you’ll need something from Eaton. For years Pierre Aubin, owner of L’Express du Midi, Delson Transport, and Transport Audet of Ste-Catharine, Que., has been spec’ing Eaton 18-speeds behind his 600-hp Cummins engines. Between the three companies, he runs more than 100 B-trains and four-axle flatbeds with payloads of 41,000 and 38,000 kg, respectively. They’re all operating in northern Quebec and on that province’s notorious Cote du Nord, between Sainte-Anne-de-Beaupré and Sept-Isles. “That’s no place for an under-spec’d truck, let me tell you,” Aubin says. “You need all the gears and the close ratios on those roads. They are nothing like American highways. When you get to the top of that first hill, you’re looking into the eyes of God.” Most of his 18-speeds are manuals, by the way. He has a few UltraShift Plus automated 18’s and few automated transmissions in his straight-truck tanker fleet. “I do not see the value in spending an additional $8,000 for a less-reliable transmission,” he says. “Those automated transmissions are a pleasure to drive, I’ll admit that, but when they break down they leave you with no options but to call a tow truck.” In contrast, many other Canadian B-train fleets claim they are doing just fine with automated manuals. Winnipeg-based Paul’s Hauling is primarily a fuel hauler using B-train tankers. The company operates throughout Ontario and the four western provinces as well as on the winter roads around Thompson in northern Manitoba and Pickle Lake in northern Ontario. The company’s powertrain spec’ might seem surprising. The newer trucks in the fleet are all 13-litre engines at 1,850 lb-ft and 500 or 505 hp. The transmission spec’ includes Eaton UltraShift Plus and Mack mDrive, and the most recent delivery from Freightliner included the DT12 transmission. “The latest bunch of Cascadias we ordered from Freightliner were equipped with the DT12,” says Trent Siemens, director of maintenance at Paul’s Hauling. “We had been testing a few for about a year and Freightliner was watching them closely. They have now approved the transmission for our application with the DD13 engine at 505/1,850.” Daimler’s current brochure shows the maximum gross vehicle weight for the DT12 is 130,000 lb. (58,500 kg), so this application suggests it’s capable of even more with engineering approval. “We do not tell the OEMs specifically what we want. They give us what they feel is best for the application given our weight and terrain and the rest of our operating conditions,” Siemens says. The fleet also took recent delivery a few Peterbilts with Paccar MX13 engines at 510/1,850 and Eaton UltraShift automated 18-speeds. Later this year they will take delivery of some Mack Anthems with similarly spec’d MP8 engines and the new 13-speed mDrive HD transmissions. While smaller-displacement engines and proprietary “on-highway” transmissions keep turning up in fairly demanding applications, don’t count on seeing many of them in really heavy haul applications like the fleets that haul overweight loads with specialized equipment. For that crowd, it’s Eaton’s RT-series 18-speed manual transmissions or the Ultrashift Plus MXP automated 18-speed — or even a two-stick 5×4 or 6×4 setup. With 100-ton loads, the need for gears and tons of torque and horsepower are pretty obvious. While much of the on-road driving portion of those trips might be done with a lesser setup, it’s often the last few miles of a trip that dictate the spec’, says Rod Olyowsky, operations manager of Regina-based heavy-hauler Cara Dawn Transport. “More than half or our revenue comes from loads weighing 100,000 lb. or more,” he says. “We haul all over North America, but the most challenging jobs see us hauling into mine sites in southeastern British Columbia. They usually aren’t located a few miles from a freeway off ramp. They are often at the top of a 10- or 20-mile long 9% grade.” Cara Dawn runs mostly tri-drive tractors in the west with 600-hp/2,050 lb-ft engines mated to 18-speed transmissions, “We still have a few duplex 5×4 transmissions as well,” says Olyowsky. “Sometimes even those are barely enough.” Many of the older drivers who work in that sector are leery of the automated manual transmissions, but the UltraShifts are making their way into the business. “There’s a big difference between 140,000-lb. GVW and 280,000 to 300,000-lb. GVW on a 9% grade,” says Olyowsky. “The drivers prefer to be in control of what the equipment is doing.” Of course, a lot of drivers said that about 80,000-lb. GVW trucks when the Eaton’s AutoShift first emerged 20 years ago. It’s taken some time, but now many of those drivers won’t leave the yard with anything but an automated transmission. More options than ever Canadian fleets that operate six-and seven-axle combinations now have transmission and engine choices they may not have considered in the past. Transmission choices for really heavy applications are still quite limited, but the mid-weight market between 47,000 and 57,000 kg is now opening up to the 12-speed offerings. Gross weight may be less of a factor than it previously was, but the terrain you operate on will still be the determining factor for your transmission spec’. Along with the traditional 18-speed offerings from Eaton, we now see Volvo’s I-Shift and Mack’s mDrive HD providing additional ratios for heavy haul and severe service. These offer up to 14 forward gears with astonishingly low creeper ratios for specialty applications like pouring curbs and sidewalks by concrete mixers. They are also more than capable of handling some high-GVW on-highway applications if not 100,000-kg loads of mining equipment on the side of a mountain. Transmissions don’t care which engine is producing the torque, so with ratings mostly exceeding 2,050 lb-ft, most of the 12-speed transmissions can now handle big power. Neither Volvo or Mack offer an engine producing more than 1,860 lb-ft, so there’s obviously some redundancy in those transmissions. Daimler’s DT12 is also rated for 2,050 lb-ft, and it’s allowed in applications up to 130,000 lb. (58,500 kg) with a dual-plate clutch and approval from engineering. Here are a few choices worth considering. Allison TC10 Speeds: 10 forward / 2 reverse Torque rating: 1,850 lb-ft Gear Ratios Overdrive: 7.40 – 0.86 Dry weight: 1,074 lb. / 487 kg Detroit DT12 Speeds: 12 forward / 4 reverse Torque Rating: 2,050 lb-ft Gear Ratios Direct Drive: 14.93 – 1 Overdrive: 11.67 – 0.78 Dry Weight 518 – 639 lb. / 233 – 287 kg Eaton UltraShift Plus MXP (Multipurpose Extreme Performance) Speeds: 18 forward / 4 reverse Gear Ratios A-ratio: 16.70 – 0.73 B-ratio: 19.73 – 0.73 Torque rating: 1,650 – 2,250 lb-ft Dry weight: 978 lb. / 444 kg Eaton RT-18 Manual Speeds: 18 forward / 4 reverse Gear Ratios B-ratio: 14.4 – 0.73 Torque rating: 2,250 lb-ft Dry weight: 716 lb. / 324 kg Mack mDrive HD Speeds: 12, 13, 14 forward / 2 reverse Torque rating: 2,060 lb-ft Gear Ratios Direct Drive: 19.38 – 1 Overdrive: 17.58 – 0.78 Dry weight: 687 lb. / 312 kg Mack Maxitorque ES manual Speeds: 18 forward / 3 reverse Torque rating: 2,100 lb.-ft. Gear ratios: 16.42 – 0.71 Dry weight: 798 lb. / 359 kg Volvo I-Shift Speeds: 12, 13, 14 forward / 2-6 reverse Gear ratios: 11.73 – 0.78 Torque Rating: 2,300 lb-ft Dry weight: 720 / 324 kg

Navistar's Clarke Calls 2018 a 'Breakout Year' in Financial Results Heavy Duty Trucking (HDT) / December 18, 2018 Navistar International announced its fourth quarter 2018 financial results, reporting a net income of $188 million, up $53 million from the same quarter last year. For the whole fiscal year, Navistar reported a net income of $340 million, way up from just $30 million in net income for fiscal year 2017. Fourth quarter adjusted EBITDA increased 20% to $322 million, compared to $268 million one year ago. Fiscal year 2018 adjusted EBITDA saw a 42% increase to $826 million from $582 million in 2017. Full-year adjusted EBITDA margins increased to 8.1% up from 6.8% for 2017. This marks the sixth consecutive year of annual growth in adjusted EBITDA on both a dollar and percentage basis for the company. "2018 was a very strong year for the industry, and a breakout year for Navistar," said Troy Clarke, chairman, president and CEO. "We were the only truck OEM to grow Class 8 share during the year. With the industry's newest product lineup, superior quality, and a strong focus on customer uptime, we expect to gain market share in 2019 for the third year in a row." Revenues in the quarter increased 28%, to $3.3 billion, compared to fourth quarter 2017. The revenue increase was largely driven by a 45% increase in the company's "Core" volumes, which represent its sales of Class 6-8 trucks and buses in the United States and Canada. For the Class 8 retail market alone, Navistar’s share grew to 13.5% in fiscal year 2018 versus 11.8% in fiscal year 2017. For 2019, Navistar provided industry and financial guidance. The company expects retail deliveries of Class 6-8 trucks and buses in North America to be 295,000 to 425,000 units, with Class 8 truck deliveries making up 265,000 to 295,000 units. Revenues are expected to be between $10.75 billion and $11.25 billion and adjusted EBITDA is expected to be between $850 million and $900 million. "While we expect 2019 to be another strong year for Navistar and the industry, it's important to recognize that Navistar as an investment is much more than just a cycle play," said Clarke. "As our ongoing improvements demonstrate, the company also has strong opportunities to benefit by recapturing market share, growing parts revenue, improving margins, generating free cash flow and further de-risking the balance sheet." .

Reuters / December 18, 2018 Navistar International Corp reported a better-than-expected quarterly profit and raised its truck delivery forecast for 2019 on Tuesday, sending its shares up about 20 percent. The company has gained traction from a robust U.S. economy and is seeing strong freight demand drive sales of its high-margin, heavy trucks that haul goods across the country. The company's shares rose as much as 19.5 percent to $28.50 in morning trade, their biggest percentage gain in two years. Navistar said it plans to deliver more of its long-haul Class 8 trucks - used by the rigs that transport freight across America's highways - next year, as hauliers rush to replace older vehicles with more fuel-efficient ones. Production for these trucks is expected to rise 5 percent to 335,000 units in 2019, according to ACT Research, the industry body tracking the commercial vehicle market. Lisle, Illinois-based Navistar said it now expects to deliver between 265,000 and 295,000 of its Class 8 vehicles in 2019, from the 255,000 units to 285,000 units range it forecast earlier. The company said 2019 is shaping up as another very good year. "Class 8 sales remain well above replacement demand ... and volumes grew 60 percent, well above the industry growth rate of 36 percent," Navistar Chief Executive Officer Troy Clarke said on a post-earnings call. Navistar said volumes next year would get a boost from its recent launches in the Class 4 and Class 5 category. It expects to deliver between 395,000 and 425,000 units of Class 6-8 vehicles in 2019, from an earlier 385,000 units to 415,000 units range. The company also raised its 2019 EBITDA guidance to between $850 million and $900 million, from an earlier forecast of $775 million to $825 million. Revenue in the truck business, Navistar's biggest, rose 75.8 percent to $197 million in the fourth quarter ended Oct. 31. The company expects its 2019 revenue to be between $10.75 billion and $11.25 billion. Net income attributable to the company rose 39 percent to $188 million. Earnings per share rose to $1.89 from $1.36 per share, beating analysts' average expectation of $1.71. Navistar's revenue rose to $3.32 billion from $2.6 billion, also beating estimates.