International Trucks In Serious Come-Back Mode

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Today's Trucking / June 5, 2015

Despite still dealing with financial problems, the truck and engine manufacturer Navistar International Corp. is rapidly gaining market share in the North American medium-duty market.

That was one of several nuggets the company discussed in a conference call with analysts on Thursday.

According to Troy Clark, president and CEO, Navistar’s medium duty market share increased six percentage points in its fiscal second quarter over the first quarter to 27%.

“In fact one of our major leasing customers recently shared some data with us that shows that DuraStar chassis and ISB engine combination delivers the best fuel economy and lowest cost of ownership across their entire fleet,” he said. “Our leasing and rental customers are increasingly happy with our performance. Our share is growing with these very important buyers. Notably we've also seen a significant increase in dealer wide sales. That's key to our success in the medium-duty segment.”

Growth for Navistar, compared to a year ago, is also happening in the heavy-duty truck market arena with dealer led sales up 36% year-over year, which has also resulted in the company taking in more used trucks.

“We expect that we'll continue to manage our higher than normal used truck inventory over the next few years. That said, our used truck team continues to create opportunities to address the issue,” Clark said. “One way is through our Diamond Renewed program that provides a new truck experience to used truck buyer. Diamond Renewed sales are growing and were up 150% [in the second fiscal quarter compared to the first quarter.]”

He noted in addition to this, its dealers are increasing their activities in used trucks.

“We've also been successful finding some new markets for these vehicles globally. Its just a fact the faster we sell or turn our used truck inventory more used trucks we can take unlocking more market share and we're encouraged by our progress,” Clark said.

According to Navistar, it held US$375 million in gross used truck inventory at the end of the second quarter, US$10 million more than in the previous quarter, though its used truck sales increased 26% during the comparable time periods. It expects this level of used trucks held in inventory to go higher, peaking next year.

Despite this better news, Navistar still is in the red, reporting a net loss of $US64 million, but that’s down considerably from US$297 a year earlier, while revenue fell slightly to just below US$2.7 million.

In releasing these figures before the conference call, in a statement Clark said the results reflect continued progress in and positive momentum in the North American industry

“Revenues from the truck segment grew 4% compared to a year ago,” said Walter Borst, executive vice president and chief financial officer, during the conference call “The growth was primarily driven by a 14% increase in our core truck markets which included a 1,700 unit increase in chargeouts. Upsetting the growth in the core markets were lower sales in our export and Mexico businesses.”

He said the results of Navistar’s truck segment profit improved by US$78 million compared to last year.

“Contributing to this improvement were higher truck sales in North America, lower warranty expenses and cost reduction,” Borst said. “These improvements were partially offset by losses from our used truck operations.”

Also helping improve Navistar’s numbers, according to Borst, is the quality of new products has improved significantly along with warranty expense, the latter of had been much higher due to a high number of warranty claims by customers.

“For the second quarter of 2015 warrant expense excluding preexisting adjustments as a percentage of manufacturing revenue was 2.9% compared to 3.1% in 2014,” he said. “The decrease reflects quality improvements and more recent model years and continued efforts to reduce overall repair costs.”