Navistar reasserts commitment to Cummins engines

[kscarbel2]

Fleet Owner  /  September 8, 2016

Truck maker touts market share gains, new products over Q3 loss of $34 million

Navistar International Corp. management on Thursday emphasized the focus on gaining market share with its current truck and engine lineup (and the soon-to-be revealed Project Horizon), deflecting questions about future powertrain products following the recently announced alliance with Volkswagen Truck & Bus. Still, the company currently has “no plans to displace Cummins” as an engine supplier, Navistar President and CEO Troy Clarke said.

Earlier this week, Clarke had suggested that a Volkswagen-based powertrain could be available by 2019, an “illustrative” timeframe that’s “not tomorrow, but not well into next decade"—and that sparked speculation that Cummins would be on the way out as a third-party engine supplier.

“We have no plans to displace Cummins engines between now and the 2019 date that, quite frankly, I wish we hadn’t said because there’s not as much substance behind that as a lot of people seem to consider,” Clarke said, in response to numerous questions from investment analysts during Navistar’s third-quarter earnings conference call. “Cummins is an important partner for us and they’re helping us create outstanding vehicles that are getting a lot of traction in the market. We’re including their product in all of the new product launches that will take place over the next 18 months.”

Cummins engines are currently in more than 80% of the company’s vehicles and ultimately, he added, the customer will continue to make the decision on powertrain options.

“We think we are the most customer-centric truck company, and let’s just live by that for a while,” Clarke said.

Otherwise, he restated his earlier position that the Volkswagen alliance is in a very early phase, and only now that the deal has been announced can the two companies begin “to work together to figure out what we’re going to do when.”

More immediately, Clarke pointed to the Project Horizon launch later this month as a critical part of International Truck’s ongoing effort to reclaim market share.

“When we put a lot of energy and effort into a major redesign of our product, we have a lot of goals in mind,” Clarke said, naming improved quality, fuel efficiency, uptime, and operating cost. “And I think our trucks are more than pretty good today. We’re in launch—some of these products are coming off the line as we speak.”

Questioned about reports of industry-wide price cutting in a down market, Bill Kozek, president of Truck & Parts, downplayed any significant impact.

“Obviously, we’ve got a lot of capacity out there—Class 8 specifically. Everybody is getting more aggressive on their pricing,” Kozek said. “That’s just the way the industry is, but it’s nothing out of the ordinary and I’m not seeing any of our competitors doing anything that hurts the entire industry.”

As for the earnings report, Navistar lost $34 million in the third quarter, worse than Wall Street had expected, as truck sales fell 24%. But Clarke emphasized improved cost savings and a lower break-even point, along with an increasing share of new orders—even as industry-wide truck sales slide.

“This quarter's results show that we continue to make progress in the face of tougher market conditions, particularly in the heavy segment," said Clarke. “We are confident that as the industry works through its near term challenges, particularly in Class 8, our improvements in order share will translate to improved retail share as well.”