You sank my Navistar

Jason Cannon March 13, 2013

Imagine turning a battleship around.

The thing is as long as 10 football fields. It weights how many thousand tons?

The momentum alone makes the simple task of turning 180 degrees more than jerking the wheel.

The battleship in this case is Navistar, and the turnaround is a financial one.

And the turnaround is no less a Herculean effort.

The fact the company posted a $114 million loss in the first quarter of this year and still beat expectations tells you a lot about the doldrums from whence they came.

Navistar’s challenge is fairly simple: turn all the red ink on the balance sheet to black.

Easier said than done during an economic meltdown on the heels of waning consumer confidence in your product.

But Navistar has set its table for success.

When your core business is facing challenges to the hilt, ancillary businesses become more distractions than hobbies. As such, Navistar is punting them.

Earlier this year, the company sold its Mahindra stake and this month unloaded its Workhorse Custom Chassis and Monaco RV brands – two non-core businesses that were underperforming in their own rights.

Navistar EBITDA improved year-over-year by $163 million, primarily driven by better performance at the operating segments. That’s some healthy return. There’s still a ways to go, but it’s clear the company has a path to get there.

The man behind the wheel, Troy Clarke, is hardly in foreign territory.

Clarke helped steer General Motors through bankruptcy before joining Navistar in 2009.

If there was a fall more public and documented than Navistar, it was General Motors.

While Navistar’s Q1 numbers are nothing flashy – they’re still red – they do reflect a marked improvement from the year before. Simply put: the plan is working.

Warranty claims are down, clearly indicating quality is on the rise (thank you, Cummins) and orders for the company’s 15 liter engine are close to 3,500 units.

The company’s 13 liter entry is likely no more than two months from hitting market and early indications are the horsepower and fuel economy package it offers will be well received in the marketplace.

It took more than a year for Navistar to find itself in this position and it will take more than a year to dig itself out.

However, I think in the not so distant future, one of the industry’s giant battleships will be once again facing the right direction, knowing its turnaround was built on meeting market demands with improved products and winning back consumer confidence.

Jason Cannon is Online Managing Editor of Successful Dealer. He can be reached via email at jasoncannon@randallreilly.com. Follow him on twitter at @By_Jason_Cannon.

Jason Cannon is Online Managing Editor for Truck Parts & Service.

You can follow me on twitter at @By_Jason_Cannon

  • dieselralph@yahoo.com

    The 15L you mention is not “their” engine. They ended their 15L debacle. It is a Cummins 15L engine they are buying. The reason warranty costs are down is because they sold a lot less engines after the early engines left such a bad taste in the customers mouth. Those early engines are going to have huge costs, all their lives. Once they launch their SCR product it will have its share of start-up warranty costs too. Cummins has its problems with its own engines, like all OEMs, you better believe they will have start-up issues supplying aftertreatmenet to Navistar engines. I think you will need 5 years to recover half the share they lost. Ustian was not the only disaster causing agent at Navistar. There were hundreds of yes men that didn’t speak up. They still work there. The management culture is devoid of a backbone. Until they purge their ranks of all the lemmings in managment, they may follow each other off another cliff. Stay tuned for the medium-duty engine disaster on the horizon. Losing Ford was the first step. school bus share is the next canary in the mine, and its not looking healthy.

  • http://twitter.com/By_Jason_Cannon Jason Cannon

    Thanks for the feedback. All good points. Although I do reference Cummins in the post. You raise a good point on medium-duty and the loss of Ford.