Navistar International Corp. reported growing losses as it struggles to deal with a sluggish market for heavy-duty trucks.
The Lisle, Ill., truck manufacturer said Tuesday that it lost $62 million in the first quarter, almost double the $33 million it lost in the same period a year earlier. Revenue dipped 6 percent to $1.6 billion for Navistar’s first fiscal quarter ended Jan. 31.
The results trailed the expectations of investment analysts, according to Thomson Reuters
“Our results are on track with our plan for the year, and demonstrate our ability to effectively manage costs at a time of persistent Class 8 industry headwinds,” said Troy Clarke, Navistar’s chairman and chief executive.
He said the truck company’s order book is growing faster than its current market share, “which confirms our confidence in the retail share improvement to come.”
The market for trucks in the heaviest Class 8 weight segment is starting to turn around.
North American orders for Class 8 trucks rose 28 percent to 22,900 vehicles in February compared with the same month a year earlier, according to FTR Transportation Intelligence. February’s order level was 5 percent above January.
Orders have increased for four consecutive months prompting analysts to raise their production estimates for 2017. Last week Stifel Financial Corp. raised its 2017 production estimate from 200,000 vehicles to 215,000. That level of production would about match the 216,000 truck sales the industry logged last year but is still well behind the 278,000 Class 8 truck sales of 2015.
Navistar also is looking to gain from a rapid introduction of new models, which will “position us to take advantage of the anticipated Class 8 rebound in the second half,” Clarke said.
In the first quarter, Navistar began delivery of its new International LT Series Class 8, long-haul truck. The truck maker has booked more than 5,000 orders for the LT and shipped 2,500 units, Clarke said.
Last week the company unveiled its International A26 engine, which it hopes will drive sales in the 13-liter engine segment. Clarke said Navistar plans to continue to introduce new products every four to six months through the end of 2018, refreshing its entire line. It also will reenter the smaller Class 4 and 5 truck segment in a venture with General Motors.
The company also is booking business outside of its core truck lines. Navistar's defense unit recently won two foreign military contracts worth a combined $475 million from the U.S. Army Contracting Command, Clarke said. It will produce MaxxPro mine Resistant Ambush Protected vehicles, or MRAPs, for Pakistan, and it will upgrade and provide support for MRAPs for the United Arab Emirates.
All these initiatives should improve the company's outlook, Michael Baudendistel, a Stifel analyst, said in a report to investors.
“We believe Navistar’s market share has bottomed,” Baudendistel said.
Navistar had a 10 percent share of the market for Class 8 trucks in the first quarter but he expects the new products will help the company grow, but at a slow pace.
“We believe the new LT series (a significant improvement, in our opinion, from its predecessor, the ProStar) is the most important piece in that recovery. We also believe the just-released A26 engine (the company’s re-entry into the 13-liter engine market) may be just as important as the new tractor, as roughly 50 percent of the market now uses 13-liter engines,” Baudendistel wrote.
Another factor behind a Navistar recovery is the start last week of a strategic alliance with Volkswagen Truck & Bus, which should generate synergies and cost savings, he said.
The German automaker invested $256 million in Navistar and gained two seats on its board directors. Volkswagen now owns 16.6 percent of Navistar. The two companies have launched a procurement joint venture and a strategic technology and supply collaboration, both of which are already up and running.
“Now that the transaction has closed, we can start collaborating with Volkswagen Truck & Bus to increase our global scale, strengthen our competitiveness, and provide our customers with expanded access to cutting-edge products, technology and services,” Clarke said. “This marks an exciting new chapter in Navistar's history, and another step in our journey to becoming a stronger, more profitable company.”