Smaller-than-expected 1Q loss for Navistar

Navistar International Corporation, the nation's largest combined commercial truck, school bus and mid-range diesel engine producer, today reported a smaller-than-expected first-quarter loss, raised its fiscal 2004 industry sales forecast and increased its profitability target for the full year.

The company said the net loss for the quarter ended January 31, 2004, totaled $23 million, or ($0.34) per diluted common share, compared with a loss of $99 million, or ($1.49) per diluted common share in the first quarter a year ago. Navistar had given guidance of a first quarter loss of between ($0.40) and ($0.50) per diluted common share while the mean estimate of 10 security analysts was for a first quarter loss of ($0.44) per diluted common share.

"Even after adjusting for the first-quarter volume increase, operating income exceeded our expectations," said Daniel C. Ustian, Navistar chairman, president and chief executive officer.

Consolidated sales and revenues from the company's manufacturing and financial services operations for the first quarter totaled $1.9 billion, compared with $1.6 billion in the first quarter of 2003.

Ustian said first-quarter results reflect volume improvements spurred by strengthening industry demand coupled with the company's on-going cost reduction and quality improvement programs and the benefits of its focused facility manufacturing strategy.

Manufacturing gross margin, boosted by an improving performance from truck operations, more than doubled to 12 percent from the 5.3 percent reported in the first quarter a year ago.

"We expect to be solidly profitable for the year through on-going execution of our operating plan, continued realization of variable and fixed cost reductions and quality improvements," Ustian said.

The company is increasing its forecast for total industry sales from the forecast it made last December.

The company now projects total truck industry retail sales volume for Class 6-8 and school buses in the United States and Canada for fiscal 2004 at 328,500 units, up from the previous forecast of 304,500 units and 25 percent above the 263,400 industry retail sales in fiscal 2003.

Heavy truck sales are expected to increase to 208,000 units from the previous forecast of 191,000 units, while sales of Class 6-7 medium trucks are estimated to increase to 93,000 units from the previous forecast of 86,000 units. Forecasted school bus volume is unchanged at 27,500 units.

Ustian also announced that the board of directors has approved the company's overall heavy truck strategy, which calls for a capital investment of $150 million for the introduction of a new line-haul Class 8 truck. Capital for the program is included in the company's previously announced average $250 million to $300 million per year capital investment program over the industry cycle.

"This is one of the first notable steps in our goal to reach $15 billion in sales and revenues," Ustian said. "We expect this product to be as revolutionary as our new 7000 and 8000 models have been and to make clear our intention to be the product leader."

According to Ustian, the new line-haul truck will leverage International's existing high performance vehicle technology used in the company's bus, medium, severe service and regional-haul Class 8 trucks, each of which is the leader in the market in which it competes. The new truck is scheduled to be introduced in the 2007/2008 timeframe.

"The long-haul Class 8 market is critical to our business and to our dealer network, which provides International an industry-leading distribution system," Ustian said. "Cost improvements that already have been delivered, additional cost reduction opportunities associated with the new line-haul project and the Chatham heavy truck agreements have contributed to a set of product economics that will meet our required rate of return of 15 percent ROA over the next business cycle."

Ustian also noted that the company's plans are rapidly moving ahead to leverage existing medium truck and parts platforms as well as International's family of diesel engines, particularly the new 4.5-liter V-6 diesel engine being used to compete for military contracts.

In conjunction with the U.S. Army National Automotive Center, the company will unveil two prototype concept vehicles built on International medium truck platforms March 8 at the World Conference of the Society of Automotive Engineers in Detroit.

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