Navistar wins U.S. defense contract

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WARRENVILLE, Ill. – Navistar International Corporation has won a contract from the U.S. Army Tank-Automotive and Armaments Command (TACOM).

According to company officials, the contract, which has a potential value of US$467 million, is to provide vehicles needed by the Afghanistan National Army to conduct operations in support of rebuilding and providing stability in Afghanistan.

The first order from the new three-year contract totals US$61.8 million for 374 vehicles as part of a US$311.5 million fixed price contract. Overall, the contract calls for International Truck and Engine Corporation to supply up to a total of 2,781 vehicles, including 2,400 general transport trucks and 381 specialty vehicles, such as dump, water, recovery and hazardous material trucks. In addition, International will supply all required spare parts necessary to support two years of scheduled maintenance.

Daniel C. Ustian, Navistar chairman, president and chief executive officer, said the new military contract affords the company the opportunity to achieve planned incremental growth without incurring new investment expenses because the trucks will be built utilizing existing 7000 series platforms. Truck cabs will be produced at the company’s Springfield, Oh. plant with final assembly taking place at the company’s plant in Garland, Tex. In-line mid-range duty diesel engines will be produced at the company’s engine assembly plant in Melrose Park, Ill.

“This new contract represents another major step forward in the program we announced to leverage existing truck, parts and engine platforms to sell products and services to the U.S. military,” Ustian said. “Our comprehensive product offerings, including quality, high volume manufacturing efficiencies, training, after-sale services and global distribution offers to the military options that the competition does not. Our discipline in commercial vehicle design, development and scale gives us a competitive edge.”

According to Ustian, revenues and income from the first phase of the new contract will have a minimal impact on 2005 and the company reaffirmed its guidance for 2005 of revenues between $11 billion to $11.3 billion with earnings in the range of $4.60 to $5.00 per diluted common share.

Archie Massicotte, president, International Military and Government, LLC, a wholly-owned subsidiary of the company established to focus on military and government opportunities, said that International already has nine additional contracts with the U.S. government for more than 1,000 units that are expected to generate approximately $100 million in revenues. These contracts encompass severe service trucks and buses that will be used in the Iraq reconstruction effort.

The company has also been selected to compete for a contract to repower the military HMMWV (“Humvee”) and currently has bids out for other U.S. and foreign government military contracts.

International has also been awarded a contract for the modeling simulation phase of the army’s future tactical truck system (FTTS) – advance concept technology demonstration (ALTD). This program will assess key technologies and emerging future army sustainment concepts. Additionally, the company has been awarded a contract to deliver armored personnel carriers to the Israel Ministry of Defense. Navistar International Corporation is the parent company of International Truck and Engine Corporation.

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