Navistar CEO promises improved product quality, increased market share
May 23, 2013
LISLE, Ill. -- In a meeting with trade press journalists this evening, Troy Clarke, head of Navistar International, spoke candidly about the company’s recent challenges and the reasons he thinks it has turned the corner.
LISLE, Ill. — In a meeting with trade press journalists this evening, Troy Clarke, head of Navistar International, spoke candidly about the company’s recent challenges and the reasons he thinks it has turned the corner.
“We don’t have any false pretensions as to where we might be,” he admitted. “Our (Class 8) market share is low right now; it’s neighbouring at 14.5% and it was about 18% last year and higher than that the year before. Truthfully, it’s been tough selling products this year. People know we’re making this change (to SCR), they know we’ve been working through some quality issues and they have had every reason to stand on the sidelines and say ‘We’re going to wait and see how Navistar has done.’ But now we’re back in the market, we have products to sell, we believe we’ve addressed any number of our quality issues and the products we’re building today are far better than anyone has seen from Navistar since prior to 2010 and maybe even prior to that.”
Clarke, who has steered Navistar through its difficult restructuring – shedding non-core businesses and refocusing on product quality – said he’s optimistic about where the company now stands.
“I believe we’ve got a shot at demonstrating we can begin to gain market share by the end of this fiscal year,” he said, without giving a specific target. “We will go up.”
Clarke noted he took the helm at Navistar in the midst of a “perfect storm.” The North American truck market started 2012 strong, but saw sales decline in each subsequent quarter. The wars in Iraq and Afghanistan were wound down, reducing the need for MRAP military vehicles produced by Navistar’s lucrative defense division.
“That was an important part of our business. Especially with the recession that started in 2008 in the trucking industry, (the military business) did a lot to buoy our results,” Clarke said.
Exacerbating the situation, “We had some higher than expected warranty costs,” Clarke admitted. “Most of those warranty costs were associated with the big bore engine we had introduced just before 2009 and we really had a significant number in the field at that particular point,” he said.
At that time, Clarke recalled, “it appeared problems were showing up at our door as fast as you could put name tags on them.”
Still, the company enacted a bold restructuring plan that would see it through the turmoil.
“We began systematically making changes,” Clarke explained. “We decided to embark upon using SCR as opposed to EGR and began our path to put Cummins’ SCR system on our 13-litre engines. We needed to do it on a very aggressive timeframe.”
The ISX15 was rolled out in the International ProStar ahead of schedule last December, and the MaxxForce 13 with SCR was also deployed just ahead of Navistar’s self-imposed deadline in April.
Meanwhile, Navistar was eliminating projects that weren’t core to its business (ie. the Mahindra joint venture in India and its RV and electric truck businesses) while other projects, including development of its own natural gas engines, were put “on pause.”
Clarke said the company has cut its costs by more than $200 million.
It is now offering the popular International ProStar with the Cummins ISX15 and the MaxxForce 13L with SCR – an engine it remains bullish about.
“We have been able to dial down the EGR and rely upon SCR to clean up the exhaust and we have found the engine is far more responsive,” Clarke said.
The company feels very positive about its revamped product line, and for good reason. It’s quick to point out the International ProStar and Cummins ISX engine were once a formidable combination that enjoyed industry-leading market share. Still, Clarke is quick to add that customers will ultimately determine whether Navistar has returned to its former glory.
“We’re dedicating ourselves to things like quality; not how we define it, but how our customers define it,” he said.
Clarke’s tone may have been absent the bravado of his Navistar predecessors, but it certainly wasn’t lacking confidence. He noted the MaxxForce 13 with SCR has accumulated more than a million miles of testing. Over the past 10 months, the company has racked up more than 4.5 million miles in testing on its vehicles; more than in the two previous years combined.
“I think that is one indicator of how we look at our business differently (than before),” he said, adding that it surpassed its own field testing targets because the trucks were more reliable than expected right out of the gate.
Clarke’s confidence is based on the faith he has in the Navistar team and also the conversations he’s had with customers. He said he spends Mondays and Fridays in the office, and the rest of the week meeting face-to-face with customers. So far, he has met with about 250 customers, and has even closed deals for about 1,000 trucks himself.
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