Seeking both to meet customer demand and to buy time for further engineering, Navistar International Corp. is making available another Cummins diesel engine equipped with an SCR (selective catalytic reduction) emissions-aftertreatment system.
The medium-duty truck and bus models getting this Cummins engine will continue to be offered as well with the manufacturer’s own MaxxForce engines, which continues to use EGR (exhaust-gas recirculation) aftertreatment.
Specifically, Navistar is adding the mid-range Cummins ISB 6.7L engine with SCR as an option on its International DuraStar truck and IC Bus CE Series school-bus models.
“We’re not exiting the engine business,” Bill Kozek, Navistar’s president-- North America Truck & Parts, emphasized to journalists during a phone conference late yesterday. “The addition of SCR [on the ISB] gives us more time for [implementing a] transition plan for our own medium-duty engines [to using SCR].”
The upshot is that until Navistar’s medium-duty MaxxForce engines are engineered with SCR, they will be available as EGR-equipped engines, which the OEM can legally sell via banked “emissions credits” it holds.
Suggesting what the timing might be for medium-duty SCR on Navistar’s engines, Kozek replied to a reporter’s question that “We have sufficient medium-duty credits [to last] at least through next year.”
He added that engine sales are “not just about the credits, but giving our customers the choice they want—and the ISB lets us get to market now [in medium-duty] with an SCR engine.”
Kozek stated in another reply that an announcement about offering the Cummins ISB in the Navistar WorkStar medium-duty truck as well would come “at a later date.”
He also advised during the call that Navistar is “looking at the natural-gas market [for medium-duty] and, obviously, we are keeping a close watch on it and will be in it if the demand is there.”
As for the DuraStar and the IC Bus CE Series powered by the Cummins ISB, they will be Navistar’s first medium-duty vehicles with engines fitted with SCR emissions aftertreatment.
Kozek said that orders are now being taken for the ISB. Initial truck builds are slated to begin later this month. Regular ISB production for DuraStar trucks is scheduled to start in December. Regular production for CE Series school buses is scheduled for late January.
“Adding the proven, market-accepted Cummins ISB to our lineup is a key part of our strategy to offer our customers the most comprehensive medium-duty truck and bus offerings,” said Jack Allen, executive vp & COO, in the OEM’s just-released third-quarter earnings report.
“The ISB will complement our existing engine offerings and will be a catalyst as we look to improve our medium-duty truck and bus business in 2014 and beyond,” he continued.
For the third quarter, the OEM posted a net loss of $247 million or $3.06 per diluted share. That compares to 3Q 2012 net income of $84 million or $1.22 per diluted share.
Third-quarter 2012 results included an income tax benefit of $188 million. The third-quarter loss for continuing operations was $237 million, said Navistar.
The company cited lower volumes in its North American truck business for the third-quarter earnings loss.
Navistar said total revenue was $2.9 billion. That’s down 12% from3Q 2012, which Navistar said was due to the impact of the company’s SCR emissions transition for both its heavy-duty and medium-duty vehicles as well as a 9% drop in overall industry demand.
But the loss was partially offset by a $36-million reduction in engineering and product development costs and $14 million in lower selling, general and administrative (SG&A) expenses.
In individual segment reporting, Navistar reported a $58 million loss in its truck segment compared to a $26 million loss in the third quarter of 2012, on a 15% drop in net sales. The engine division reported a loss of $86 million compared to $47 million in third quarter 2012. Net sales were 14 percent lower year-over-year at $723 million, Navistar said.
“We were pleased with our strong cash performance in the quarter,” stated Troy Clarke, president & CEO. “We also continued to make solid progress on key elements of our ‘Drive to Deliver’ turnaround plan, especially the on-time launches of our new Class 8 product offerings, which drove Navistar's order share up to more than 20% in the quarter, compared to 12% in the second quarter.
“We’re encouraged by the growing customer acceptance of our new products,” he continued. “At the same time, we clearly need to accelerate progress with our financial results, and we are already implementing additional cost reduction and business improvement actions to counter our near-term volume challenges. This includes resizing our company to match our current business environment.”
According to Navistar, it is in the process of reducing its workforce by 500 salaried employees and long-term contractor positions before the end of the year. That is expected to net $50 to $60 million in annual savings, starting in fiscal year 2014.
“These actions are always difficult, but we are committed to making tough choices to return Navistar to profitability,” Clarke said.
