Wider horizons

Nov. 14, 2008
“At a time when the commercial truck industry is severely down in North America, we are growing beyond the cyclicality of our traditional markets.” –Daniel C. Ustian, chairman, president and CEO of Navistar. A lot of folks frankly didn’t like Dan ...

At a time when the commercial truck industry is severely down in North America, we are growing beyond the cyclicality of our traditional markets.” –Daniel C. Ustian, chairman, president and CEO of Navistar.

A lot of folks frankly didn’t like Dan Ustian’s plans for Navistar when he became the top dog at the truck and engine maker back in 2004. This is a guy who liked to think globally, looking for all kinds of opportunities – buying a Brazilian engine maker, partnering with Germany’s MAN Nutzfahrzeuge Group to build Navistar’s very first 11 and 13 liter engines, expanding the company’s military and school bus operations.

[Dan Ustian, Navistar's chairman, president, and CEO.]

More than a few Wall Street analysts wanted Navistar to just focus on building trucks – worried that its “build-a-little-of-everything” approach would spread the manufacturer too thin.

Yet more and more, it’s looking like Navistar’s move is the right one – especially in terms of becoming a more global enterprise, like its rivals in the business. Sweden’s Volvo AB, Germany’s Daimler AG, along with Paccar in the U.S. are all global titans, building trucks and engines across the world. And those wider horizons seem vital for survival, especially in light of the severe downturn going on in North America.

Take the new “midibus” Navistar recently unveiled at the Expo Transporte show in Guadalajara, Mexico – a mid-sized commercial bus designed initially for Mexico and Latin American markets, but also with an eye for export elsewhere, to places such as India.

“The midibus represents an important milestone for our global business,” Ustian said in a recent press release. “It is the first Navistar vehicle specifically designed and developed for global markets.”

Unlike other vehicles Navistar currently sells in global markets that are derivatives of existing products the company sells in North America, Ustian pointed out that the midibus is going to be targeted from the start for Latin America and other global markets. It’s also the result of a global design effort, too, jointly developed by the company’s Truck Development and Technology Center in Fort Wayne, Indiana, and Mahindra Engineering Services in Pune, India, with the midibus engine was designed and built by the company’s MWM International Motores unit in Brazil.

This is of course is only one illustration of the bigger global steps Navistar is taking – a reflection of how truck makers are increasingly looking beyond just the domestic horizons of their home markets for new opportunities.

Volvo did this by buying U.S. stalwart Mack Trucks, with Daimler’s Freightliner division picking up Canada’s famous Western Star brand at the start of this decade. Paccar followed the trend by buying European concern DAF Trucks, then plotted out a long-term strategy to bring DAF’s engine-building skill to the U.S. market – an effort that becomes reality early next year with the opening of a $400 million engine plant in Missouri.

Now it’s Navistar’s turn – expanding its global product lineup and dealer network, adding to its portfolio of military contracts, and thus improving its cost competitiveness as volumes grow. The company is building what it calls a “sustainable business” of at least $2 billion a year selling military vehicles to the U.S. and its allies, bolstered by a growing dealership network overseas. It’s added two new dealerships in Qatar and Oman, boosting its network to 15 full-service dealerships in 33 locations in the Middle East, including Saudi Arabia and the United Arab Emirates.

[Interestingly, Navistar also has three dealerships in Iraq, which help provide after sales support to the U.S. military vehicles supplied by its Navistar Defense subsidiary. Think about that: getting combat damage fixed at your local Navistar dealer. It’s more than a little strange.]

“Expansion into global markets represents significant near-term growth opportunities for us,” said David Johanneson, Navistar’s group vice president, global sales, marketing and distribution. “Our distribution strategy in the Middle East is an example of how we’re executing our global growth strategy.”

In a way, none of Navistar’s moves really surprises me – largely because I talked about some of these issues with Ustian himself about 10 years ago, back when he was the group vice president and general manager of Navistar’s engine group. A native of Harvey, IL (a suburb of Chicago), Ustian knows how to look for and seize opportunities – like when he snagged a full-time job as a supervisor at the Bliss & Laughlin steel plant, even though he was only working part time while attending college. He finished his degree in 1972 by going to night school at Chicago’s De Paul University, and quickly joined Navistar (still called International Harvester back then) in 1973.

[The U.S. customer isn't forgotten, though -- as Navistar's development of the unique LoneStar Class 8 model demonstrates.]

When I met Ustian at a new light-duty diesel engine roll out at a company manufacturing plant outside Indianapolis, he spoke of the need to stop thinking in domestic terms – just about the U.S. market – and start viewing things from a global perspective. I don’t have my notes anymore from our chat all those years ago, but let me tell you, Ustian made an impression on me. Here’s a domestic diesel engine guy looking to compete OUTSIDE the U.S. for business – against some of the best diesel-engine makers in the world, on THEIR turf. That got my attention.

Yet it made sense, for places like Europe sported some of the biggest demand for light-duty diesel engines, as almost all their cars and trucks operated on diesel. He felt more than confident, too, that the U.S. workers building that U.S. engine iron could compete successfully against any world players – and it’s clear he’s kept that viewpoint as he ascended Navistar’s ranks, first to president and COO in 2002, then president and CEO in 2003 and finally adding the chairman’s title in 2004.

“With the significant growth of our defense business and the abundance of other growth opportunities around the world, we are integrating and aligning our operations for maximum impact in the marketplace,” Ustian said, after the company announced it would reorganize its operations to create a more global footprint. “Our realignment will enable us to make the most of our opportunities while gaining efficiencies throughout the company.”

It’s an ambitious effort to say the least and the jury is still out on whether it’ll ultimately be successful, but one thing is for certain – Navistar’s wide view of the global horizon is here to stay.

About the Author

Sean Kilcarr 1 | Senior Editor

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