(Adds details on lawsuits, updates shares)
By James B. Kelleher
Sept 3 Navistar International Corp on
Wednesday reported a smaller-than-expected quarterly loss as
commercial vehicle demand rebounded in North America and
warranty costs related to its roll-out of a failed
emissions-reduction system continued to fall.
The suburban Chicago-based maker of trucks, buses and
military vehicles also reported its first pretax quarterly
profit from continuing operations since 2011 and raised its
forecast for industry sales of the biggest commercial trucks in
the United States and Canada for fiscal 2014.
The company believes customers in those two countries,
critical for Navistar, will buy between 235,000 to 240,000 of
the big rigs, up from a previous forecast of 225,000 to 235,000
Navistar shares, up nearly 15 percent over the past year,
rose another 1.5 percent to $39.00 in early trading on the New
York Stock Exchange.
The company said its loss narrowed to $2 million, or 2 cents
a share, in the third quarter ended July 31, from $247 million,
or $3.06 a share, during the comparable quarter last year.
Sales were flat at $2.8 billion.
Analysts, on average, expected Navistar to post a loss of 66
cents a share, according to Reuters estimates.
The company said ongoing efforts to pare overhead costs and
to restructure operations paid off during the quarter, in the
wake of a costly and unsuccessful bid to develop and market a
novel emission-reduction system known as "EGR." Structural costs
fell $86 million, or 21 percent.
Navistar said outlays on warranty-related repairs fell 22
percent in the third quarter. So far this year, the company has
spent $65 million on the claims, down from $252 million during
the comparable period in 2013.
Even so, the EGR issue is not entirely behind the company.
During the quarter, a flurry of lawsuits seeking class-action
status were filed against it in the United States and Canada.
The four suits allege that Navistar's EGR-equipped engines had
pervasive quality issues and defects that the company knew about
but failed to disclose to buyers.
Navistar says it has not been served with the Canadian
lawsuit. Its deadline to respond to the three U.S. lawsuits is
September 10 but Navistar has warned investors it is "unable to
provide meaningful quantification of how the final resolution of
these claims may impact our future consolidated financial
Stephen Volkmann, an analyst at Jefferies Equity Research,
said that while Navistar's results were encouraging, its market
share continued to lag management's targets.
"Retail sales share, which trails orders by several months,
was 14 percent" through the end of July, Volkmann said, well
below the 21 percent goal the company had set for itself and
down from 15 percent at the end of the last quarter.
Navistar CEO and President Troy Clarke acknowledged the
continuing challenge in a statement.
"While we have work ahead of us to grow the business,
improve our market share and further reduce our cost of doing
business," Clarke said.
(Additional reporting by Sagarika Jaisinghani in Bangalore;
Editing by Jeffrey Benkoe, Bernadette Baum and Nick Zieminski)