* Records $196 million tax benefit in third quarter
* Loss before items widens to $100 million from year-ago $54
* 'We are not pleased with these results,' new CEO says
* Company looks for units to sell
* Shares up 5.4 percent
By Scott Malone
Sept 6 Navistar International Corp
announced plans to cut jobs and reported a quarterly profit on
Thursday after a $196 million tax benefit offset the high costs
of its unsuccessful program to develop a new style of diesel
The U.S. maker of International-brand heavy trucks and
school buses also said it had begun looking to sell operations
as part of a push by newly named interim Chief Executive Officer
Lewis Campbell to cut operating costs by $150 million to $175
million next year.
Shares of Navistar rose 5.4 percent to $21.52 in premarket
"At least from a bigger-picture perspective, it appears like
the new CEO, Campbell, is saying the right things and going to
be doing the right things" in restructuring the company, said
Morningstar equity analyst Basili Alukos.
Navistar said net income had fallen to $84 million, or $1.22
per share, in the third quarter ended on July 31 from $1.4
billion, or $18.24 per share, a year earlier.
Without the tax benefit, Navistar would have lost $100
million, compared with a year-earlier loss of $54 million, also
excluding special items.
The gain in the latest quarter stemmed from a drop in the
company's estimate of its tax bill this year amid mounting
Sales fell 6.1 percent to $3.28 billion from $3.49 billion.
"Clearly we are not pleased with these results," Campbell
said in a statement.
Navistar last week ousted CEO Daniel Ustian, a 37-year
veteran of the Lisle, Illinois-based company, and replaced him
with Campbell. It also promoted Troy Clarke to the new role of
president and chief operating officer.
The company said a combination of staff buyouts completed
during its third quarter and layoffs to come in the fourth
quarter would reduce its annual expenses by $70 million to $80
Navistar had struggled to win U.S. Environmental Protection
Agency approval for its new diesel engine. Unlike rivals such as
Paccar Inc and Volvo AB, the company was
attempting to limit emissions of the greenhouse gas nitrogen
oxide without using the additive urea.
Last month, Navistar abandoned that effort, saying it would
instead begin selling trucks with engines from Cummins Inc
early next year. In the meantime, it is paying fines of
up to $3,755 per noncompliant engine it sells after the EPA last
week nearly doubled the penalties it is imposing.
Preparing to manufacture trucks with those new engines while
continuing to make trucks with its existing engines will be one
of Navistar's major operational challenges in the next few
months, Morningstar's Alukos said.
"That is the big wild card," he said.
At Wednesday's close, Navistar shares had lost about half
their value over the past year, and the company has drawn the
interest of activist investors including MHR Fund Management LLC
and Icahn Associates Corp. Each of the two has a stake
approaching 15 percent -- the point that would trigger a
poison-pill defense the company adopted in June.
The company's four largest shareholders - a list that also
includes Franklin Resources Inc and Gabelli Funds -
collectively own more than 55 percent of Navistar.