Navistar 'going forward' despite tough years, board power struggle

By Charlie Morasch, Land Line contributing writer | 9/28/2012

Tooele, UT – Racing motorcycles zip around tight curves here, and owners of new Cobra Mustangs can take a course on learning to drive their street-legal sports coupes loaded with ungodly horsepower.

It’s on the property’s off-road trails where a trucking giant hopes to regain its advantage after a tumultuous few years.

For each of the last three years, Navistar has brought hundreds of salespeople and managers to the Miller Motorsports Park track facility in Tooele, UT, built by Utah Jazz owner Larry Miller.

Truck sales employees drove 50 trucks made both by Navistar and its competitors on paved paths. Some vocational truck models head through off-road tracks of mud and hills.

Near the track property is the Deseret Chemical Depot, where the U.S. Army oversees the detonation of large stockpiles of mustard gas and other chemical weapons, and where stockpiles once totaled nearly half of America’s chemical weapons.

Detonations still occur, and truck test drives and engine classwork are sometimes interrupted by the explosions.

“It shakes things up from time to time,” says Jim Hebe, Navistar senior vice president of Northern American sales operations.

If any company has been battle tested lately with unpredictable shake-ups, it’s Navistar.

During the past three years of the company’s 175-year history, Navistar employees and dealers have had to defend International’s go-it-alone EGR emissions approach as the rest of the industry added urea-based SCR after-treatment. When it became clear in late 2011 that emissions credits would run out, they awaited word from the top and legal rulings after the company sued the Environmental Protection Agency.

Rumors of a possible bankruptcy/merger/takeover persisted, and even after CEO Daniel Ustian was ousted in August, headlines continued to echo criticisms of activist shareholder Carl Icahn. Icahn owns a reported 15 percent of Navistar’s stock and in mid-September called for more control of the company’s board of directors as he and former business associate Mark Rachesky of MHR Fund Management have each increased their shares in the company.

“We’re still going to go through the next few months of Rachesky and Icahn trying to decide who is going to be the dominant force on our board,” Hebe said.

“Who gives a shit,” Hebe told a gathering of International dealers and trucking media Wednesday, Sept. 26. “At the end of the day, who cares who sits on our board of directors? It sure as shit didn’t make any difference for the last three years. Why would it make any difference going forward?”

Hebe said Navistar built itself up, become a dominant force in the industry and “through no fault of its own, finds itself fighting for survival.”

Many would argue the “through no fault of its own,” point, and Hebe himself points to one major mistake the company made after binding itself to EGR in 2010: trying to make EGR work without outside help.

“The decision to go it alone was the wrong decision,” Hebe said.

Addressing the confidence International dealers have with Navistar, Hebe said many dealers wanted negative noise surrounding the company to quiet.

This summer, Navistar announced it was working with Cummins to package the Cummins SCR system with Navistar trucks. The system already has EPA and CARB approval, and engineers are continuing to prepare for multiple truck model rollouts starting this winter. After initially branding its MaxxForce engines that use Cummins SCR devices as “ICT+,” for In-Cylinder Technology, Navistar is now simply calling it SCR.

“We have got the right emissions strategy, finally,” Hebe said.

When the smoke clears and the rumblings settle, Hebe said Navistar will regain the market share and success it boasted before the EGR “go-it-alone” approach.

Hebe told dealers Navistar would work to reclaim its place in the industry.

“This is a company that helped build the U.S. and helped build North America,” he said. “We have an obligation to keep the company building for another 175 years.”

Emptying the notebook:

  • Navistar says the boot camp is the company’s largest single marketing expense. The camp allows sales people to learn the advantages its competitors have when comparing with International trucks. Hebe said Navistar aims to make customer service its most consistent advantage. “I don’t care who runs our board, and at the end of the day, who runs this company,” Hebe told the crowd of dealers. “The strength of this company is right here in this dealer organization.”
  • Adding Cummins SCR package adds about 400 pounds to Navistar trucks. The company is looking at ways to offset the weight addition.
  • Current Navistar-made EGR engines, MY 2010-2012, are certified for life by the EPA and the California Air Resources Board, said Tim Schick, Navistar vice president of North American engine sales.
  • “Everyone that comes here drives trucks,” Hebe said of the Miller Motorsports Park, a point proved when I warned Navistar peeps that my driver’s license lacked an important “C.”
  • “It’s a closed course, hop in,” I was told.
  • Cummins Division Manager for the South Central Region Mark Karrasch attended the boot camp and reiterated the two companies’ strong relationship, despite there not being a written contract sealing the partnership. Hebe praised the Cummins ISX engine, and a Navistar presentation said the company believes the addition of the ISX15 will expand International’s customer base. “We may see the ISX in the ProStar become the absolute fuel economy leader,” Hebe said.
  • Navistar says Freightliner is its biggest competitor. Freightliner is “our single biggest competitor in all aspects, particularly here (vocational),” Hebe said.
  • The public will see a more upfront approach from Navistar, Hebe said. “We’re through with the B.S.,” he said. “We’ve had enough of it the past three years.”
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