Navistar Finds Rough Road To Higher Truck Market Share

Date : 02/03/2012 @ 8:04AM
Source : Dow Jones News
Stock : Cummins Inc. (CMI)
Quote : 166.47  0.0 (0.00%) @ 4:00AM

Navistar Finds Rough Road To Higher Truck Market Share

Navistar (NYSE:NAV)
Historical Stock Chart

5 Years : From Jul 2012 to Jul 2017

Click Here for more Navistar Charts.

Navistar's International Corp.'s (NAV) competitors have managed to plant doubts about Navistar's engines that have held down the company's market share gains, says Chairman and Chief Executive Dan Ustian.

Navistar made reaching a 25% share of the heavy-duty commercial truck market a focal point of its message to Wall Street last year. Ustian believed the company could grab truck volume by exploiting rivals' higher truck prices for additional pollution-reduction components. Navistar opted to use a less expensive exhaust treatment system, but ended 2011 with a 21.4% market share, up about four percentage points from the end of 2010.

Ustian said his company has had difficulty fending off rival truck and engine manufacturers' attacks on the pollution-reduction technology used on the company's new 13-liter and 15-liter engines. None of the other truck makers in North America use the same system for reducing nitrogen oxide in engine exhaust, making Navistar an easy target for cut-throat comparison marketing by competitors. Ustian said they've managed to generate enough suspicion and anxiety about the fuel economy, power and durability of Navistar's engines to cause trucking companies to be cautious about Navistar trucks.

"They've put doubt in people's mind," said Ustian during an interview Wednesday with Dow Jones Newswires. "That part has been tougher to overcome than we thought. If you're a trucking company, you may believe our story, but can you take the risk? They've been reluctant to take that risk. Their livelihood depends on that truck being right."

Ustian said he's confident that Navistar will eventually be able to convert more of the market to Navistar trucks as the company's engines develop a positive track record.

"We've got more work to do in that area" he said.

Navistar is the third-largest seller of heavy-duty trucks in the North America behind Paccar Inc. (PCAR) and Daimler AG's (DDAIY, DAI.XE) Freightliner brand. After decades of giving truck buyers a choice of engine manufacturers, Navistar two years ago decided to offer only its own engines in its trucks, effectively severing its relationship with engine maker Cummins Inc. (CMI).

Ustian and other Navistar executives spent Wednesday trying to ease stock analysts' concerns about Navistar's engines complying with federal standards for nitrogen oxide emissions. Since 2010 the company has been using pollution credits to meet with the ultra-low level prescribed by the U.S. Environmental Protection Agency.

"There's a degree of skepticism regarding how the investment community has looked at their ability to deliver on their engine strategy," said Brian Spronheimer, an analyst for Gabelli & Co., who believes that company's engines will meet the EPA's standards.

Navistar's stock price is down 33.4% in the past nine months, despite surging demand for commercial trucks in North America. The stock Thursday closed up 1.3%, at $45.91 a share.

The company said it has submitted its l3-liter engine for certification at 0.2-gram of nitrogen oxide per brake-horsepower hour, the EPA's latest standard. Navistar said it also will soon be ready to pursue certification for its 15-liter engine. Navistar's engines have been at about 0.50-gram of nitrogen oxide, which is an ingredient in greenhouse gas blamed for global warming.

Environmental regulators warned last month that Navistar is quickly running out of pollution credits for its noncompliant heavy-duty engines. The EPA established a set of fines for Navistar to pay in the event that the company exhausts its credits before its engines are certified. The fines, which could be as much as $2,000 an engine, would allow Navistar to continue selling its engines in the U.S.

"I don't like what they determined as the penalties," said Ustian. "But their intentions are good."

Ustian believes any fines the company pays will be minimal and short-lived. He insists the company's engines will be able to reach the 0.20-gram level with exhaust gas recirculation, or ERG. The process recirculates exhaust through an engine's combustion process, burning the nitrogen oxide that otherwise would be sent into the atmosphere from a truck's exhaust pipe. Although Navistar's EGR engines haven't reached the 0.20-gram standard previously, the company maintains it has modified the controls on the system to reach the standard.

Navistar contends ERG is more user-friendly than competitors' pollution-reduction systems and does not sacrifice fuel economy, a key argument used against EGR. The rest of the truck industry reduces nitrogen oxide through a process known as selective catalytic reduction, or SCR.

SCR filters engine exhaust through a urea solution that turns nitrogen oxide into water and nitrogen. The system is widely used on cars and trucks in Europe, but requires truck operators to maintain a reservoir of urea to keep the system functioning properly. Navistar has repeatedly complained that EPA's regulations on SCR permit drivers to operate their trucks for long distances without sufficient levels of urea, releasing untreated engine exhaust into the atmosphere.

-By Bob Tita, Dow Jones Newswires; 312 750 4129; robert.tita@dowjones.com

Latest CMI Messages

{{bbMessage.M_Alias}} {{bbMessage.MSG_Date}} {{bbMessage.HowLongAgo}} {{bbMessage.MSG_ID}} {{bbMessage.MSG_Subject}}

Loading Messages....


No {{symbol}} Message Board. Create One! See More Posts on {{symbol}} Message Board See More Message Board Posts


Your Recent History
LSE
GKP
Gulf Keyst..
LSE
QPP
Quindell
FTSE
UKX
FTSE 100
LSE
IOF
Iofina
FX
GBPUSD
UK Sterlin..
Stocks you've viewed will appear in this box, letting you easily return to quotes you've seen previously.

Register now to create your own custom streaming stock watchlist.


NYSE, AMEX, and ASX quotes are delayed by at least 20 minutes.
All other quotes are delayed by at least 15 minutes unless otherwise stated.