Navistar Reports First Quarter Loss as Truck Market Remains Soft

WARRENVILLE, Ill., Feb. 15 As it forecast last December, Navistar International Corporation , the nation's largest truck and mid-range diesel engine company, today reported a first quarter loss.

The company, producer of International® brand trucks and diesel engines, said it lost $56 million, or $0.93 per diluted common share for the quarter ended January 31, 2002 compared with a loss of $35 million, or $0.58 per diluted common share in the first quarter a year ago. The consensus estimate of Wall Street security analysts was a loss of $0.94 cents per share.

Consolidated sales and revenues from the company's manufacturing and financial services operations for the first quarter totaled $1.5 billion, approximately the same as in the first quarter of 2001.

John R. Horne, Navistar chairman, president and chief executive officer, said that the business is operating well despite the challenging market conditions and a forecast for reduced 2002 industry volume.

According to Horne, the company has not changed its earnings outlook for the year, but with the company's reduced forecast for heavy truck industry retail demand and the softness of the medium truck market, ``the challenge for the second quarter and the year has increased.''

Horne emphasized that first quarter results belie the fundamental changes the company has made to enhance its product development process, reduce fixed overhead and develop the ability to adjust variable costs throughout the cycle. He said that by the end of 2002 when all of the company's new truck models will have been introduced, the company will have much lower manufacturing costs and that the next phase of its truck strategy will be to lower fixed costs and implement a more flexible cost structure.

``Our strategy to continue to change our cost structure is targeted to materially outperform 1999 earnings at the top of the next cycle and to assure earnings of more than $2.00 per share at the bottom of the next cycle,'' Horne said. ``We believe the changes we continue to make, coupled with a new product lineup of trucks and diesel engines and an expanded relationship with Ford Motor Company, will drive future growth and profitability when the economy improves.''

Horne said new and used truck pricing remained weak during the first quarter, but appears to have stabilized which may be an indication that the market bottomed out in the first quarter. The company's used truck inventories declined slightly during the quarter.

According to Horne, while leading truck industry indicators such as pricing, used truck inventories and truck tonnage have stabilized, the demand for new trucks is lower than when the company completed its business plan for 2002, which occurred before the events of September 11. As a result, the company is lowering its forecast for total truck industry volume in fiscal 2002 in the United States and Canada by 10,000 units to 284,500 units.

Demand for heavy trucks for the year ending October 31, 2002 is now forecast at 144,000 units, down from the previous forecast of 154,000 units. Demand for medium trucks remains unchanged at 112,500 units, including 87,500 Class 6-7 trucks. School bus demand remains at 28,000 units. The company's truck shipments in the second quarter ending April 30, 2002 will be approximately 8 percent lower than a year ago.

``We continue to watch the market trends closely and will adjust our forecast as necessary,'' Horne said.

Worldwide shipments of medium and heavy trucks and school buses during the first quarter totaled 16,700 units, compared with 19,800 units in the first quarter of 2001. Overall estimated market share in the first quarter rose to 26.3 percent from 25.1 percent a year earlier.

Significantly, Class 6-7 market share, where the company's new International brand high performance truck currently competes, rose to 42.6 percent from 40.7 percent a year ago. The first medium class high performance truck was introduced in the second quarter last year. Additional new medium high performance models were introduced in December and February. And new model introductions will continue throughout the year with five more new models ranging from the new V-8 medium truck to the new Class 8 day cab with 11 to 12 liter engines.

Shipments of V-8 diesel engines to other original equipment manufacturers during the quarter totaled 69,000 units, up from 67,500 units in the first quarter of 2001.

Navistar International Corporation is the parent company of International Truck and Engine Corporation, a leading producer of mid-range diesel engines, medium trucks, heavy trucks, severe service vehicles, and a provider of parts and service sold under the International brand. American Transportation Corporation, a wholly owned subsidiary, produces school buses. The company also is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. Additionally, through a joint venture with Ford Motor Company, the company will build medium commercial trucks and currently sells and services truck and diesel engine parts. International Truck and Engine has the broadest distribution network in the industry. Financing for customers and dealers is provided through a wholly owned subsidiary. Additional information can be found on the company's web site at www.nav-international.com .