Navistar: Things Don't Look Better!

Christopher Bowe writing for the FT reported that Navistar International, the US truck and engine maker, yesterday reported a narrower second-quarter loss than expected, but warned that few signs of a turnaround in truck demand have emerged.

Navistar said the quarterly losses stemmed from continued weakness in medium-duty trucks - its forte - and reduced government budgets for buying its school buses.

Flying high a few years ago with deep order backlogs, truckmakers now are struggling to offset a sharp and protracted pull-back in demand in the weakened US economy. Trucks are often an early sign of a re-energised business investment climate as companies prepare to move more goods in an improved economy.

Although some signs have shown improved demand for heavy trucks - 18-wheeler tractor-trailers - Navistar said the expected rebound for medium trucks in the first half this year did not happen. It now hopes such signs will emerge in the second half. Moreover, the company reduced its estimate for industry sales of medium trucks by 10 per cent to 101,500 units.

It also cautioned that its current order rate was at 85,000 medium trucks for the year and that a boost in the second half was needed to hit its revised industry and company sales targets.

"If the industry doesn't pick up, it's very hard for us to meet our hopes for the year," said Bob Lannert, vice chairman and chief financial officer.

Truck leasing companies' reluctance to return to buying medium trucks has hit it hard, Navistar said. Sales to leasing companies are down 60 per cent and Navistar holds 50 per cent of the medium-duty leasing market, which it expects to maintain. It revised higher its heavy Class 8 industry sales estimate from 144,000 units to 156,000.

In its fiscal second quarter ended April, Navistar posted losses of $4m, or 7 cents a share, against profits of $3m, or 5 cents, last time.

Revenues fell 6 per cent to $1.7bn. The company attributed the narrower loss to its cost-reduction programmes and streamlining manufacturing platforms.