Fitch Ratings Places Navistar on Rating Watch Negative

CHICAGO--Jan. 19, 2006--Fitch Ratings has placed the debt ratings of both Navistar International Corp. (NAV) and its subsidiary, Navistar Financial Corp. (NFC) on Rating Watch Negative. The parent and subsidiary credit ratings remain as follows:

Navistar International Corp.

-- Issuer Default Rating (IDR) 'BB';

-- Senior unsecured debt 'BB';

-- Subordinated debt 'B+'.

Navistar Finance Corp.

-- Senior unsecured secured bank lines 'BB';

-- Senior unsecured debt 'BB'.

The Rating Watch Negative results from Fitch's concerns related to the delay in filing audited year-end financial statements. Specifically, Fitch is concerned with the uncertainty regarding the duration of the delay, the scope of the issues under discussion and the eventual outcome of the audit, as well as possible measures creditors may take in a filing-default scenario and the potential for restricted access to financial markets that companies generally face when uncertainty arises from the lack of audited financial statements over a lengthy period time.

However, Fitch notes that NAV said that it has received a waiver through May 31 on NFC's $1.2 billion revolver and that unaudited year end manufacturing cash balances approximated $875 million, up from $731 million at the end of the third quarter. In addition, Fitch expects NAV to be free cash flow positive in 2006. This liquidity should allow Navistar to manage its limited financing needs in 2006. However, if debt-holders pursue covenant measures, liquidity could be significantly stressed.

NAV announced that it has delayed filing its fiscal 2005 (Oct. 31, 2005 year-end) Form 10-K report with the Securities and Exchange Commission (SEC) because the company is still in discussions with its outside auditors about 'a number of open items including some complex and technical accounting issues.' NAV cannot determine the impact the resolution of these issues may have, if any, on net income and there has been no determination as to when the ongoing discussions with the company's auditor will be concluded or when NAV will be able to file its Form 10-K. Navistar also said that in mid-December 2005, a key member of the auditor's team went on an unexpected, extended medical leave and that new audit team has been assigned to complete the year-end audit for fiscal 2005.

Fitch's credit ratings reflect Navistar's improved profitability from industry volumes, market penetration and cost reduction efforts. Fitch expects medium and heavy truck markets to remain strong through 2006. Similar to the pre-buy situation that developed in 2002 and the resulting lower volume in 2003, Fitch expects industry demand to be negatively impacted by more stringent air emissions regulations beginning in 2007.

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