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1.

Introduction
1.1

Company overview

This assignment is regarding to case study of Navistar Corporation. It is one of public type of
automotive company in USA which is face to financial crisis in previous years. But it has had
bright heritage in 90th century. Its industry is automotive write now but formed by harvest. Its
products are manufacture of Trucks, Buses, School buses, IC buses (integrated circuit)
workhorse brand chassis for motor homes and step Van. In addition they manufacture diesel
engines and parts. Navistar was founded in 1902. 16500 employees are working under Navistar
Cor. Parts , services and products are selling through a network of nearly 1000 dealer outlets in
USA .It covers 60 dealers in 90 countries around the world. Headquarter is lisle, Llinosis in
USA.
The aim of this assignment is to critically reflect surface analyzes regarding this organization and
major thing is introduce the viable turnaround strategies for up survive Navistar corporation.
1.2

Key Issues

Slow growth rate of the industry that is caused by economic decline leading the decreasing
of the growth to 2%.
The products that the competitors manufactures are all the same as all of those truck
manufacturer mainly focused on driver comfort and safety.
Complicated and detailed difficult orders to be realized as the order specification from the
fleet manager can be as much as 200 lines items.
Relatively high driver turnover usually range from 80 to 200% that create a driver shortage
due to low pay, long distance from home, and uncomfortable equipment.
Cost reduction issue that contradicting with the company attempts to increase the quality
of its customer service.
Aggressive technology development in the industry as Volvo and Paccar had plans to
improve part availability, computer system, and communication. It does not include the attempts
from other companies on interior comfort by Freightliner, engine durability by Mack,
aerodynamic model that improve fuel economy by Peterbilt.
1.3

Major Problems

The company just wrapped up year two of its urgent turn-around program, instituted after its
Exhaust Gas Recirculation-only (EGR) emissions strategy failed to materialize. To be fair, if the
strategy had worked, it would have been a game-changer. But Navistars previous management
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team, headed by president Dan Ustian, kept trying to pound a square peg into a round hole far
too long after it was apparent EGR-only wasnt viable.
1. Its attempted methods to comply with Environmental Protection Agency (EPA) diesel
emissions regulations had failed and the company would be forced to revise its
compliance plan at enormous costs;
2. Navistar did not have engines available in a timely manner to meet the 2010 EPA
standards;
3. Navistar's filings with the Securities and Exchange Commission (SEC) contained
incomplete and misleading disclosures, including statements about the costs of recalls
and details of various debts;
4. And as a result of the foregoing, defendants lacked a reasonable basis for their positive
statements about the company and its revenue outlook.
1.4

Revenue

Truck maker Navistar International Corp.'s loss widened in its most recent quarter as revenue
tumbled a worse-than-expected 11%.
Shares of Navistar, down 48% this year, tumbled 13% to $15.10 a share in premarket
trading.Overall, Navistar reported a loss of $28 million, or 34 cents a share, compared with a
year-earlier loss of $2 million, or two cents a share.
Profit in the prior-year period was helped by a $32 million benefit from the company's
reassessment of warranty costs for products sold.
Losses from continuing operations were 37 cents in the quarter, compared with a loss of four
cents a share a year earlier. Revenue slid 11% to $2.54 billion, as growth in truck, bus and parts
sales was offset by lower exports and revenue declines in its global operations.
Analysts had expected a profit of eight cents a share and revenue of $2.75 billion.
The company has had little success so far in gaining share in the heavy-duty truck market. It
remains in fourth place with about 13%, off its 15.4% goal for 2015.
Company is on track to achieve its market-share goals for the year, as it seems improvement in
medium, school bus and severe service trucks.In the most recent quarter, the company saw a 5%
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increase in chargeouts for Class 6-8 trucks and buses in the U.S. and Canada from the year
earlier.The truck segment recorded a loss of $36 million compared with a year earlier loss of $3
million.
In the parts segment, profit grew 10% to $151 million, helped by margin improvement in
commercial markets.
The global operations segment recorded a loss of $26 million, compared with a loss of $21
million a year earlier due to the downturn in Brazil. South American engine shipments were
down 42% year-over-year.

1.5

Market Share

It shows how weak the Navistars market share and income status in the industry.
1.5

Competitors of Navistar

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Navistar has to competes with 3 of big players in same industry. Those are Pccar, AB
Volvo and Daimler.
Among those that PACCAR is one of the world's largest designers and manufacturers of big rig
diesel trucks. Its lineup of light-, medium-, and heavy-duty trucks includes the
Kenworth. Peterbilt, and DAF nameplates. The company also manufactures and distributes after
market truck parts for these brands. PACCAR's other products include Braden, Carco, and
Gearmatic industrial winches. With the exception of a few company-owned branches, PACCAR's
trucks and parts are sold through independent dealers. Its PACCAR Financial Services and
PacLease subsidiaries offer financing and truck leasing, respectively.Other one is Volvo should
really only inspire images of burly truck drivers. The company is one of the world's largest
makers of trucks, buses, and construction equipment as well as Navistar in North America, the
company makes big rigs through its Volvo Trucks North America unit; Volvo also owns
controlling interests in the well-known Mack Trucks brand in North America and Renault
Trucks in Europe. Other products include marine (Volvo Penta) and industrial engines. Overall
Volvo has production facilities in nearly 20 countries.
Other previous big player Daimler is now starting to challenge for all competitors that not only
Navistar. it is climbing up now in industry. Daimler's cars may stop on a dime, but they cost a
little more than that. Daimler's passenger car business, Mercedes-Benz, includes luxury brands
Mercedes and Maybach, as well as compact, hybrid, and electric models, including
its smart brand. Other major auto brands include Freightliner, Western Star, BharatBenz, Fuso,
Setra, and Thomas Built Buses, while financial services brands include Mercedes-Benz Bank,
Mercedes-Benz Financial, moovel, and car2go. Its Daimler Trucks North America unit
manufactures heavy-trucks in the US. Daimler sells its vehicles in 40 countries, but Europe
represents around 35% of its net sales. Providing a complete view of how this company and its
competitors stack up against one another, the Competitive Landscape report includes benchmarks
on over 30 parameters related to sales, employees, market cap, profitability, and growth ect as
follows.

Profitability
Valuation
Operations
Financial Ratios
Per Share Data
Growth Statistics
Technology
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1.6 Competitor Advantages


Navistar is previously gone down in profit margin but they are still survive in the industry
for 108 years. Because of Navistars has sustainability strategies for long time and short
time.
1. Brilliant Engineering
2.

Loyal customers

3. Good designs
4. Positive hesitage
5. Distribution strategy
VII Navistars Stock
a. Navistar International Corp stock is getting run off the road today, down around
13.62USD write now.This is more of the same ugliness for shareholders over the
past few years.the company's stock lose more than 60% of its value since the
beginning of 2014.
b. There's absolutely no news out there to point at as an explanation for Navistar's
sharp sell-off today, which is happening on exceedingly high share volume that's

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more than triple the three-month average. There's also not anything on the
newswire about competitor Paccar (that could affect Navistar's stock price today.
2. Chances are, what we are seeing is a combination of factors. This time of year, it's not
uncommon to see individual investors and large funds and money managers offload
stocks that are down for the year. Not only are there tax benefits from so-called tax-loss
selling, but funds often sell off their losers to make their portfolios look better.
3. For a stock like Navistar's, which is now down more than 71% this year, it's a prime endof-year selling candidate. Sometimes momentum can take over, too, when a little bit of
selling sends a stock lower, which leads to more selling. Before you know it, a beat-down
stock gets even more beaten down. I think that's the situation here.
2.0

PEST Analysis

2.1
Political
USA has a strong democratic setup and effective rule of law, with elections that are considered
fair and transparent. The country enjoys massive political and economic influence over both
national and global policymaking, and is recognized as the leading superpower in the world.
However, the country faces international criticism for its interventionist policies regarding the
War on Terror which is souring foreign relations, and at the same time fueling terrorist groups,
increasing the threat of terrorism. At the previous the U.S. Environmental Protection Agency
filed suit against Navistar International Corp. on Wednesday, July 15, claiming the truck
maker violated the Clean Air Act.
In the lawsuit, the EPA claims Navistar installed more than 7,700 engines built in 2009 into 2010
model year units, which violated the EPA emissions standards that took effect Jan. 1, 2010. Civil
penalties could total in excess of $300 million if Navistar is found liable a fine of upwards of
$37,500 a day per each each violation.Navistar said assembly of the engines cited by the EPA
started in 2009, but they werent completed until early 2010. The company has said previously
these engines should be permitted as brief engines eligible for trucks built in 2010. But the
EPA said the company failed to secure the proper exemptions to use the engines. The suit further
claims the engines were not covered by certificates of conformity; something that has already
been before federal judges. In 2013, federal judges threw out an EPA rule related to its approval
of heavy-duty truck engines that did not meet its emission standards.
1.

The ruling came as Daimler, Volvo and others repeatedly challenged the EPA over its
decision to grant certificates of conformity to Navistar, which allowed the company to
market engines that failed to meet emission requirements and pay a nearly $4,000 fine on
each non-complaint engine sold. plan at enormous costs;

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2.

Navistar did not have engines available in a timely manner to meet the 2010 EPA
standards;

3.

Navistar's filings with the Securities and Exchange Commission (SEC) contained
incomplete and misleading disclosures, including statements about the costs of recalls and
details of various debts;

4.

And as a result of the foregoing, defendants lacked a reasonable basis for their positive
statements about the company and its revenue outlook.
2.2 Economic

The United States of America is the third most populous country in the world, and the fourth
largest by total area. With a population of over 318 million, the country is ethnically diverse and
has the largest economy in the world. The countrys growth slowed down after the 9/11 attacks
and the recession in 2009 added to that as the economy contracted significantly. However, the
economy is now moving on steady course forward thanks to increase in business investment,
consumer expenditure and substantial decrease in unemployment.With a GDP of over $16.760
trillion, the US is the largest economy in the world. The economic system is well-developed and
gathers its strength from its services and manufacturing industries. The recession in 2009
adversely affected the economy of the country and unemployment rates soared to an alarming
point. But the economy bounced back with a growth of around 4% in the third quarter of 2014 as
consumers and businesses have stepped up spending. However, the increasing budget deficit puts
the economic prosperity of the country at grave risk as the deficit currently amounts to a
staggering $506 million. It is lokking on 2001 Economic down effect of Terrorist arttack in USA
also effect to Navistars down profit margin. Navistar started to gone market down in 2003.it was
unstable Economic condition in USA.
2.3

Social

Like most developed countries, the US faces the problem of an aging population which can lead
to a serious labor shortage and rising tax rates in the future. Nonetheless, the education
and healthcare system is one of the best in the world. A majority of the population has a liberal
mindset, but rising racial intolerance is a serious concern. Additionally, increasing illegal
immigration is another concern, as there are currently more than 11.7 million people living
illegally in the US, further increasing the risk of racial discrimination.
2.4

Technology

Innovation and technology are the cornerstones of the US economy. Since its inception, the
country has been leading in terms of adapting and applying technology. Though the country faces
strong competition from rising economies, it is expected it will continue to retain a technology
supremacy over its competitors. Additionally, the US has also been at the forefront in enhancing
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and developing technologies in areas such as nanotechnology, environmental technology and


biotechnology, which opens up massive opportunities for companies with expertise in the
mentioned fields. IT is another field the US has been excelling in. However, it has also been
facing intense competition from countries like China and India,Koria, Japan.thoses countries also
climbing up in same Technology write now. Navistar has to research continuously for generate
new technologies for develop automotive skills and face to competes with domestic and
internationally competitors.
So, in this Technology analysis of USA, we examined briefly the various factors that are
affecting the external macro environment of the country.
3.0 Porters five forces
3.1 Bargaining power of suppliers
I . Diverse distribution channel (Navistar)
The more diverse distribution channels become the less bargaining power a single distributor will
have. This positively affects Navistar. Diverse Distribution Channel (Navistar)" will have a longterm negative impact on this entity, which subtracts from the entity's value.When suppliers are
reliant on high volumes, they have less bargaining power, because a producer can threaten to cut
volumes and hurt the suppliers profits. This can positively affect Navistar.
II Volume is critical to suppliers (Navistar)
When suppliers are reliant on high volumes, they have less bargaining power, because a
producer can threaten to cut volumes and hurt the suppliers profits. This can
positively affect Navistar.
3.2 Bargaining Power of Customers
I
Product is important to customer (Navistar)
When customers cherish particular products they end up paying more for that one product. This
positively affects Navistar.
3.3 Intensity of Existing Rivalry
When industries are growing revenue quickly, they are less likely to compete, because the total
industry size is also growing. The only way to grow in slow growth industries is to steal marketshare from competitors. Fast industry growth positively affects Navistar.

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3.4 Threat of Substitutes


3.5 Threat of New Competitors
I Industry requires economies of scale (Navistar)
Economies of scale help producers to lower their cost by producing the next unit of output at
lower costs. When new competitors enter the market, they will have a higher cost of production,
because they have smaller economies of scale. Economies of scale positively affect Navistar.
"Industry Requires Economies Of Scale (Navistar)" has a significant impact, so an analyst
should put more weight into it. "Industry Requires Economies Of Scale (Navistar)" will have a
long-term positive impact on the this entity, which adds to its value. This qualitative factor will
lead to a decrease in costs. This statement will lead to an increase in profits for this
entity. "Industry Requires Economies Of Scale (Navistar)" is a difficult qualitative factor to
defend, so competing institutions will have an easy time overcoming it.
II Strong brand names are important (Navistar)
If strong brands are critical to compete, then new competitors will have to improve their brand
value in order to effectively compete. Strong brands positively affect Navistar.
III Customers are loyal to existing brands (Navistar)
It takes time and money to build a brand. When companies need to spend resources building a
brand, they have fewer resources to compete in the marketplace. These costs positively
affect Navistar.
IV Advanced technologies are required (Navistar)
Advanced technologies make it difficult for new competitors to enter the market because they
have to develop those technologies before effectively competing. The requirement for advanced
technologies positively affects Navistar. Advanced Technologies Are Required (Navistar)" will
have a long-term positive impact on the this entity, which adds to its value.
V Entry barriers are high (Navistar)
When barriers are high, it is more difficult for new competitors to enter the market. High entry
barriers positively affect profits for Navistar. "Entry Barriers Are High (Navistar)" has a
significant impact, so an analyst should put more weight into it. "Entry Barriers Are High
(Navistar)" will have a long-term positive impact on the this entity, which adds to its value. This
statements will have a short-term positive impact on this entity, which adds to its value. This
qualitative factor will lead to a decrease in costs. This statement will lead to an increase in profits
for this entity. "Entry Barriers Are High (Navistar)" is an easily defendable qualitative factor, so
competing institutions will have a difficult time overcoming it. "Entry Barriers Are High
(Navistar)" is a difficult qualitative factor to overcome, so the investment will have to spend a lot
of time trying to overcome this issue.

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4. SWOT analyze
Strength

Weakness
Existing profit margin
Existing market share

Monetary assistance provided


Domestic market
Experienced business units
High growth rate
Reduced labor costs
Existing distribution and sales networks
Barriers of market entry
Threads

Opportunities

Growing demand
New markets ( China, Koria, India)
Economic growth
Unexpected climate disasters
Strict political rules ax changes
Price changes
Technological problems
Increasing costs
Rising cost of raw materials
Increase in labor costs
Cash flow

5.0

Increasing constructions day by day( Truck,


Military vehicle demand)
Priority for safe of nation (school bus)

Possible Turnaround Strategies

Increase its focus on customers' satisfaction by manufacturing high durability and comfortable
and quality trucks that focus on the drivers' comfort and safety and also focusing on fleet
manager's need and wants. It should start research for identify and solve for navistars Engine
trouble and rapidly solve it.

Get business loan and develop the research and solve the engine problem by research.
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Collaborate with same technology related company.

Give priority for research and Development for future innovation creation and existing
problem solve

Attract more buyers Where is needed country specially which is highly doing
construction for truck and war situation for military vehicles. As well as who are the
considering mainly for safety first their nation.

d
Cost cutting strategy, by implementing high technology in the production of
trucks.

Develop the high efficiency of workers by motivation with explain current situation.

Penetration to the South American market when there are potentially large markets in

Countries such as Mexico, Chile, Argentina and Brazil. Navistar can also open up an

Assembly line in South America.

Low labor costs

Enhance the necessary employees like that improved Engineers, Research Assistants,
Chemises, Software Engineers as well as reduce extra workers in organization.

Decrease the salary from employees that specially executive post according to particular
finance order until income will be ok.

Difficulties in penetrating to the South American market.

Time consuming especially finding strategic alliances to be successful in marketing their


trucks in the South America countries.
6.0

Creating of customer loyalty.

Conclusion

According to this analyze Navistars some of powerful business strengths have helped to
survived in automotive until today. Navistar has faced to the significant finance crisis at
the moment that one of mistake they have done regarding their engine manufacturing fail.
But at the past Navistar was king of the best engine introduction and truck industry. It is
clear that consider about award which they have won. Navistar is trying to regain those
using turnaround strategies. As well as it can be a first in automotive industry as same as
before with using new strategies and change the previous strategies carefully as above
mentioned.
7.0

Recommendation

As my knowledge come up with the best recommendation for Navistar to implement. One
of the recommendation is Navistar should focus on the customer satisfaction by producing high
durability product, providing comfort and safety for truck drivers, and after sale customer
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support. By manufacturing such quality of trucks, Navistar will be able to attract more customers
especially in the South American market. Also, by manufacturing good quality trucks, customers
will start to have beliefs in the Navistar products, and thus creating customers loyalty. The
underpinning reason for maintaining and possibly increase the customer support is because those
products from other companies and Navistar itself are all alike in technological manner.
Consequently, Navistar should be better compete on intangible factors as point to compete.
Secondly, the products that this company sells are falls to specialty good category which requires
the buyer to really shops around and choose the best one. While the buyer are mostly expert and
knowledgeable about the product and need to get products that can return their investment,
pursuing customer-oriented action is the best alternative for this company in this industry.
Another recommendation that we come up with is for Navistar to penetrate to the South
American market where there are potentially large market exist there combined with customerfocused strategy. This will be a great opportunity for this company which really support the
possibility of its strengths within intersecting with this opportunity and creating leverage. For
Navistar to be able to compete in the South American market, it needs to be able to produce good
quality and high durable trucks, like Mexican truck fleet which have estimated age of 12 years.
Having to open up an assembly line in the South American market will also reduce the labor
cost, since labor cost in the South American countries are low. Therefore, it can be expected that
the company can realize a high profit margin out of this market. With this recommendation, we
hope that this company will be able to maintain its current position in the industry by preventing
all possible way that can trigger the problems and constraints from emerging as internal and
external factors effecting the company intercepting.

References
http://www.reuters.com/finance/stocks/companyOfficers?symbol
http://www.nasdaq.com/symbol/nav/recommendations
http://www.forbes.com/forbes/welcome/#33ed26b449f8
http://www.wikiwealth.com/five-forces-competitor:navistar:industry-requires-economies
http://www.reuters.com/finance/stocks/companyOfficers?symbol=NAV
http://www.equipmentworld.com/first-and-10-at-the-50-where-things-stand-with-navistar/

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