August 15, 2001

Navistar Reports Third Quarter Profit Despite Continued Softness in Demand for New Trucks

Improved Processes Help Company Perform At Lower Industry Volume Levels

WARRENVILLE, Ill. -- August 15, 2001 -- Navistar International Corporation (NYSE: NAV) producer of InternationalÒ brand commercial trucks, school buses and diesel engines today reported that it operated in the black for the second consecutive quarter despite the continued industry-wide softness in demand for new trucks.

Net income for the three months ended July 31, 2001 totaled $2 million or $0.03 per diluted common share, compared with $96 million, or $1.60 per diluted common share a year ago. Consolidated sales and revenues from manufacturing and financial services operations for the third quarter totaled $1.6 billion, compared with $1.9 billion in the same period in 2000.

John R. Horne, chairman, president and chief executive officer of Navistar, said manufacturing gross margins rose again in the third quarter to 14.2 percent from 13.9 percent in the second quarter and 11.0 percent in the first quarter. Margins in the third quarter last year totaled 17.5 percent.

“The quarter-to-quarter improvement in our gross margins on lower volume is a clear reflection of the improvements that we have made in our cost structure,” Horne said. “Our short- term goal is to show a profit for the full year which would be an excellent performance for us. We continue to balance truck production with industry demand and work on improving our cost structure.”

For the first nine months of fiscal 2001, Navistar reported a loss of $30 million, or $0.51 per diluted common share, compared with net income of $264 million, or $4.26 per diluted common share in the first nine months of 2000. Consolidated sales and revenues for the first nine months of fiscal 2001 declined to $4.9 billion from $6.5 billion in the same period in 2000. Manufacturing gross margin for the nine months was 13.1 percent compared with 17.4 percent last year.

Worldwide shipments of International brand heavy and medium trucks and school buses during the third quarter totaled 20,600 units, compared with the 27,600 units shipped in the third quarter of 2000. Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totaled 80,200 compared with 72,200 units shipped in the third quarter of 2000. The increase in OEM engine shipments resulted from the inclusion of 9,300 engines from Maxion Motores, acquired earlier this year.

Horne said that the truck market in North America continues to be weak and this trend is expected to continue for at least another six to 12 months. Pricing on new and used trucks remains very competitive and is a challenge for the industry, he said.

“As I have said before, while we cannot control market conditions, we can control how we respond and we can continue to take costs out of our operations and manage our production schedules so that we will be a stronger company when the market turns up,” Horne said.

According to Horne, the recently announced plan to boost production of Class 8 heavy trucks at its Chatham, Ontario assembly plant is an example of how the company is managing inventories in the downturn. Production will be increased to 60 units per day from the present 43 units per day effective September 4 to put production at a level that more closely matches current retail demand, Horne explained. For the past year, the company has been producing below retail demand to reduce dealer inventories. Inventories have now reached a level that will allow the increase. Based on published production and sales figures, Navistar believes it has the lowest dealer inventory in Class 8 in the industry relative to its market share.

Horne said the new joint venture with Ford Motor Company is another example of how the company is building for the future. He called the joint venture, the terms of which were finalized on August 7, “one of the most significant events in the company’s nearly 100-year history.”

The joint venture, which will operate under the name Blue Diamond Truck Company LLC, will build medium commercial trucks on a common chassis, furnish truck and diesel engine service parts to dealers of both companies and explore other advanced diesel engine opportunities.

“By leveraging scale with Ford, we will be able to bring products to market more quickly, improve the cost of materials purchased and improve the utilization of our facility at Escobedo, Mexico,” Horne said. “Additionally, this will enable us to significantly grow our engine business in the long term.

Navistar International Corporation (NYSE: NAV) is the parent company of International Truck and Engine Corporation, a leading producer of mid-range diesel engines, medium trucks, school buses, heavy trucks, severe service vehicles, and parts and service sold under the International® brand. The company also is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. With world headquarters in Warrenville, a suburb of Chicago, Navistar had 2000 sales and revenues of $8.5 billion. Additional information can be found on the company’s web site at www.internationaldelivers.com

Forward Looking Statements

Statements contained in this news release that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including but not limited to general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility, and other risks detailed from time to time in Navistar’s Securities and Exchange Commission filings. Navistar assumes no obligation to update the information included in this news release.


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