December 18, 2002

Navistar Closes On $190 Million Convertible Bond Sale; Offering Consistent With Previously Announced 2003 Financing Plans; Proceeds To Be Used To Repay Existing Debt

WARRENVILLE, Ill., Dec 18, 2002 (BUSINESS WIRE) --

Navistar International Corporation (NYSE:NAV) announced today that it has closed on $190 million of new senior convertible bonds sold in a private placement. The placement was consistent with the 2003 financing plans that were communicated to investors on October 29 and during the fourth quarter conference call on December 3.

The non-callable bonds, with a 2.5 percent coupon and five-year maturity, were priced at par and are convertible into 5.5 million shares of Navistar common stock at $34.71 per share, a 30 percent premium to the closing price at the date of the convertible bond issuance. The bonds are guaranteed by International Truck and Engine Corporation and rank equally with other unsecured indebtedness of Navistar International Corporation. The net proceeds of this issuance will be used to repay existing debt, including $100 million of 7 percent senior notes maturing February 2003.

The securities will not be or have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Robert C. Lannert, Navistar vice chairman and chief financial officer, said that the company liked the low coupon on the convertible bonds but was concerned about dilution for shareowners and therefore the company bought a call option on 5.5 million shares at $34.71 per share. The purchased call option turned the convertible bond issue into straight debt. However, because of the cost of the call option, the combination was slightly more expensive than straight debt.

To offset some of the cost of the purchased call, the company sold a call option on 5.5 million shares at $53.40 per share. The net cost of the two call options is between $20 million and $30 million. Both calls have five-year maturities to match the bonds and should the $53.40 call be in the money at maturity, Navistar has the option to settle in cash or in Navistar common stock.

Lannert said the company believes this transaction is highly favorable for shareowners compared to other financing alternatives as it:

    --  Completes the external financing initiatives for 2003
        previously outlined to shareowners. The company believes that
        this financing plan provides sufficient liquidity to cash flow
        the business even if production levels continue at the level
        of fiscal year 2002 (approximately 74,000 trucks) through
        2005.
    --  Offers a favorable cost of debt relative to rates currently
        being paid on existing debt and prospective rates likely to
        have been incurred if the company had chosen a straight debt
        alternative.
    --  Allows for only minimal dilution above $53.40 per share as it
        is anticipated that company's earnings will expand in a better
        industry environment and as a result of the profit improvement
        initiatives made over the last 5 years.

Headquartered in Warrenville, Ill., 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, heavy trucks, severe service vehicles and a provider of parts and service sold under the International(R) brand. IC 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 builds medium commercial trucks and sells truck and diesel engine service 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

    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 release.

Navistar International Corporation, Warrenville
Roy Wiley, 630/753-2627 (Media)
Ramona Long, 630/753-2406 (Investors)
www.nav-international.com
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