Navistar chief executive, Troy Clarke has said the door is open for potential deals as he fights to keep the truck maker’s turnaround on track amid a U.S. sales slump.
“Everything we’re doing just makes us a better partner,” Clarke said during a recent interview at the company’s Lisle, Illinois headquarters.
“Everything we do is just making a better company that performs well.”
Analysts have speculated that Navistar could be a candidate for an acquisition or alliance, possibly with the truck operations of Volkswagen.
Volkswagen said in February that it may pursue acquisitions or a public listing to grow its truck business, which has no significant presence in North America.
Navistar is seen as an attractive target because it has a larger North American dealer network than rival Paccar
Under Clarke, Navistar has agreed to manufacture a line of medium-duty trucks for the CEO’s former employer, General Motors for sale under the Chevrolet brand, due to launch in 2018.
“We have the opportunity to do more of those kinds of things in the event we continue to remain a standalone company,” Clarke said.
“On the other hand, there are companies out there that could use our ability to do that kind of stuff to grow their footprint in North America.”
Clarke has signalled his openness to prospective partners in the past, although he has not addressed the issue as directly in recent calls with analysts. His comments to Reuters come as the company is under increasing pressure.
Navistar is still recovering from disastrous missteps on emissions control technology that led to the loss of sales volume and market share.
Clarke has promised the company will generate profits and cash flow this year after losing $US187 million on turn over of $US 10.1 billion in 2015.
However he is fighting a slump in U.S. commercial truck sales that has accelerated during the past several months.
Orders for Class 8 highway prime movers have fallen 25 per cent to 284,000 vehicles last year and predictions are that it could fall to 250,000 this year.
January orders were down 48 per cent on the same month last year and Navistar’s shares are off more than 70 per cent from a year ago and its market capitilisation of $US720 million is less than $US 1 billion cash it has on hand.
Navistar is one of several big heartland manufacturers, including heavy equipment maker Caterpillar and farm machinery giant John Deere which are stuck in a rough spot in the uneven U.S. economy.
Navistar has been caught by a cyclical downturn with about 18 months left to go in its turnaround effort.
“The new management has done a good job, but you would never know it from where the stock is,” said one US analyst.
As the market has soured, Daimler Trucks announced in mid-February that it would cut 1,250 jobs in North America while Volvo said last month it would cut North American production.
Clarke said his promise of profits this year, which he is not backing away from, took into account a weak market.
“We anticipated the market being where it is,” he said. “The rumours that suggest it could be worse, we don’t believe that.”
The future of Navistar and its 14,400 employees worldwide will depend on a small group of investors that includes Carl Icahn, who controls 19.96 percent of the company. The top 10 investors in Navistar control more than 90 percent of the stock.
The ongoing emissions scandal at VW means the timing of any move it might make on a US truck presence is unclear, however while it fights battles over the emission scandal on the car front its truck operations in Europe spearheaded by Scania and MAN and its own truck range in South America are delivering strong profits for VW.
Clarke and his team have shed staff and cut costs, with $200 million more in cuts planned for this fiscal year ending October 31.
Some analysts question whether that will be enough. estimating Navistar could burn through $300 million in cash this year and up to $400 million in 2017 if the downturn continues.