Navistar International Corp. (NAVZ.PK) is a holding company whose units provide integrated and best-in-class transportation solutions. The company produces International-brand commercial trucks, MaxxForce-brand diesel engines, and IC-brand school buses, as well as Workhorse-brand chassis for motor homes and step vans. Navistar is also a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets.
In the commercial truck business, headwinds have been provided not only by the economic slowdown, but by stiff competition from foreign competitors such as Volvo, Scania, Man, and Iveco, among others. Navistar has wisely diversified into other related businesses alongside their commercial truck business. For instance, Navistar is a defense contractor. Since May 2007, Navistar has received orders for more than 5200 MRAP vehicles (Mine Resistant Ambush Protected Vehicles) from the military. These vehicle orders total more than $3 billion for Navistar. Going forward, the military business is expected to generate about $2 billion in annual revenues.
Navistar has also diversified into ‘green’ transportation by producing International Durastar Hybrid diesel trucks. These trucks employ a parallel-type, diesel-electric hybrid architecture that is supplied by Eaton Corp (ETN:NYSE). These trucks are more efficient in city and stop-and-go driving, and are estimated to save approximately 1000-1500 gallons of fuel per year. They are particularly effective for the utility industry where the engine can be shut off, but electric power will still operate the vehicle. American Electric Power (AEP:NYSE) has ordered 22 of these trucks from Navistar.
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