Economic Value

In addition to making the industry’s most fuel-efficient long-haul vehicles, Navistar works hard to provide complete support to customers through service, parts and credit options, and weighs specific powertrain and emissions control strategies with the customer’s interests in mind.

Emissions strategy. For example, Navistar plans to use Exhaust Gas Recirculation (EGR) to meet the U.S. EPA’s stringent 2010 emissions standards for nitrous oxides (NOx). The alternative most competitors are offering, Selective Catalytic Reduction (SCR), will require extra hardware, controls and use of liquid urea, leading to higher overall operating costs for customers. We believe it is good business for Navistar to absorb the burden of emissions compliance – not the customer – and that the extra costs and challenges associated with SCR will ultimately provide Navistar with competitive advantage.

Hybrid technology. To help customers determine whether it makes good economic sense to purchase hybrid vehicles instead of conventional diesel vehicles, Navistar has quantified payback periods for both the International® DuraStar® hybrid pick-up-and-delivery truck and the DuraStar hybrid utility truck. In a follow-up to this payback period study, Navistar is working with the Indiana University School of Public and Environmental Affairs to examine the costs and benefits of hybrid technology from a broader perspective, reflecting such societal issues as reduced air pollution, global warming, and energy independence.

Navistar also looks for ways to drive sustainable improvements that will provide a more competitive cost structure. Three examples are facilities energy savings projects, lean purchasing initiatives and global distribution improvements.

Facilities energy savings. Navistar is active in the Business Roundtable’s Climate RESOLVE program, which focuses on monitoring and reducing emissions of greenhouse gases (GHGs) from facilities and products. The company has worked with the University of Chicago and independent research organization Resources for the Future to study the costs and benefits of specific steps, and based on these analyses, has established aggressive but achievable GHG reduction goals, to be achieved over the near term primarily through reductions in energy usage.

Lean purchasing initiatives. During 2008, we committed to aggressive reduction of waste expenditures across 17 truck, engine and warehouse facilities. Our ultimate goal is to have zero waste go to landfills. In addition, we are committed to reducing the non-recyclable waste shipped by suppliers. All waste stream data is now being tracked consistently across the enterprise.

Global distribution improvements. Wide-ranging green initiatives fall into three main areas: a) reuse, reduce and recycle, b) community partnerships and c) remanufacturing. Every month, for example, our distribution group recovers an average of 4.6 million pounds of motor vehicle cores and ships them to suppliers, reducing the use of raw materials and the energy used to extract them.

To reduce the impact of economic cycles, Navistar is making strategic investments in non-cyclical markets, new products that serve the broader world truck and engine marketplace, and advanced energy-saving technologies:

Defense products. Navistar Defense has developed a sustainable business by leveraging the company’s commercial truck platform to offer the United States and its allies a wide portfolio of products that provide added safety and security for defense personnel.

Global products. Navistar is leveraging advanced emissions reduction technology to help the world’s developing economies meet more stringent environmental standards. Our 2005 acquisition of MWM in South America, our Mahindra International joint ventures in India, and our license agreement with Dongfeng Chaoyang Design (DCD) in China are all enabling us to produce a full range of global diesel engines with multi-tier emissions options.

Advanced technologies. Most recently, Navistar was selected by the U.S. Department of Energy (DOE) to develop a plug-in hybrid electric vehicle (PHEV) school bus to be used in fleets across the country. PHEVs will play an important role in achieving America’s energy independence by reducing petroleum use and GHG emissions. President Obama has established a goal of putting one million plug-in hybrid vehicles on the road by 2015.