UPDATE: Navistar Sees 11% Improvement In 2010 Truck Sales

(Updates with CEO's conference call comments; details about military truck sales. Also updates stock price.)

By Bob Tita

Of DOW JONES NEWSWIRES

CHICAGO -(Dow Jones)- Commercial truck and engine maker Navistar International Corp. (NAV) expects no better than a modest improvement in commercial truck sales next year, as the shipping industry stages a halting recovery.

Navistar on Thursday predicted North American commercial truck sales will increase by about 11% next year, discounting the likelihood of a robust upturn in consumer and manufacturing activity that would require a significant expansion of truck fleets.

The Illinois company expects industrywide retail sales of medium- and heavy- duty trucks and buses in the U.S. and Canada to be in a range of 175,000 to 215, 000 vehicles in 2010. With the midpoint of that range at 195,000 trucks, that's about an 11% improvement over this year's sales range midpoint, which is a 45- year low.

Navistar expects to see improved order volume at the start of its 2010 fiscal year Nov. 1 but anticipates demand softening by the middle of the year before gradually increasing again toward the end of 2010. The company said the bulk of its truck orders are coming from large trucking lines.

"Only the big guys are buying," said Chairman and Chief Executive Daniel Ustian during a conference call with analysts, adding that "80% of our orders are from high-volume fleets. When will the small guys buy? We have not put that into our forecast."

Navistar is the leading producer of medium-duty trucks by sales and currently holds a second-place share of the heavy-duty truck market.

The company late Wednesday reported an unexpected loss for its fiscal third quarter and lowered its fiscal-year earnings target for the second-straight quarter.

The news sent Navistar's shares down 7.6% to $42.19 in recent trading.

The loss largely stemmed from a decline in truck sales, resulting in a $28 million operating loss in the company's truck-making segment. Navistar's truck operations were idle for 39 days in the quarter beyond the regularly scheduled summer shutdown.

Navistar has been able to offset lower revenue from trucks during the three- year long slump in commercial truck sales with military truck orders. The company said it expects military truck revenue to come in at $2.7 billion this year. But Navistar lost two major military truck contracts this summer to rival truck builder Oshkosh Corp. (OSK).

"We were disappointed to say the least," Ustian said about the contracts. " Even without that, we have a sustainable $2-billion-a-year [military] business." Navistar has filed a protest with the Department of Defense over the contract awarded to Oshkosh for a medium-sized tactical truck. Ustian said the company has questions about the cost evaluations used by the Pentagon.

"We were beaten and not just by a little amount," Ustian said. "It doesn't make sense to us."

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

  (END) Dow Jones Newswires
  09-10-091222ET
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