Navistar International Corp. named a new chief executive with the backing of activist investor Carl Icahn, sending the truck maker’s stock up as much as 28 per cent as investors bet on a recovery from a disastrous engine redesign.
Chief operating officer Troy Clarke will take over as CEO from turnaround specialist Lewis Campbell, a former Textron Inc. chief, who took on the task of fixing the faltering manufacturer after the failure of its new generation diesel engines.
Revenue is still falling, the company’s latest quarterly result showed, although on Thursday it forecast market share gains later this financial year.
Mr. Icahn, Navistar’s third-largest shareholder who agitated for change in the company during its troubled times, said Mr. Clarke’s work to improve manufacturing operations showed he was “the right man” to be CEO.
“We believe that Troy will be able to focus the company on its core business, execute on aggressive cost and market share targets and ultimately succeed in leading Navistar to the dominant position in North America heavy truck market,” Mr. Icahn said in a statement.
Under Mr. Campbell, Navistar cut jobs, sold interests in non-core joint ventures, raised money by selling shares and avoided a proxy fight with Mr. Icahn by agreeing to appoint new board members.
“Our turnaround is well under way and is gaining momentum, which is why we are now ready to put a longer-term CEO in place,” Mr. Campbell said on a conference call with analysts. “We can see the end of the runway and it looks very good.”
Mr. Campbell took over as interim CEO in August after Navistar fired former CEO Daniel Ustian over problems with the engine, which was designed to meet new emission control standards but failed to get regulatory approval.
Mr. Clarke joined Navistar from General Motors in 2010. He was named COO last year and will take on the top job next month.
Navistar ran up quarterly losses after the U.S. Environmental Protection Agency denied approval for its new diesel engine. Unlike rivals Paccar Inc. and Volvo AB, the company was attempting to limit emissions of the greenhouse gas nitrogen oxide without using additive urea.
Navistar later abandoned that effort and is currently buying engines from rival Cummins Inc. while it develops a new model with technology more in line with industry standards. It is still paying fines for every non-compliant engine it sold.
Shares of Navistar, which also reported a narrower quarterly loss and an improved cash balance on Thursday, jumped as high as $32.04 (U.S.) before easing back to $31.29 in early afternoon trading on the New York Stock Exchange.
The first-quarter loss shrank to $123-million, or $1.53 per share, from $153-million, or $2.19 per share, a year earlier. Excluding discontinued operations, it reported a loss of $1.42 per share.
Manufacturing revenue fell 12 per cent to $2.6-billion.
Analysts expected a loss of $1.76 per share on revenue of $2.81-billion, according to Thomson Reuters I/B/E/S.
Navistar expects its market share to start improving in the second half of 2013 and said its cash balance at the end of the first quarter was $1.19-billion, above its forecast range of $950-million to $1.05-billion.
The company forecast cash balance of $1-billion to $1.1-billion at the end of the second quarter.
Robert W. Baird analyst David Leiker said that while the second-quarter cash balance was a slight step down, it likely marks a low point for the year and he expects it to improve in the second half of the year.
Lisle, Ill.-based Navistar said it was on track to exceed its goal of reducing structural costs by $175-million this year.
The company said it has also identified additional cost savings to further lower its break-even point in 2013.
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