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Navistar’s mid-decade engine debacle drives customer-focused culture change

Executives believe 25 percent market share by 2025 is doable for No. 4 truck maker

Navistar is setting ambitious goals for growth in its aftersales business.

It is easy to dismiss company declarations of “customer first” as marketing tripe.   

But when your company survives nearly going out of business over a product flaw that halved market share and pushed angry customers into the arms of competitors, such a pledge takes on deeper meaning.

For Navistar International Co., (NYSE:NAV) rebuilding what it lost earlier this decade requires melting distrust between the heavy-duty truck manufacturer and its dealers to retain and add customers. 

The MaxxForce debacle

The trouble began in the late 2000s when Navistar decided to use exhaust gas recirculation, or EGR, to control nitrous oxide (NOx) emissions from its heavy-duty trucks equipped with MaxxForce 11- and 13-liter engines. However, after Navistar invested heavily in the technology, EGR failed to meet federal emissions rules. Competitors who adopted selective catalytic reduction (SCR) technology avoided problems.   

Navistar paid more than $1 billion in warranty costs to cover reliability and fuel-economy problems with the trucks. It wrote off almost $500 million to cover used trucks it repurchased from angry customers and resold at a loss. That was on top of the $700 million development cost of the engines. 

In May, the Lisle, Illinois-based company set aside $159 million to pay customers in a class action and other claims.

The MaxxForce engines tarnished Navistar’s reputation. Sales plunged. The company lost almost half its market share as costs soared and losses climbed.

Humility lesson

“It taught us as a company to be very humble in relation to customers and focus on what is really important,” said Friedrich Baumann, Navistar president of Aftersales and Alliance Management.

Navistar has been steadily winning back customers since the MaxxForce debacle. But its 17.4 percent market share ranks fourth among original equipment manufacturers (OEMs). Navistar’s customer satisfaction also ranks fourth.

Uptime manifesto

Making good trucks attracts fleet business. Keeping those trucks running – what the industry calls uptime – is just as important.

“Service sells trucks as much as trucks sell trucks,” Baumann said.

As a result of its strategic planning, technology approach and service expansion, Navistar intends to lead the industry by 2025 in predicting when a truck needs repair, directing fleet managers to the best-located service facility and completing the repair within 24 hours.

In a briefing for reporters in Boulder, Colorado, on Aug. 6, Navistar executives and dealers shared the map driving the improvements behind its Vision 2025. Cards explained how core growth, business transformation, operational excellence and aftersales combine to create customer-centric thinking.

Terry Minor, two-time Navistar Dealer of the Year whose Nashville, Tennessee, stores have 47 percent market share compared to 1 percent when he took over a dozen years ago.

“There is no table that cannot be overturned, no idea that cannot be considered,” said Terry Minor, who owns International dealerships in middle Tennessee. “If it is something that affects the customer, then we figure out where both company and dealer could give something.”

“It’s a willingness to share information on both sides of the fence, manufacturer and dealer,” said Minor, Navistar’s Dealer of the Year in 2017 and 2018.  

Technology driven

Unlike its competitors, Navistar’s On Command Connection telematics service operates on an open software platform. As a result, 380,000 trucks with a range of driver management software use the Navistar network. Just four in 10 of those trucks are International brands.

On Command is the heart of data-sharing that is shrinking truck repair times. Downtime means a truck is not making money for its owner.

From the first quarter of 2018 through Navistar’s fiscal third quarter that ended June 30, the number of trucks repaired within 24 hours improved 73 percent, said Chintan Sopariwala, Navistar vice president of Global Distribution Operations.

Chintan Sopariwala, Navistar vice president of Global Distribution Operations

The industry average for a 24-hour turnaround is in the mid-40 percent range, Sopariwala said. Navistar’s goal is a so-far elusive 80 percent.

Right parts, right time

A key to same-day repairs is having the right part in the dealership when it’s needed. Navistar’s Dealer Inventory Alliance scans six data sources to predictively stock dealer shelves. That has increased the number of specific parts in stock by 21 percent while reducing the quantity of some parts. It replaces the industry’s traditional sell-and-replace approach.

“I manage 98 percent of my parts through the system,” Minor said. “It has changed the mix and quantities on the shelf, but my investment didn’t change much monetarily.”

The realignment has reduced emergency orders in the aftersales network by 40 percent since it started.

Expanding access

Navistar’s service partnership with Love’s Travel Stops & Country Stores and its Speedco affiliate went live on Aug. 1. The additional 326 locations and 1,300 technicians make  Navistar’s service network the industry’s largest, with more than 1,000 sites in North America.

The companies spent four months traveling the country with six training trailers. Love’s technicians experienced classroom, online and hands-on training to perform work with service repair times of three hours or less.   

“Professional drivers know that time is money, and this partnership provides them with trusted maintenance services that enable them to manage their equipment and get back on the road quickly,” said Tom Edwards, vice president of truck solutions for Love’s.

In 1999, Daimler Trucks North America (OTC:DMLRY) formed a similar arrangement for its Freightliner and Western Star brands with TravelCenters of America (TA).

Baumann, who ran aftersales for Daimler Trucks, including the TA partnership, before joining Navistar, said the partnership gains Navistar access to Love’s tire shredding, diesel exhaust fluid (DEF) and crude oil hauling businesses.

“There are different areas where we can collaborate,” he said.

Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.