If you don’t know who Navistar is, don’t bother trying navistar.com… It’s slowed to a crawl under the weight of thousands of too smart for their own good sell styled stock market wiz kids who got a hot tip on NAV overnight. Thus a bunch of people who wouldn’t know a Navistar International truck if it ran them over has suddenly become stockholders in this remnant of the great recession before last. I’ll save you the google search- Navistar is the filleted remnants of once great International Harvester, with the Harvester part sold off to IVECO AKA FIAT and the remains not so cleverly renamed Navistar and spottily mismanaged for the last three decades.

Now I tend to refer to companies like Navistar as “toxic”, sorta like some of the Hostess facilities built atop underground fuel tanks that drew no bids in the bankruptcy liquidations. Navistar is looking at around $300 million in EPA fines for starting assembly of several thousand engines before the tighter 2010 EPA emissions standards were in effect, then finishing assembly and installing them in 2010 to get around the 2010 regs. That’s not Navistar’s first run in with emissions controversy, as they built and sold engines that didn’t quite meet the 2010 standards legally for a couple years by trading emissions credits from previous engines that did… Problem was, they kept building the offending engines after their stock of credits ran out. Customers weren’t too happy with those engines either, as they tried getting by without the superior SCR emissions control strategy, making them thirstier and less reliable.

So it’s been awhile since Navistar’s shown a profit as they plod along selling three billion $$$ or so of trucks, etc. per year. Meanwhile they’ve taken on the liability of opening another plant in northern Alabama while closing other plants, and when the cabover refuse truck slated for that plant was dropped, they had to do a joint venture with a railcar company to avoid paying back millions in state subsidies by keeping the plant busy. And having told Cummins  to kiss off when Navistar went there own way on engines and emissions technology, Navistar had to kiss up and beg Cummins back when they ran out of emissions credits and customers for their failed massive EGR emissions technology. Inviting Cummins back to their party left Navistar with engine overcapacity as they’d bought the design of their own ten liter plus  diesels from VW subsidiary MAN.

So now Navistar has excess capacity up the wazoo, an aging model lineup, and EPA trouble… Is it any wonder it’s market valuation has been hovering around a fifth of asset value? Is it any wonder that VW, flush with cash and eager to expand into the North American market with a truck product that already carries their engines, didn’t buy Navistar?

Navistar is toxic.

It gets worse… the trucking biz is in a cycling slowdown, having bought heavily in the recovery to replace aging trucks that weren’t replaced during the recession. Add in the increasing share of general freight going “intermodal” on the railroads, and the big trucking companies are putting on less and less miles. That means the fleets that put on 700,000 or so miles in five years running day and night on Interstates all over the country before they trade for  a new truck are now running their trucks within a couple hundred miles of the intermodal yards and putting on maybe half that mileage. That means it’ll be ten years instead of five before they trade in for a new truck. Add some size and weight increases that’ll mean less trucks are needed to haul the same freight AND the cyclic economic downturn we’re overdue for… And Navistar’s future looks bleak.

So it stands to reason that the Wall Street that has bid Tesla and Twitter up to infinite multiples of the profits they’ve never made has fallen head over hills for Navistar. And if Navistar goes under for good, those Wall Street whiz kids will still have millions left to spend on yachts, villas, and fast cars. But the good folks who build, service, and operate Navistar trucks will be stuck in the usual long line at bankruptcy court,  begging for pennies on the dollar…

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