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September 14, 2012

Disaster du Jour at Navistar

Well, things move apace in the boardroom battle at Navistar. The fire started with Carl Icahn’s open letter to the Navistar Board has indeed flared with the gasoline of the abrupt response by the corporation. There’s absolutely no doubt Icahn’s use of “amicably” in his settlement terms is a somewhat misused version of the word. Icahn is plainly furious.

Personally, I have to wonder why it has taken Icahn so long to get his dander up. But I suppose when you’re a billionaire, a $330.9 million investment, made just over a year ago, going down the tubes is something you put on the back burner until it boils over.

Well it has.

The Navistar Board has reacted slowly and altogether predictably, firing Dan Ustian – at last – and then sitting back on its hands as it has for the last four years as Ustian took the company down the wrong technology road, leading to abject failure in meeting EPA2010 with a compliant heavy-duty engine. The substance of the first response to Icahn’s wake-up letter of September 9 was that the company is now on track with a clear path forward.

Icahn is clearly infuriated by that. In his second letter September 11, he wrote: “After years of supporting a failed strategy, squandering corporate assets, overpaying underperforming executives, watching share price and market share consistently decline and, in my experience, making every possible effort to avoid engaging with shareholders in a meaningful dialogue about the future of this company, this Board is asking for a chance to implement their latest ‘clear path forward’ at Navistar. It is a chance shareholders cannot afford to take. After all, this is the same Board that proved fully capable of spending our money to open a new, gold plated corporate headquarters, but failed to develop an engine that could meet EPA standards.”

Other amicable remarks include: “It appears to me that the old management team received unwavering support from this Board, and in particular from this Board's executive committee, right up until the point where it began to endanger Board members' jobs. Only then were they willing to do anything about it, and even then they were not willing to find a permanent management team or have an open discussion with shareholders.”

And, he continues, “What has happened at Navistar over the past three years is not simply a matter of poor business judgment – as far as I am concerned it represents a blatant, ongoing disregard for the success of the company and a long track record of ignoring the perilous situation the company is in, while rewarding the strategy and management team that got us here. In my opinion, by damaging our company and its prospects, the Navistar Board has also exposed itself to significant risk of personal liability both as a result of its continuing reckless disregard for the needs of the company and the requirements of its business, and by adoption of a poison pill in the unique circumstance existing at Navistar.”

To see the full fury, go to and see what Icahn REALLY thinks of the Navistar Board. It makes compelling reading.

Now, further to my comment in the last post concerning how other senior executives may fare post-Ustian, it seems Dee Kapur, Truck president and only a few months ago promoted to vice chairman, is now Kaput, to borrow from Oliver Dixon’s highly amusing post. His departure has been met with far less fanfare.

In all this, to my mind the people hurt most are not the investors but the customers who go sucked in to purchasing the worthless trucks. And I use the term advisedly. John Barnes, who is Director of Operations for Commercial Transload of Minnesota Truck Lines wrote in an e-mail, “It is a total disaster and now the trade values [for these trucks] are so bad you can’t give them away.”

It is absolutely certain Barnes is not the only frustrated fleet manager – or even owner-operator – out there struggling with trucks they can’t use and can’t sell. They are massively out of pocket and have no idea where to turn. I have heard rumblings that some larger fleets are planning to file suit against Navistar, and I would love to put some names in a future blog so we can get an idea of where this activity may be going.

If you care to share your experiences with these trucks, as John Barnes has, I’d love to hear from you. E-mail me at

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