--Lewis Campbell appointed Navistar's interim CEO
--Chairman and CEO Dan Ustian resigns, effective immediately
--Troy Clarke appointed chief operating officer
(Adds details about activist investors and stock price activity
in final three paragraphs.)
By Bob Tita
Truck maker Navistar International Corp. (NAV) appointed former
Textron Inc. (TXT) chief executive Lewis Campbell as its chairman
and interim chief executive Monday, following the resignation of
Dan Ustian.
The management change takes effect immediately as the company
aims to distance itself from a failed engine-emissions strategy
that has driven Navistar's stock down sharply this year and
attracted activist investors Carl Icahn and Mark Rachesky.
Under Mr. Ustian, Navistar repeatedly assured customers and
investors for 2 1/2 years that it could succeed with a
diesel-exhaust treatment process that ultimately failed to receive
backing from federal environmental regulators. Navistar abandoned
the controversial, costly emissions strategy in early July and
agreed to buy engines and exhaust-treatment components from engine
maker Cummins Inc. (CMI).
Mr. Ustian's exit from Navistar had been anticipated since June,
when the company's board appointed Troy Clarke to the newly created
position of president of Navistar's truck, engine and parts
operations. Mr. Clarke, who had been president of the company's
Asia-Pacific operations, was promoted to chief operating officer
Monday.
Mr. Clarke joined the Lisle, Ill., company in January 2010 after
a 35-year run at General Motors Co. (GM, GMM.U.T). Mr. Campbell, 66
years old, also has a GM connection. He spent 24 years at the auto
maker in product-design, engineering and manufacturing
positions.
The selection of Mr. Campbell and the rapid promotion of an
outsider in Mr. Clarke suggests the Navistar board is determined to
bring new approaches to a company where most top executives spent
decades rising through the company's management ranks.
"Our board and management are aligned around a clear path
forward, and we are confident that under the leadership of Lewis
and Troy, Navistar will make continuing progress in executing its
near-term strategic priorities, driving growth and creating
shareholder value," said lead director Michael Hammes in a written
statement.
Analysts say keeping Mr. Clarke in charge of the company's
day-to-day operations could free up Mr. Campbell to focus on major
strategic and financial initiatives at Navistar, including the
possible sale of parts of the company.
"He definitely has a bias for action and is not a guy who's
afraid to make changes when he sees management changes are
warranted," said Stephen Volkmann, an analyst for Jefferies &
Co. who covered Textron during Mr. Campbell's tenure. "He has a
very return-on-capital view of the world."
In a decade as chief executive and chairman of the Rhode Island
industrial conglomerate that ended in 2010, Mr. Campbell managed
the realignment of the company's business portfolio, selling its
auto-trim and fasteners businesses. Textron's major business lines
include Cessna airplanes, Bell helicopters and E-Z-Go golf
carts.
But the company stumbled badly during the 2008 recession as
demand for corporate aircraft and helicopters plunged. The credit
crunch also exposed problems with the company's finance unit, which
had aggressively expanded its subprime-lending activities beyond
Textron equipment to include projects such as golf courses.
Mr. Ustian's resignation ends a 37-year career with the company.
During a nine-year stretch as chief executive, Mr. Ustian nearly
doubled annual sales to $14 billion. Mr. Ustian, 62 years old,
initiated a series of business expansions and operational triumphs
that moved the company away from years of retrenchment and
reorganization that followed the breakup of Navistar's predecessor
company, International Harvester, in the mid-1980s.
Mr. Ustian, who headed the company's engine business before
becoming CEO in 2003, restored profitability for the company's
truck business by lowering expenses, engineered the company's first
acquisitions and partnerships outside of North America and launched
the company's defense business. Its defense business allowed
Navistar to offset a steep decline in commercial truck demand with
sales of heavily armored patrol trucks for U.S. troops in Iraq and
Afghanistan. Navistar has built more than 8,700 Mine Resistant
Ambush Protected trucks, also known as MRAPs.
But Mr. Ustian's inability to win U.S. Environmental Protection
Agency certification for Navistar's engines ultimately led to his
departure. He was an enthusiastic supporter of a treatment system
called exhaust-gas recirculation, or EGR, in which hot diesel
exhaust is cooled to lower the nitrogen-oxide level before being
released through a truck's tailpipe.
Other truck and engine makers concluded that the process alone
wouldn't be sufficient for complying with the EPA's 2010 ultra-low
nitrogen-oxide standard and opted to combine EGR with another
process that filters exhaust through a urea solution.
That process, known as selective catalytic reduction, or SCR,
raised the price of new trucks by about $10,000. Mr. Ustian
believed Navistar could gain market share by offering a
less-expensive treatment option that relied solely on EGR.
But Navistar was unable to convince the EPA to certify its EGR
engines. Earlier this year, the company began paying fines for
selling noncompliant engines. Navistar's switch to SCR accelerated
after a federal appeals court ruled the fines were too low.
Navistar's stock on Monday trimmed most of its early gains,
closing up 1.5% at $23.32 a share. The stock price has fallen about
46% in the past six months, as investors have repeatedly shown
their frustration with the company, particularly after two straight
quarterly losses.
Messrs. Icahn and Rachesky began scooping up shares this spring
with the intent of engaging the board in talks about increasing
shareholder value. In response, the Navistar board adopted a
takeover defense plan in June that has effectively limited the two
investors' stakes in the company to just under 15% each.
A representative for Mr. Rachesky declined to comment on the
management change at Navistar. Mr. Icahn didn't immediately return
a phone call.
--Write to Bob Tita at robert.tita@dowjones.com
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