Navistar International Corp NAV
Q1 2012 Earnings Call Transcript

Operator: Andy Casey, Wells Fargo Securities.

Andrew Casey - Wells Fargo Securities: First, thanks for the clarification on the $25 million NCP hit. Dan could you or A.J. let us know how many months you are assuming the NCP payments continue for that $25 million hit?

Andrew J. (A. J.) Cederoth - EVP and CFO: So Andy here is maybe a way to look at it, we've submitted this for the 0.2 and that goes through a process of typically that's about three months I think is about average of that. So when we get the certification, it still takes some time for us to get the production on that. So, what we are doing right now is getting ready to go to production in that and it will be about June before we can get into production with that particular engine. So, that kind of gives you a framework of where it would be, the preciseness of it, we can't tell you, but our objective is it's be in production on that in June.

Andrew Casey - Wells Fargo Securities: Then if we look at these warranty issues that caused the charges, can you kind of give us little more details so we can make an assessment on why these may or may not impact field performance of your ultimate solution for EPA 2010 at the 0.2 level?

Andrew J. (A. J.) Cederoth - EVP and CFO: First let's bring it into two categories. I think the first one is, those are – the half of it is from old products, and those are things that we had assumed we had repaired. We had all those fixes in place, but the trend didn't come down like we had expected. So obviously, we didn't fix them through the levels that satisfied our trend rates, and so that continues. The other ones where we went out in the field and were more proactive on it and it increased our trend rate because of that and what we may see now is prove that those fixes are in place and trend rate will come down, both from as A.J. point out from a frequency standpoint and from a dollar standpoint. So, we believe we're all in place. These are from '10 – early '10 products. We had an opportunity we found in our customers, utilization of the vehicles are less in the December month, so we went after them with aggressiveness to try to get at them same page when they won't be running – wouldn't be running as much and we did that, but what it did do is increased the trend rate on that. So, that also gives us the confidence that we can bring it down again.

Operator: David Leiker, Robert W. Baird.

David Leiker - Robert W. Baird: Dan, did you say that actual cash cost as you see these warranty changes in the quarter that was a $3 million number, did I hear that correctly?

Daniel C. Ustian - Chairman, President and CEO: David, it was a $3 million increase from what we expected.

Andrew J. (A. J.) Cederoth - EVP and CFO: Increase from the trend that we had before.

Daniel C. Ustian - Chairman, President and CEO: Someone just let me know here and these are – we've got all of the Zs and the inline DTUs and we haven't had any issues since the '06 and '08, one I just talked about there. So, these '10 engines are running best they've ever run. It's in the early on '10, there were some minor things that caused us to go back and prepare them and much of them were in calibration.

David Leiker - Robert W. Baird: Can you tell us specifically what components or parts of the engine that you're having a warranty issue with on those engines?

Andrew J. (A. J.) Cederoth - EVP and CFO: I think when you get into these things everything is so electronically controlled that when you do calibration on it, it could affect whether the performance of any part of that engine works or not and when you have how many different, got Jack Allen, we have so many different variations that the electronic controllers have to be able to adapt to each of those. We took some time – several months before we got all those things in place on the control side. So, it’s more of a system thing I think than it is (indiscernible). Not specific hardware.