Sit down with Troy Clarke, Navistar’s president and chief executive officer, to talk about anything and everything from Navistar’s strategy for grabbing more market share to developing next-gen truck equipment to the growth potential of Navistar stock and it all comes back to a single simple statement: “Helping our customers make more money.”
“Let’s talk about electric vehicles,” Troy says as he flips a sheet of paper littered with thoughts and talking points to the blank side and starts working through the numbers. “The economic model of a truck, today, is: ‘Here’s the purchase price, here’s a total cost of operation, and here’s your residual value.’”
He quickly scrawls the ROI of automated manual transmissions (AMTs) as an example of a recent truck technology that has finally gained mass adoption with 80%+ build rates across all OEMs.
“I tell customers that an AMT is going to save them 1% fuel economy, and adoption still took a decade because we had to get trucks through a four-year cycle. Fleets wanted to see how much of their initial investment they also got back on the used market. It’s an interesting technology that basically took two cycles—eight years—to get to the critical mass and hit a tipping point.
“All right, so back to an electric truck.” He draws another ROI calculation column next to the AMT column and labels it “Electric Vehicle.” But where the AMT column had hard monetary costs, Troy fills the Electric Vehicle column with a lot of question marks.
“Now we’re talking about a purchase price that’s significantly higher…”
“…with the prospect of an operating cost that could be significantly lower, assuming it fits what you’re trying to do. If I have to have a driver sitting next to the truck while it’s going through a four-hour charge, then that probably doesn’t fit a fleet’s model.”
“Then, we have the last two questions: What’s the residual value of a truck, and what’s the ownership cycle? Do you still plan on selling your rig in four years? What if the cost of an electric tractor was $250,000, but the operating costs were 50% lower, and it fit into your business model? What if the maintenance cost was less because there are fewer moving pieces; would you keep it for 10 years?
“That’s what we have to figure out.”
Lesson 1: Moving forward
Navistar’s perspective on emerging technologies is perhaps the most nuanced in the industry. The variables that orbit electric trucks, automated driving systems and beyond are hauntingly similar to the unknowns of the late 2000s SCR/EGR era—environmental-driven technology development, changing equipment operations, and a potential impact on the service costs and processes. After its EGR missteps, the manufacturer clawed its way back to profitability last year and isn’t likely to forget the lessons of the past.
Troy believes that profitability could have happened sooner, but Navistar made the decision to invest in the development of new products that have rolled out over the past two years. The refresh of International’s entire lineup that included new regional haul (RH Series) and long-haul (LT Series) models culminated in its foray into the Class 4 market with the CV Series and included a new engine with the 12.4-liter A26. Troy is focused on keeping the momentum moving forward.
“There’s a transformation that has taken place here at Navistar because we don’t spend all of our time talking about and managing issues from the past,” he says confidently. “We are a company that, let me just say this boldly, we have the opportunity to double our market share. We have a history of having been much, much higher, and we lost half of our market share in the last four or five years. No other company in the trucking industry in America today has the opportunity to double their market share. They haven’t had the kind of issues that we’ve had to deal with. If they could double their market share, they probably would’ve by now. Some of them gained market share, maybe at our expense, but we have the opportunity to get that back.”
So how is Navistar going to do that?
Lesson 2: Targeted tactics
There are two main tent pole tactics that Troy identifies as market share-gaining drivers: uptime and focusing on customers’ segments, as opposed to product segments. While the entire industry is focused on uptime, Navistar’s open platform telematics and remote diagnostics platform, OnCommand Connection, enables a fleet to bring all of its trucks under one OEM-backed telematics dashboard.
“The power of information is that it’s the ability to make decisions before they’re forced upon you. That capability alone can help significantly lower costs or improve the uptime of a fleet,” Troy says. “A small fleet might not have a person looking at a dashboard all day. OnCommand Connection can automate that process so that you get notifications through your cell phone.”
Moving forward, integrating service data and building a maintenance history is the next step in providing increased uptime. The goal is to provide visibility into the service needs of the truck to know that if you’re fixing a battery-related issue for the third time at a third service location, then you have visibility into that and do a proper root-cause analysis that also leverages the data. After amassing that data, Navistar will be able to support its OnCommand Connection Live Action Plans, a feature that aims to predict when a part is going to fail before it actually does.
The second tactic is customer segmentation—that means developing a deeper sense of the customer’s needs and challenges and then presenting solutions.
“We have to understand how the economics of our customers work,” Troy explains. “What I really want to know is how I can help my customer make more money by buying a truck from me rather than someone else. Then we can develop a suite of business practices. It’s the old marketing adage: ‘Product, Place, Price, Promotion.’ We put a plan together that integrates all four of those things, and we’re having success with it.”
Troy’s focus is to foster a deeper relationship with his customers with the goal of becoming an equipment consultant, which leads us to the third lesson.
Lesson 3: Trucking takes trust
In-development truck technology grabs lots of headlines. Data-driven solutions are talked about in sweeping, business-changing ways. Efficiency gains, total cost of ownership, return on investment—there is no shortage of talking points in the industry, but at the end of the day, you have to be able to trust the person you’re working with on the other end of the table, phone or screen. To make the equipment solutions of tomorrow work, Troy knows that it is going to take collaboration and a deep mutual trust with customers.
“This is the great thing about our industry—it recognizes the role of experimentation and feedback, especially large fleets,” he says. “Many of them have their own engineers who are working on specs and optimization, and trying to find trucks that they feel are ideally suited to them; we can have those discussions at various levels of the organization.”
Troy points to automated driving systems as an example of a technology that’s growing by leaps and bounds, but poses plenty of challenges:
“Think about the prospect of an automated truck. When I look automated driving technology, right now, it’s a pretty brute force approach. Yeah, there is AI that developers are testing, and testing, and testing; observing, and observing, and observing to create AI profiles. At the end of the day, that system needs to be integrated into not just the truck, but it also needs integrated into the transportation system.
“But the real question is,” he pauses just long enough to let the moment hang in anticipation, “how does it fit into the fleet’s business model? We’re going to go through the cycles of learning to understand how these things impact our customers, and we’re going to go through these cycles together. We’ll learn what the real total operating costs are.
“And the cool thing is, as we’re in this period of growth [at Navistar]. We have one of the most, if not the most, contemporary product lineups in the market today with the advantages and selling points that support our desire to increase market share and revenue. That will help create shareholder value, and allow us to experiment and invest in technologies like electric trucks.
“Hey,” he says through a growing smile, “don’t you love it when a plan comes together?”