An International LT Series tractor-trailer on the highway. (Traton)
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Traton’s profits rose in the second quarter of 2024 as higher prices and South American demand trumped a slump in truck sales for Navistar’s International Trucks brand due to a shortage of mirrors.
Munich-based Traton posted a profit in the most recent quarter of $1.095 billion, up 4.4% compared with $1.049 billion in the year-ago period. Traton reports its earnings in Euros, and all conversions are correct as of July 26.
Traton revenues in Q2 totaled $12.587 billion, a 0.7% decrease compared with $12.674 billion a year earlier. Support came from a strong South American market (aiding Scania and Volkswagen Truck & Bus sales), higher prices and a “favorable market and product mix.”
Navistar’s revenues fell 21% year on year to $2.437 billion from $3.092 billion. The company, whose takeover by Traton closed in 2021, saw its return on sales slump to 2.7% from 6% a year earlier. Navistar’s adjusted operating profit tumbled to $65.2 million from $186.8 million a year earlier.
Traton had already given the market a heads-up on parts of Navistar’s Q2 performance. On July 10, Traton said Navistar sales in Q2 slumped 31% year over year.
Lisle, Ill.-based Navistar sold 16,032 trucks and buses in the most recent quarter, compared with 23,243 in the year-ago period. Navistar’s truck sales in Q2 totaled 13,143, compared with 19,595 a year earlier.
International sells Classes 4-8 trucks in North America as well as Classes 4-5 trucks in Latin America. In the U.S., the company focuses on Classes 6-8.
Navistar is now working through a production backlog totaling 8,000 trucks as a result of a mirror supplier declaring force majeure on deliveries due to a fire. The unidentified supplier’s production site is in the same neighborhood as Navistar’s Escobedo manufacturing plant.
“We expect to be able to complete the trucks. They are built. We have an additional line. An additional shift up to complete them with mirrors and deliver them,” Traton CEO Christian Levin said during the company’s analyst earnings call July 26. “The vast majority we expect to deliver in the second half of this year.”
Supply chain issues bedeviled Navistar in both the first and second quarters of 2024. In the first quarter, the company continued to be hurt by chassis frame rail and axle supply issues. Levin said the frame rail problem had been completely overcome at International, which now has three suppliers of the product.
However, International only has one mirror supplier, and analysts questioned the company’s reliance on that source, which Chief Financial Officer Michael Jackstein said was something Traton was mulling.
“Where it makes sense to go for dual sourcing, instead of single sourcing, we clearly will consider this,” Jackstein said.
Navistar’s supply chain problems are long-standing and taking time to work through, said Levin.
“We took over a company that had a lot of problems, but they had a new factory facility in Texas, in San Antonio. But we were surprised to find that there was no systematic work improvement work at all ongoing,” Levin told analysts.
An International eMV electric truck sits on display at TMC 2023. (John Sommers II/Transport Topics)
“We have moved a lot of our top people, both from Europe and from Brazil, up and over to the U.S. and Mexico to support Navistar in revamping the entire production system, including the supply chain,” he said.
“So, there’s actually no surprise that we take those hits. There’s also no surprise that we’re last in line with the suppliers because we’ve been the one who has had the toughest relationships with suppliers based on our poor financial outcome and always being under pressure,” Levin said.
“This is something that we’re gradually working on. It’s not only about whether we go single or double sourcing. It’s really about another way of working … this is work that will take time,” he added.
Meantime, Navistar’s order book is nearly full for the rest of 2024, Traton’s top executive said. Truck orders in the most recent quarter totaled 13,594, compared with 7,833 in the year-ago period, the company said in a presentation accompanying the results.
The parent group’s orders in the most recent three-month period totaled 58,982, up 3.9% compared with 56,788 a year earlier.
Traton, the truck and bus unit of German automotive giant Volkswagen, sold 78,962 vehicles in Q2, down 5% compared with Q2 2023’s 83,527 trucks and buses.
“Customers are becoming more cautious in Europe and North America. Markets are normalizing after the last two very strong years,” Levin said on the call.
In the first half of 2024, Traton posted a profit of $2.304 billion, up 7% compared with $2.142 billion a year earlier.
The company’s sales revenue rose 2% to $25.401 billion from $24.852 billion in the first half of 2023, citing a continued normalization of market conditions.
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