Winners focus on what is important, now and over the long term. In 1999, we made fundamental improvements in the way we do business as a company. We proved that we know how to set targets, how to meet them and how to keep doing that over time. Our people set big goals, and held themselves accountable for achieving them. Here's what we accomplished relative to 1998:

• Sales of $8.6 billion, up 10 percent
• Net income of $366 million, up 44 percent
• Earnings per share of $5.52, up 59 percent

EXECUTIVE COUNCIL A newly organized executive council is leading Navistar into the next century. Pictured are (left to right) Robert A. Boardman, senior vice president and general counsel; Pamela J. Hamilton, senior vice president, human resources and administration; Daniel C. Ustian, president, engine and foundry group; John R. Horne, chairman, president and chief executive officer; J. Steven Keate, president, truck group; Robert C. Lannert, executive vice president and chief financial officer; and John J. Bongiorno, president, financial services.

[To Our Shareowners]

All these improvements exclude the benefits of our deferred tax asset valuation allowance adjustments. For the third year in a row, we raised our target for return on shareholder equity. For the third year in a row, we hit that new target. And we achieved this substantially improved performance even though we continued to invest heavily in programs designed to support future growth. Year over year, we spent an additional $125 million on new product development and start-ups. We also spent $498 million on capital investments. Just look at the building blocks we put in place this year:

NEW PRODUCTS We had the smoothest new product introductions in our history, including new heavy and severe service products, the International 9000i and 5000i, and a new line of more robust, in-line six-cylinder engines, the International 530E and DT466E. We also made great progress on our next generation vehicle and next generation diesel engine, which will power us in the new millennium. And we forged ahead with a 2000 capital investment program of $600 million that includes major investments in these next generation vehicle and diesel programs.

NEW BRAND IDENTITY We developed a new International logo that builds on the best of our tradition and brings it into the 21st century. We rededicated ourselves to achieve what our brand promises: "International understands and delivers the best ways to move our customers ahead. On the road and in their business."

NEW PARTNERSHIPS We expanded to South America with a major customer, Ford, in place, and served it through our partnership with Maxion Motores. We also established a progressive new labor contract with the Canadian Auto Workers that ensures our Chatham facility will continue to be competitive well into the future.

NEW FACILITIES We began the construction of new brick-and-mortar facilities, including our new cab stamping plant in Springfield, our new engine plant at Huntsville and our new Chicago suburban office facility at Cantera. We completed plant expansions in Escobedo and Garland. We made massive changes in Springfield to support the next generation vehicle, so that all of the required infrastructure will be in place well in advance of this new product's introduction in mid-2001. We announced a new facility in South Carolina for our fuel-injection joint venture with Siemens Automotive, and in December 1999, a new plant in Tulsa, Okla., to produce our integrated conventional school buses, which will revolutionize the industry.

NEW MANAGEMENT TEAM We strengthened our senior management team when Steve Keate was promoted to president of the truck group. We also named Dan Ustian president of the engine group and John Bongiorno president of financial services, in confirmation of their major contributions as leaders of these groups. All these senior managers have consistently delivered strong results, a sense of vision for the future, and a focus on the things that really count.

NEW ATTITUDE Of all our accomplishments this year, I'm proudest of this one. Looking around the company, there's a new culture of accountability. Our people deliver on their commitments. They don't look for excuses, they look for solutions.

In January, our plants in Indianapolis, Springfield, Fort Wayne, Chatham, Waukesha and Melrose Park were all hit by major blizzards. No one came to me, as some might have in the past, and used the bad weather as an excuse for poor performance. Instead, people fought back. They rounded up four-wheel-drive vehicles and brought in enough people to get the lines going. So when we held operating reviews at the end of January, our managers were able to tell me what their teams had done to make up for the weather.

With all these building blocks in place, we are well positioned for success, whichever way the industry may go. Each of our businesses is healthier than it was one year ago. They add up to a diverse company that is well positioned to succeed. And we are committed to doing it, year after year.

A special note. In August 1999, we were deeply saddened by the death of board member Jack Laskowski, United Auto Workers vice president. Jack will be remembered as a visionary and pragmatic leader. He was also a builder, committed to forging a true sense of partnership between management and represented employees. We will miss Jack.

John R. Horne
Chairman, President and Chief Executive Officer

December 16, 1999

  Annual Report 1999