Financial, Real Estate, Stock Markets Trends and Current Affairs

VARIANCE ANALYSIS

3Q-2007

3Q-2008

Change

Variance analysis

Actual

Estimates

%

Absolute

Sales and revenues

Sales of manufactured products,
net

                2,852

              3,879

            3,536

10%

               343

Finance revenues

                   104

                   75

                 94

-20%

                (19)

Sales and revenues, net

                2,956

              3,954

            3,629

9%

               325

                      -  

Costs of products sold

                2,428

              3,115

            2,968

5%

               147

Selling, general and
administrative expenses

                   368

                 386

               380

2%

                   6

Engineering and product
development costs

                     86

                 108

               102

6%

                   6

Interest expense

                   125

                   88

               102

-13%

 
              (14)

Other (income) expenses, net

                    (34)

                    (5)

                  -  

                  (5)

Total costs and expenses

                2,973

              3,692

            3,551

4%

               141

Equity in income of
non-consolidated affiliates

                     22

                   18

                 20

-9%

                  (2)

Income (loss) before income tax

                       5

                 280

                 98

187%

               182

Income tax benefit (expense)

                      (9)

                    (8)

                (29)

-73%

                 21

Net income (loss)

                      (4)

                 272

                 68

298%

               204

Basic earnings (loss) per share

                 (0.05)

                3.85

              0.97

296%

2.88

Diluted earnings (loss) per share

                 (0.05)

                3.68

              0.93

294%

2.75

Growth (y-o-y)

0%

Sales and revenues

U.S. military sales
increased to $1.2 billion (32% of sales) in 3Q2008 versus $59 million in
3Q2007 (3% of sales).

Sales of manufactured products,
net

-20%

36%

24%

12%

Finance revenues

24%

-28%

-10%

-18%

Sales and revenues, net

-19%

34%

23%

11%

Revenue growth

Truck

70%

49%

21.6%

Navistar's revenues
increased 34% yo-y as asgainst our estimates of 23%, primarily due to higher
than expected pricing improvement due to changing product mix and new product
launch.

Engine

-17%

-23%

5.8%

Parts

10%

3%

6.6%

Financial service

-29%

-14%

-14.9%

Sales and revenues, net

-19%

34%

23%

11%

Pricing growth

Truck (q-o-q)

3.9%

8.3%

-1.0%

9.3%

Navistar's unit price
in the truck segment increased 55% ahead of our estimates of 42% due to
greater than expected impact on pricing due to new product launch like
ProStar and higher than expected contibution from military segment.

Engine (q-o-q)

10.1%

11.3%

-0.8%

12.1%

Truck (y-o-y)

55%

42%

13.4%

Engine (y-o-y)

13.5%

1.2%

12.3%

Volume growth (y-o-y)

Navistar's
shipments (y-o-y growth)

Navistar's truck
shipments increased 10% in 3Q2008 versus our estimates of 5% increase while
its Engine shiments declined 27% as against our estiamtes of a 24%
decline.  Although Navistar's traditional
segments continued to face weakness, improved performance from military
segment helped the company to mitigate the weakness in other segemnts.

School buses

-26%

-16%

5%

-21%

Class 6 and 7 medium trucks

-54%

4%

-6%

9%

Class 8 trucks

-58%

48%

34%

14%

Total
Traditional Markets

-75%

18%

14%

5%

Total Expansion Markets

-25%

-4%

2%

-6%

Truck shipments

-58%

10%

5%

5%

Engine shipments

-15%

-27%

-24%

-3%

Costs of products sold

-19%

28%

22%

6%

Navistar's total cost
and expenses increased 24%, 5% ahead of estimated 19% increase. However due
to higher-than-expected pricing impact, Navistar's gross margins expanded to
21.2% compared to estimated gross margin of 18.2%
Simillarly we were expecting Navistar's operating margin to expand to 2.1%
from a negatve margin 0.6%. However Navistar's reported margins expanded
ahead of our expectations to 6.6%

Selling, general and
administrative expenses

15%

5%

3%

2%

Engineering and product
development costs

-25%

26%

19%

7%

Interest expense

6%

-30%

-19%

-11%

Total costs and expenses

-16%

24%

19%

5%

Gross margin

17.9%

21.2%

18.2%

3.0%

Operating margin

-0.6%

6.6%

2.1%

4.5%

Pre-tax margin

0.2%

7.1%

2.7%

4.4%

Net income margin

-0.1%

6.9%

1.9%

5.0%

Truck

Revenues

1,715

2,922

2,552

14%

370

Price per unit (000's)

69.7

108.2

98.9

9%

9.3

Navistar's chargeouts in units
(shipments)

School buses

3,200

2,700

3,375

-20%

Class 6 and 7 medium trucks

5,600

5,800

5,289

10%

Class 8 trucks

6,500

9,600

8,719

10%

Total Traditional Markets

2,600

18,100

17,383

4%

Total Expansion Markets

3,900

8,900

8,425

6%

Navistar's total shipments

                6,500

            27,000

          25,807

5%

Engine

Revenues

971

808

752

7.5%

56

Price per unit (000's)

8.97

10.19

9.08

12.2%

1.11

Unit sales

Ford

65,300

25,200

45,710

-45%

Other OEM

29,200

4,800

23,360

-79%

Total OEM sales

94,500

30,300

69,070

-56%

Intercompany sales

13,700

19,000

13,701

39%

Total sales

            108,200

            79,300

          82,771

-4.2%

Parts

Revenues

405

444

451

-1.6%

(7)

Financial service

Revenues

133

95

115

-17.3%

(20)