Navistar International Corporation (NYSE:NAV) is downgraded by Fitch Ratings from B to C, which shows that overall outlook is Negative for the company.
The Negative Rating outlook reveals the company’s negative manufacturing free cash flow (FCF) and sharp liquidity risk, and the same thing would continue for 2013.
Company is facing large number of challenges to keep away the liquidity pressures, and free cash flow could be reduce by implementation of NAV’s revised engine policy, reduction in workforce and possible extra reforms should be needed.
Other issue that could be related to reduce free cash flow is lower sales volumes estimated for the fourth quarter, and limited margins linked to the use of Cummins SCR technology, the cost of non-conformance penalties (NCPs), and higher guarantee expense for NAV’s emissions compliant engines.
According to the analyst of Fitch the industry demand for the company products and the speed of the company’s market share are hard to estimate and the confidence of customer on Navistar International Corporation is negative.
The company’s market share started to decline in August, But the company’s near financial condition will be define by the efficiency and timing of NAV’s transition to its revised emissions technology.
According to the company estimates, they would become productive when they bring their NAV’s ICT+ engines in 2013, but according to the analysts the timing between the depletion and full production could damage the company and its market shares at least temporarily. Another possibility, the company will need approval by the EPA for its reconfigured emissions equipment.
Navistar International Corporation (NYSE:NAV) plans to preserve its cash by redirecting product development to its engine policy; cut off its investments related to its global expansion and reduced its capital investment. The long-term actions are required by NAV to adopt restructuring by controlling cost structure and reductions in workforce.
According to Fitch the rating will be positive if manufacturing free cash flow returns toward a breakeven level by the start of financial year 2013, NAV’s latest engine policy is execute on time and at reasonable price, then NAV’s market share begins to recover.
