Navistar's (NAV) story over the last two decades has been a difficult one, with the company losing significant share in its core medium-duty and heavy-duty truck markets and suffering repeated hits to its reputation from product quality issues (including, but not exclusively, the well-known EGR fiasco). Adjusted annual revenue growth over the past 10-15 years has been slightly negative, with very little in the way of meaningful free cash flow generation, and the shares have done almost nothing over that time.
The five-year returns haven't been so bad, though, and now-former CEO Tony Clarke has done some good things with the company. Even so, I believe Traton's improved offer for the company is a good starting point, and I am encouraged by the board's willingness to pursue negotiations. While a fully turned-around Navistar would indeed be worth more than Traton's offer, perhaps substantially more, I believe shareholders have to weigh the upside potential against the risk of the company coming up well short of the performance metrics that would drive that upside.
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The Truck Cycle Has Likely Bottomed, And Negotiations With Traton Could Be Fruitful For Navistar
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