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Icahn calls Navistar 'poster child for abysmal business decisions'

by Lou Whiteman | Published September 10, 2012 at 3:25 PM

Activist investor Carl Icahn has ended months of silence on Navistar International Corp., criticizing the company's hiring of a new CEO and demanding seats on the troubled truckmaker's board.

Icahn, who through affiliates owns nearly 15% of Navistar's shares outstanding, in a letter to the board called the Warrenville, Ill.-based company "a poster child for abysmal business decisions and poor corporate governance." He claimed the board is "at war with its own shareholders," and urged it to appoint four new directors immediately "before any more damage is done."

Navistar has been under pressure for nearly a year due to problems stemming from its 2001 decision to invest more than $700 million in an ambitious, but so far not viable, technology designed to meet higher emission standards. The company has suspended guidance, ousted CEO Dan Ustian and last week said it was restructuring its operations and would consider asset sales.

Icahn is one of a number of activists who have amassed stakes in Navistar over the last year, with one-time Icahn protégé Mark Rachesky also amassing a stake that pushes up against the company's 15% poison pill trigger. But the investors have been mostly silent over the summer as conditions at Navistar worsened.

Icahn is particularly critical of the board's choice of Lewis B. Campbell to replace Ustian, saying the executive has no experience in the heavy-truck industry and "a questionable track record" at industrial conglomerate Textron Inc., where he served as CEO from 1998 to 2009. Icahn said that during Campbell's tenure Textron's shares went from $37 apiece to $20 apiece, "primarily because of a risky financial subsidiary which lent money to a golf course and time share project."

Unsaid in the letter is that shares of Textron enjoyed some strong runs during Campbell's tenure, hitting a high of $73.38 in late 2007 before falling precipitously at the onset of the financial crisis.

Navistar in a statement Monday, Sept. 10, said its board "takes its fiduciary duties very seriously" and the company "maintains an ongoing dialogue with its shareholders," but criticized Icahn's letter.

"We are extremely disappointed that Mr. Icahn has chosen to pursue his unproductive tactics of threats, attacks, and disruption rather than continuing constructive engagement, particularly at this important time for Navistar," the company said. "Rest assured, the board and management have a clear path forward and are focused on executing on their plan and delivering value to shareholders."

Icahn said he is prepared to make a request under Delaware general corporate law to access corporate documents and board proceedings, and threatened dire consequences for the board should it not cooperate. The investor in his letter said he "would prefer to amicably resolve this matter now, rather than through protracted litigation and a proxy fight," and urged directors to consult legal advisers on matters including personal liability for breaches in fiduciary duty.

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Icahn calls Navistar 'poster child for abysmal business decisions'

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