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STN: WHAT ROLE DO IC BUS’ DEALERS PLAY FOR THE COM- PANY?
JM: Our dealer network is one of our greatest assets, we think it is the strongest dealer network in the industry. Part of what makes IC Bus who we are is we believe in providing support to our customers from start to finish, having them “covered” if you will. Our IC Bus dealers play that role for us. Tey are the conduit through which we work with customers, thus vital to our continued success.
STN: HOW IS THE COMPANY DOING FINANCIALLY IN THIS DOWN ECONOMY?
JM: IC Bus is financially sound. As part of a larger organization such as Navistar, we have been able to benefit from an organization that is diversified in its business, not solely relying upon the school bus or truck market. Within IC Bus specifically, our extension into the global commercial bus business has helped us diversify our rev- enue streams, which in a down school bus market allows us the ability to continue to reinvest into our school bus business.
STN: HOW IS IC BUS LEVERAGING NAVISTAR’S RELATIONSHIPS THROUGHOUT THE MEDIUM- AND HEAVY-DUTY MARKET- PLACE (I.E. RECENT ASSET PURCHASE AND FORMATION OF MONACO RV LLC, INTERNATIONAL MOVEMENT WITH MA- HINDRA MAHINDRA, ETC.) ECONOMIES OF SCALE?
JM: Trough the business and relationships Navistar has in the truck market, IC Bus is able to draw upon these not only to leverage econ- omies of scale with suppliers but also in product development. Our inventory of available components to select from in new product development or processes allows us to more effectively control de- velopment costs. For example, take something like a headlight. With our relationships around the world, we can tap into existing compo- nentry, versus developing it from scratch ourselves. Tis allows us to control costs while still bringing a world class school bus to market.
STN: WHAT IS THE CURRENT VIEW FROM IC BUS OF THE STATE OF THE SCHOOL BUS INDUSTRY?
JM: We see the industry being down this year about 20 percent. With the economic downfall, school revenues are down, lead- ing to a decrease of bus purchases. Tis unfortunately has been added onto an industry that had already been facing pressure. If we look back to before the economic collapse, the industry was shrinking due to revenue short falls, rising fuel prices, and paren- tal indifference to school bus service. Tis decline, while impor- tant to me as an employee of a bus manufacturer, is important as well as I’m a father of school age children. I want them to be able to ride the bus to and from school, which is why groups such as the American School Bus Council are so important. We still have a few months left [as of this interview], and the potential for or- dering in advance of the emissions change, but the reality is that many school districts started a new budget year July 1, and it is this fiscal year where they will feel the hit of the economy. While school districts may want to order prior to the emissions change,
a lot will not have the money to do so. STN: DO YOU SEE ANY SPECIFIC TRENDS THAT ARE FUEL- ING YOUR CONFIDENCE FOR THE LONG-TERM STRENGTH OF SCHOOL TRANSPORTATION?
JM: What gives me confidence in the long term strength of the school bus industry is the fact that a lot of people care about it. When visiting with customers, you can see the passion they have for what they do, that they believe in the benefits of the yellow school bus. And knowing that they are supported by great or- ganizations such as NAPT, NASDPTS, NSTA, and the American School Bus Council, gives me confidence that the school bus in- dustry will not only survive, but grow and prosper.
STN: CAN YOU EXPLAIN/BREAK DOWN THE RECENT $6,000 TO $8,000 PRICE INCREASES FOR YOUR 2010 VEHICLES? HOW MUCH IS TIED TO THE NEW ADVANCED EGR ENGINE AND HOW MUCH IS TIED TO OTHER MATERIALS?
JM: With each emissions change, bus and engine manufacturers have incurred costs to comply with the strict emissions standards set by the EPA. While I can’t break down the cost between en- gine and vehicle, with stricter emissions controls comes research and development costs to meet the standards. Navistar’s engine group has spent millions of dollars on R&D to be able to develop and hone MaxxForce Advanced EGR. While we understand our customers have a difficult time absorbing any price increase, we feel they will appreciate the benefits.
STN: WHAT IS THE IC BUS VISION OVER THE NEXT SIX MONTHS, YEAR FOR WEATHERING THE CURRENT ECO- NOMIC CONDITIONS? ARE THERE LONGER RANGE GOALS?
JM: Our plan to weather the economic storm is simple; we have to stay committed to executing on our strategy. First, we have to deliver 2010 EPA compliant engines using MaxxForce Ad- vanced EGR. We are on track, but it is important that we stay focused to ensure we deliver engines and buses that perform as our customers demand. Second, we have to continue to work to control bus costs. Keeping the pressure on now will only benefit our customers when the economy begins to turn around and commodity prices trend upward again. Finally, we need to deliv- er on the product programs that we have designed to improve our customers’ experience with our buses. New seat frames, new electrical harnesses and mirrors, along with longer ranging programs, designed to improve the operational experience our customers have with our buses.
STN: HOW BIG OF A ROLE DO YOU SEE PRE-BUYS AHEAD OF THE 2010 ENGINE REQUIREMENTS PLAYING INTO PURCHAS- ING DECISIONS THIS YEAR?
JM: We feel the impact of a pre-buy will be small. Many custom- ers would like to, but simply do not have the funding to do so. Some will be the recipients of grants, which will allow them to advance their school bus buys. But the federal dollars to do so were stretched pretty thin. A lot of customers looking for federal
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