Interview with Nick Matich, general manager of International’s severe service applications

Not many years ago, International Truck and Engine was in a long-term struggle simply to survive. As a survivor of once-mighty International Harvester, International’s parent company Navistar Financial was beset with financial and management difficulties throughout the 1980s and into the ’90s. As a result, the company’s trucks – always reliable and durable – fell behind the curve in terms of technology and styling. Despite the turmoil, International engineers never stopped planning, designing and dreaming about the trucks they’d build if they ever got the chance.

In the mid ’90s, that long-hoped-for opportunity arrived. The company had weathered a financial storm of cutbacks, plant closings and organizational restructuring and survived. It had money to invest in R&D and did so with a vengeance. More than $500 million went into the
design and development of International’s Next Generation Vehicle, which turned heads when it debuted in 2001. Critics expecting a stodgy, bland truck were surprised by the modern styling, tight body tolerances, advanced electronics and comfortable cab offered on the new truck. Clearly, International had turned a corner.

Nick Matich is general manager of International’s Severe Service line of vocational trucks. He joined the company in 2001 after 34 years with General Motors. Initially working as vice president of operations, Matich took over Severe Service operations in 2004 and also oversees quality control for the truck organization at large.

Q. What was your first impression when you joined International three years ago?

A. International invited me out to Las Vegas to see the launch of the Next Generation Vehicle during the interview process. When I saw the truck and understood what the company was doing and where it was going with its product lineup – that was exciting as well. I absolutely was convinced from a product standpoint they were on a path to win and dominate the trucking industry.

As I went around and I met people at the company I was impressed with the quality of the people here – they were committed to winning, they were excited about the business and had a set of core values and principals they lived by. For me that was important. That told me I’d fit into the culture here.

Q. Do you have a personal motto or creed that guides you in running International’s severe service business?

A. “Great damn trucks, period.” That’s what we’re all about. We are creating great trucks: Great from the standpoint of how they’re styled and how they’re designed. Great from the standpoint of the technology in them and great in terms of reliability, durability, ruggedness and the quality of those vehicles, which I think is absolutely the best in the industry.

Q. Currently, rising steel and fuel prices and increased demand for trucks are creating supply problems for both truck OEMs and customers. How is International dealing with these issues?

A. People act like they were surprised when steel prices shot up and we shouldn’t have been. The indicators have been there for a long time – things like the rate of construction growth in China, tariffs and so on. The tariffs were actually a good scrimmage for what we’re going through today. When they hit us we had to become creative in terms of how we use steel and how we managed it, whether it was raw material, a work in process or a finished product. And so we went through all of those considerations before the natural market forces drove steel prices even higher.

As a result, I think we’ve done a good job of managing the impact of steel. And I also give our suppliers a lot of credit in that regard as well. It would have been easy for everybody in the industry to say “Oh. Prices have gone through the roof. We’re just going to pass all of this on to the customer.” I think our suppliers have been responsible in terms of looking at ways to offset the increase in steel, as have we. It has challenged us to be more creative in finding ways to offset the steel surcharges we were getting and continually look at ways to cut out costs in our business.

We have passed on some of the steel surcharges we’ve experienced to our customers. It’s not over yet, though. We’re working on it every day. We try to be creative – working the margins and driving creativity between the suppliers, the engineers and the vehicle center to figure out ways to manage that cost. So although our customers are seeing some price increases, we’ve been responsible and held those costs low. We will continue to be aggressive in terms of protecting our customers as much as we can.

From the OEM side fuel prices are affecting our customers’ buying patterns. The fuel impact on vocational customers has been different than from national line haul fleets. We understand that most vocational customers want their fuel economy and their fuel tank size to complement each other: They want to be able to run the vehicle a full working day on a single tank of fuel. We have positioned our trucks to meet those needs.

I think we all feel a little helpless right now about fuel costs. But we’ve gone through fuel price hikes so many times and we’re going to always go through them – it’s a problem that’s here to stay. But I do believe fuel prices will come down again. As we continue to see more stability in the Middle East it will improve.

But we’re going to continue to focus on making extremely fuel-efficient vehicles. That focus is from an aerodynamic standpoint and making sure that the engine technologies are where they need to be to meet current vocational demands and government regulation. When we put a truck together and sell it, we want to be sure all of its drivetrain components are integrated to the point where customers are getting the best possible package.

Q. Talk a little about the shift in culture that’s taken place at International in the past few years.

A. I give a lot of credit for the turnaround to our recently retired chairman and CEO John Horn. John was a product guy who worked on the leadership teams of both the engine side and the truck sides of our business. He realized that if International was going to be the great company he envisioned, it was going to have to grow. And in order to grow you have to have new products. He had the courage to make that commitment and see it through. And not only did we invest in the products but we also invested in the processes so we would have world-class products when they came out of the plant. A great design suffers from a poor manufacturing process. Dan Ustian, chairman, president and CEO of Navistar, is a strong supporter of this culture.

Engineers can’t work on great product, such as the Next Generation Vehicle, and not get excited about it. When we introduced it, we hadn’t launched an entirely new product in almost 20 years. The chance to do so gets the juices flowing for engineering people. We’re also willing to invest in new processes and cutting-edge manufacturing concepts in our plants. So this culture started with a vision and the courage to execute it. And now we’re at a point where it’s really feeding on itself because of the excitement and attitude at International.

Q. So it’s not going to be another 20 years before International launches another new truck?

A. No. This is a company that is on the leading edge now – not the bleeding edge. But any new technology we pursue has got to be proven. We don’t want our customers to suffer and lose downtime or productivity. A great example is the multiplexed electronic system in the Next Generation Vehicle. We were ahead of the automotive industry when we launched that truck – and it’s unheard of for a heavy-duty truck manufacturer to beat auto manufacturers to market with new technologies. Usually the trucking industry follows automobile innovations.

This technology is so advanced we – and our customers – haven’t fully realized the potential benefits. We know it works great in terms of body installations and integrating the truck’s operating systems. But this technology can also help our customers run their businesses better; make them more productive and more cost effective in their markets. I think we’ve touched maybe on a tenth of the potential. And now those base technologies are in place, we’re just going to continue to roll out vehicle capabilities the customers can afford and put to good use in their businesses.

Q. A couple of new trucks – the SmartTruck III and the CXT pickup – are certainly a departure from the past 20 years of offerings from International. Are these trucks merely a way to showcase your new attitude and technology, or is International reaching out to new vocational markets and customers?

A. The CXT pickup truck is one that’s near and dear to my heart as well as to the whole severe-service team. And it showcases exactly what I’m talking about: Less than two years ago, the severe-service team went out on their own and designed and built the first one. And that’s what happens when a culture develops the way ours has developed in the past decade or so. People are willing to take those kinds of risks. When they built the first 7300 pickup truck, as an organization we weren’t ready for it. But we are now. And heck, I’d argue that our customer base is absolutely ready for it. Now, it’s not a product for everybody. And we’re just starting to understand the opportunities are broader than we first thought for the truck.

For me, the CXT is a bold statement about what International as a whole is all about. We are about being big. We are about being bold. And the SmartTruck fits into that philosophy as well. It started out as a concept vehicle for the military because we believe there’s a need we can fill for our Armed Forces. And then we stepped back to look at the truck and realized there are commercial applications as well because the core vehicle is based on our multiplexing capabilities. That technology absolutely astounded the military. You can locate the truck out in the field anywhere in the world; you can communicate with its crew in real time; you can program in routes, and if it goes off a predetermined route then a signal can bring it back to where it needs to be. Obviously that same technology also makes sense in the commercial world.

So it’s a little bit of both, I guess. We’re showcasing our technology to a certain extent. But at the same time, it’s technology that has real value for our customers and these new trucks reflect that idea.

Q. What does the future hold for International?

A. Navistar has set a bold goal to become a $15 billion company by increasing market share with existing products through the introduction of new products in current markets, as well as by finding new business opportunities in similar markets. Industry leading quality and disciplined cost management will be enablers for future growth.

Q. International will then be a global corporation?

A. In order to double the size of our company – and the market is only so large in the United States – we’d have to put some of our competitors out of business. And I don’t think that’s realistic. But there are plenty of places in the world where the International Harvester heritage of International is still well recognized. We have the ability to leverage that reputation and build new products that live up to that name. We’re also going to have to continue do things differently as a company. So for me that’s exciting. Because it’s always more fun and exciting when you think about how you’re going to grow versus just trying to survive.