Navistar International (NAV)

Chief Executive Officer Compensation

          Mr. Horne stepped down as Chief Executive Officer on February 18, 2003 and as Chairman at the February 17, 2004 Annual Meeting.  In fiscal 2004, Mr. Horne was granted an option to purchase 179,600 shares of Common Stock as part of the annual grant to Company executives.

          Mr. Ustian became Chief Executive Officer on February 18, 2003 and Chairman at the February 17, 2004 Annual Meeting.  In fiscal 2004, Mr. Ustian earned a base salary of $933,333, which includes an adjustment in January 2004 to recognize his promotion to Chairman.  Mr. Ustian’s fiscal 2004 base salary is below the 50th percentile of base salaries for comparable positions.  Mr. Ustian was granted option to purchase 136,800 shares of Common Stock as part of the annual grant to Company executives in fiscal 2004.  These awards are both competitive and commensurate with market practice given recent Company and individual performance.

          Annual incentive payments were not awarded in 2004 for fiscal 2003 as the Company did not earn a profit.  The annual cash incentive payments earned in fiscal 2004 and paid in 2005 are awarded based on the achievement of a challenging return on equity goal for the Company established by the Committee, as well as the achievement of various non-financial goals of each business unit.  These non-financial goals include, but are not limited to, cost, quality and growth initiatives.

          It is the Committee’s view that the Company’s executive compensation programs and awards provide a significant link between individual and corporate performance and compensation paid.  We also believe that the programs are appropriate in the current competitive market and in the shareowners’ interests.

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