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School bus deal could mean $1.2 billion for Navistar affiliate

by Jason M. Breslow
May 15, 2008


BUSBUY

Photo courtesy IC Bus/Ketchum PR

The CE series buses being sold by IC Bus to First Student meet 2007 U.S. emissions standards.  

IC Bus LLC, a subsidiary of Warrenville-based Navistar International Corp., reached an agreement worth as much as $1.2 billion over five years to manufacture school buses for First Student Inc., of Cincinnati.

The agreement, announced Wednesday, extends through 2010 and represents one of the largest orders ever taken for a fleet of school buses, the companies said.  It also helps reverse a decline in Navistar’s school bus business, which went from a 64 percent market share in 2006 to a 60.5 percent market share in 2007.

“It’s a nice order for them and that market is probably more stable than commercial trucks which is being hurt by poor economic times,” said JB Groh, a senior research analyst at D.A. Davidson & Co. Groh gives Navistar a rating of “underperform.”

Under the terms of the contract IC Bus will begin delivering buses from its CE Series to First Student as early as this summer. The buses, powered by diesel engines, meet 2007 U.S. emission standards.  The company said no additional hiring is anticipated to carry out the contract.

The agreement also provides First Student, the largest school bus provider in North America, with options to purchase additional buses through 2012. First Student’s fleet of 60,000 yellow school buses transports nearly 4 million students in Canada and the U.S. each day.

“We’re very excited about it; they’re a good company,” said Roy Wiley, a Navistar spokesman.

The two companies declined to reveal how much the agreement would be worth without the options.  Nor would either side say how many buses have been ordered through 2010. According to Riley, however, the price of a typical school bus starts at approximately $85,000.