<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


      ( X )   QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 1999

                                       OR

      (   )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to

Commission file number 1-9618

                       NAVISTAR INTERNATIONAL CORPORATION
                       ----------------------------------
             (Exact name of registrant as specified in its charter)

                     Delaware                             36-3359573
          -------------------------------             -------------------
          (State or other jurisdiction of              (I.R.S. Employer
           incorporation or organization)             Identification No.)

 455 North Cityfront Plaza Drive, Chicago, Illinois          60611
 --------------------------------------------------    ------------------
         (Address of principal executive offices)          (Zip Code)

        Registrant's telephone number, including area code (312) 836-2000

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  12 months and (2) has been  subject to such  filing
requirements for the past 90 days. Yes X   No
                                      ---    ---

                       APPLICABLE ONLY TO ISSUERS INVOLVED
                        IN BANKRUPTCY PROCEEDINGS DURING
                            THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes     No
                         ---    ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     As  of  February  28,  1999,  the  number  of  shares  outstanding  of  the
registrant's common stock was 66,149,583.

                                     - 1 -

<PAGE>

                       NAVISTAR INTERNATIONAL CORPORATION
                          AND CONSOLIDATED SUBSIDIARIES
                           --------------------------


                                      INDEX
                                    ---------
                                                                    Page
                                                                  Reference
                                                                  ---------

Part I.  Financial Information:

     Item 1. Financial Statements:

     Statement of Income --
         Three Months Ended January 31, 1999 and 1998...........      3

     Statement of Financial Condition --
         January 31, 1999, October 31, 1998 and January 31, 1998      4

     Statement of Cash Flow --
         Three Months Ended January 31, 1999 and 1998...........      5

     Notes to Financial Statements..............................      6

     Supplemental Financial Information.........................      9

     Item 2.    Management's Discussion and Analysis of Results
                of Operations and Financial Condition...........     10

Part II. Other Information:

     Item 1.    Legal Proceedings...............................     15

     Item 6.    Exhibits and Reports on Form 8-K................     15

     Signature  ................................................     16

                                     - 2 -

<PAGE>

                         PART I - FINANCIAL INFORMATION
                         ------------------------------

ITEM 1.  Financial Statements

STATEMENT OF INCOME (Unaudited)
-------------------------------------------------------------------------------
Millions of dollars, except per share data
-------------------------------------------------------------------------------
                                                  Three Months Ended January 31
                                                  -----------------------------
                                                      Navistar International
                                                          Corporation and
                                                     Consolidated Subsidiaries
                                                     -------------------------
                                                       1999             1998
                                                      ------           ------
Sales and revenues
Sales of manufactured products ................       $1,837           $1,672
Finance and insurance revenue .................           62               45
Other income ..................................           25               10
                                                      ------           ------
  Total sales and revenues ....................        1,924            1,727
                                                      ------           ------

Costs and expenses
Cost of products and services sold ............        1,544            1,454
Postretirement benefits .......................           49               45
Engineering and research expense ..............           58               35
Marketing and administrative expense ..........          126               98
Interest expense ..............................           32               17
Other expenses ................................           16               17
                                                      ------           ------
  Total costs and expenses ....................        1,825            1,666
                                                      ------           ------

    Income before income taxes ................           99               61
    Income tax expense ........................           38               23
                                                      ------           ------
Net income ....................................           61               38

Less dividends on Series G preferred stock ....            -                7
                                                      ------           ------
Net income applicable to common stock .........       $   61           $   31
                                                      ======           ======

Earnings per share
     Basic ....................................       $  .92           $  .43
     Diluted ..................................       $  .91           $  .42

Average shares outstanding (millions)
     Basic ....................................         66.4             71.6
     Diluted ..................................         67.1             72.5

See Notes to Financial Statements.

                                     - 3 -

<PAGE>

STATEMENT OF FINANCIAL CONDITION (Unaudited)
-------------------------------------------------------------------------------
Millions of dollars
-------------------------------------------------------------------------------
                       Navistar International Corporation
                          and Consolidated Subsidiaries
                                    -------------------------------------------
                                     January 31      October 31      January 31
                                        1999            1998            1998
                                     ----------      ----------      ----------
ASSETS
-----------------------------------
Cash and cash equivalents .........    $  477         $  440           $  188
Marketable securities .............       270            624              361
                                       ------         ------           ------
                                          747          1,064              549
Receivables, net ..................     2,051          2,146            1,543
Inventories .......................       560            505              524
Property, net of accumulated
  depreciation and amortization
  of $1,024, $976 and $907 ........     1,134          1,106              896
Investments and other assets ......       253            246              294
Intangible pension assets .........       199            199              212
Deferred tax asset, net  ..........       876            912              911
                                       ------         ------           ------
Total assets ......................    $5,820         $6,178           $4,929
                                       ======         ======           ======
LIABILITIES AND SHAREOWNERS' EQUITY
-----------------------------------
Liabilities
Accounts payable, principally trade    $1,106         $1,273           $1,033
Debt: Manufacturing operations ....       472            450              125
      Financial services operations     1,520          1,672            1,020
Postretirement benefits liability .       945            934              893
Other liabilities .................       957          1,080              885
                                       ------         ------           ------
    Total liabilities .............     5,000          5,409            3,956
                                       ------         ------           ------
Commitments and contingencies

Shareowners' equity
Series G convertible preferred
  Stock ...........................    $    -         $    -            $ 240
Series D convertible junior
  preference stock ................         4              4                4
Common stock (75.3, 75.3 and
  55.4 million shares issued) .....     2,140          2,139            1,748
Class B Common stock (19.9 million
  shares issued at January 31, 1998)        -              -              388
Common stock held in treasury,
  at cost .........................      (214)          (214)            (136)
Retained earnings (deficit) .......      (770)          (829)          (1,077)
Accumulated other
  comprehensive loss ..............      (340)          (331)            (194)
                                       ------         ------           ------
    Total shareowners' equity .....       820            769              973
                                       ------         ------           ------
Total liabilities                      $5,820         $6,178           $4,929
  and shareowners' equity .........    ======         ======           ======

See Notes to Financial Statements.

                                     - 4 -

<PAGE>

STATEMENT OF CASH FLOW (Unaudited)
------------------------------------------------------------------------------
For the Three Months Ended January 31 (Millions of dollars)
------------------------------------------------------------------------------
                                                       Navistar International
                                                          Corporation and
                                                     Consolidated Subsidiaries
                                                     -------------------------
                                                        1999            1998
                                                       ------          ------
Cash flow from operations
Net income .................................           $   61          $   38
Adjustments to reconcile net income
  to cash used in operations:
  Depreciation and amortization ............               49              39
  Deferred income taxes ....................               39              23
  Postretirement benefits funding in excess
    of expense .............................                7            (294)
  Other, net ...............................              (14)            (35)
Change in operating assets and liabilities:
  Receivables ..............................             (116)             (7)
  Inventories ..............................              (63)            (31)
  Prepaid and other current assets .........              (11)             (4)
  Accounts payable .........................             (166)            (60)
  Other liabilities ........................             (114)             (1)
                                                       ------          ------
Cash used in operations ....................             (328)           (332)
                                                       ------          ------
Cash flow from investment programs
Purchase of retail notes and lease
  receivables ..............................             (316)           (237)
Collections/sales of retail notes
   and lease receivables ...................              518             485
Purchase of marketable securities ..........             (127)           (129)
Sales or maturities of marketable
  securities ...............................              481             128
Capital expenditures .......................              (48)            (60)
Property and equipment leased to others ....              (23)            (41)
Other investment programs, net .............              (10)              7
                                                       ------          ------
Cash provided by investment programs .......              475             153
                                                       ------          ------
Cash flow from financing activities
Issuance of debt ...........................               48              48
Principal payments on debt .................              (92)            (24)
Net decrease in notes and debt outstanding
  under bank revolving credit facility
  and asset-backed and other commercial
  paper programs ...........................              (86)           (211)
Mexican credit facility ....................               20              35
Repurchase of common stock .................                -             (83)
Dividends paid .............................                -              (7)
                                                       ------          ------
Cash used in financing activities ..........             (110)           (242)
                                                       ------          ------
Cash and cash equivalents
  Increase (decrease) during the period ....               37            (421)
  At beginning of the year .................              440             609
                                                       ------          ------
Cash and cash equivalents
  at end of the period .....................           $  477          $  188
                                                       ======          ======
See Notes to Financial Statements.

                                     - 5 -

<PAGE>

        Navistar International Corporation and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)

Note A.  Summary of Accounting Policies

       Navistar  International  Corporation is a holding company whose principal
operating   subsidiary   is   Navistar   International    Transportation   Corp.
(Transportation).  As used hereafter, "company" or "Navistar" refers to Navistar
International  Corporation and its consolidated  subsidiaries.  The consolidated
financial  statements  include  the  results  of  the  company's   manufacturing
operations and its wholly owned financial services subsidiaries.  The effects of
transactions  between the manufacturing and financial  services  operations have
been eliminated to arrive at the consolidated totals.

       The  accompanying  unaudited  financial  statements have been prepared in
accordance with accounting  policies described in the 1998 Annual Report on Form
10-K and should be read in conjunction with the disclosures therein.

       In the opinion of management,  these interim financial statements reflect
all adjustments,  consisting of normal recurring accruals,  necessary to present
fairly  the  financial  position,  results of  operations  and cash flow for the
periods presented. Interim results are not necessarily indicative of results for
the full year.  Certain 1998 amounts have been  reclassified to conform with the
presentation used in the 1999 financial statements.

Note B.  Supplemental Cash Flow Information

       Consolidated  interest payments during the first three months of 1999 and
1998 were $31 million and $25 million,  respectively.  Consolidated tax payments
made during the first three months of both 1999 and 1998 were not material.

Note C.  Income Taxes

       The benefit of Net Operating Loss (NOL)  carryforwards is recognized as a
deferred tax asset in the Statement of Financial Condition,  while the Statement
of Income  includes  income taxes  calculated at the statutory  rate. The amount
reported  does not  represent  cash  payment of income  taxes except for certain
state income,  foreign  withholding and federal  alternative minimum taxes which
are not  material.  In the  Statement of Financial  Condition,  the deferred tax
asset is  reduced by the  amount of  deferred  tax  expense  or  increased  by a
deferred tax benefit  recorded  during the year.  Until the company has utilized
its significant NOL carryforwards, the cash payment of federal income taxes will
be minimal.

                                     - 6 -

<PAGE>

        Navistar International Corporation and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)

Note D. Inventories

     Inventories are as follows:

                            January 31         October 31          January 31
Millions of dollars            1999               1998                1998
-----------------------------------------------------------------------------
Finished products.........   $    278            $    223            $    271
Work in process...........         85                  69                 109
Raw materials and supplies        197                 213                 144
                             --------            --------            --------
Total inventories.........   $    560            $    505            $    524
                             ========            ========            ========

Note E.  Financial Instruments

       The company purchases  collateralized  mortgage  obligations  (CMOs) that
have  predetermined   fixed-principal  payment  patterns  which  are  relatively
certain.  At January 31,  1999,  these  instruments  totaled $86 million and the
unrecognized  gain was not  material.  At quarter  end, $37 million of a Mexican
subsidiary's receivables were pledged as collateral for bank borrowings.

       In November 1998,  Navistar  Financial  Corporation (NFC) sold fixed rate
retail  receivables  on a variable rate basis.  For the protection of investors,
NFC issued an interest rate cap. Under the terms of the agreement, NFC will make
payments if interest rates exceed certain levels. The notional amount of the cap
amortizes based on the expected outstanding principal balance of the sold retail
receivables. As of January 31, 1999 the notional amount was $517 million and the
interest rate cap had a fair value of $1.8 million.

       At January  31,  1999,  NFC held  forward  treasury  locks with  notional
amounts  of  $100  million  in  anticipation  of  a  May  1999  sale  of  retail
receivables.  The  unrealized  gain on  these  forward  treasury  locks  was not
material.  In addition,  the company held Canadian dollar forward contracts with
notional  amounts of $95 million and other  derivative  contracts  with notional
amounts of $11  million.  The  unrealized  net loss on these  contracts  was not
material.

Note F.  New Accounting Pronouncements

     Effective  November  1,  1998,  Navistar  adopted  Statement  of  Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" which establishes
standards for reporting and display of comprehensive  income and its components.
Financial  statements  for prior periods have been  reclassified  as required by
this statement. Navistar's total comprehensive income was as follows:

                                                    Three Months Ended
                                                         January 31
                                              ------------------------------
Millions of dollars                             1999                   1998
--------------------------------------        --------              --------

Net income............................        $     61              $     38
Other comprehensive income (loss).....              (9)                    1
                                              --------              --------
     Total comprehensive income.......        $     52              $     39
                                              ========              ========

                                     - 7 -

<PAGE>

        Navistar International Corporation and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)

Note G. Earnings  Per Share

        Earnings per share was computed as follows:

                                                 For The Three Months Ended
                                                         January 31
                                              -------------------------------
                                                1999                   1998
                                              --------              ---------
Millions of dollars,
except share and per share data
--------------------------------------
Net income............................        $     61              $     38
Less dividends
  on Series G Preferred stock.........               -                     7
                                              --------              --------
Net income applicable to common stock
  (Basic and Diluted).................        $     61              $     31
                                              ========              ========

Average shares outstanding (millions)
     Basic............................            66.4                  71.6
        Dilutive effect of options
          outstanding and other
          dilutive securities.........              .7                    .9
                                              --------              --------
     Diluted..........................            67.1                  72.5
                                              ========              ========

Earnings per share
     Basic............................        $    .92              $    .43
     Diluted..........................        $    .91              $    .42


       Unexercised  employee stock options to purchase .3 million and .7 million
shares of Navistar  common stock during the three months ended  January 31, 1999
and 1998,  respectively,  were not included in the computation of diluted shares
outstanding  because the exercise  prices were  greater than the average  market
price of Navistar common stock.  Additionally,  the diluted calculation excludes
the effects of the conversion of the Series G preferred stock as such conversion
would produce anti-dilutive results.

Note H.  Subsequent Events

     Effective  February 1, 1999,  the  functional  currency  for the  company's
Mexican  subsidiaries  changed from the U.S.  dollar to the Mexican peso because
Mexico is no longer considered a highly inflationary  economy.  While management
does not expect the change in functional  currency to have a material  impact on
the company's  financial  position,  results of  operations  or cash flows,  the
ultimate  impact of this  change is  dependent  upon the  volume of U.S.  dollar
denominated  transactions,  changes  in  exchange  rates and the extent to which
currency risk may be hedged.

     In March 1999, the company  announced that it had finalized a joint venture
with a Brazilian  diesel engine producer to manufacture  diesel engines in South
America.

                                     - 8 -

<PAGE>

        Navistar International Corporation and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)

Supplemental Financial Information

Navistar  International  Corporation (with financial  services  operations on an
equity basis) in millions of dollars:

                                                    Three Months Ended
                                                         January 31
                                                  -----------------------
Condensed Statement of Income                       1999           1998
------------------------------------------------  --------       --------

Sales of manufactured products..................  $  1,837       $  1,672
Other income....................................        19             10
                                                  --------       --------
Total sales and revenues........................     1,856          1,682
                                                  --------       --------

Cost of products sold...........................     1,534          1,448
Postretirement benefits.........................        49             45
Engineering and research expense................        58             35
Marketing and administrative expense............       115             89
Other expenses..................................        35             27
                                                  --------       --------
Total costs and expenses........................     1,791          1,644
                                                  --------       --------

Income before income taxes
  Manufacturing operations......................        65             38
  Financial services operations.................        34             23
                                                  --------       --------
    Income before income taxes..................        99             61
    Income tax expense..........................        38             23
                                                  --------       --------
Net income......................................  $     61       $     38
                                                  ========       ========



                                                         January 31
                                                  -----------------------
                                                    1999           1998
                                                  --------       --------
Selected Statement of Financial Condition
and Cash Flow Data
------------------------------------------------
Cash, cash equivalents
  and marketable securities.....................  $    593       $    387
Total assets....................................     4,132          3,742
Total liabilities...............................     3,312          2,769
Capital expenditures............................       (48)           (60)
Depreciation and amortization...................        38             32
Change in operating assets and liabilities......      (301)          (101)
Cash used in operations.........................      (173)          (308)
Cash provided by (used in) investment programs..       191            (54)
Cash provided by (used in) financing activities.        22            (56)

                                     - 9 -

<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
        OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS

       Certain  statements  under  this  caption   constitute   "forward-looking
statements"  under the  Reform  Act,  which  involve  risks  and  uncertainties.
Navistar  International  Corporation's  actual results may differ  significantly
from the results  discussed  in such  forward-looking  statements.  Factors that
might cause such a difference  include,  but are not limited to, those discussed
under the heading "Business Environment."

       The  company  reported  net income of $61  million,  or $0.91 per diluted
common share, for the first quarter ended January 31, 1999 primarily  reflecting
higher sales of manufactured  products.  Net income was $38 million, or $.42 per
diluted common share, for the same period last year.

       The  company's  manufacturing  operations  reported  income before income
taxes of $65 million  compared  with  pretax  income of $38 million in the first
quarter  of 1998  reflecting  higher  sales of trucks and  diesel  engines.  The
financial services  operations' pretax income for the first three months of 1999
increased $11 million to $34 million primarily  reflecting a legal settlement in
favor of the company's insurance subsidiary.

       Sales and Revenues.  First quarter 1999 industry  retail sales of Class 5
through 8 trucks totaled  102,800 units,  an increase of 20% from 1998.  Class 8
heavy  truck  sales of 62,200  units  during the first  quarter of 1999 were 19%
higher than the 1998 level of 52,400 units.  Industry  sales of Class 5, 6 and 7
medium trucks,  including school buses,  increased 22% to 40,700 units. Industry
sales of school  buses,  which  accounted  for 14% of the  medium  truck  market
increased 5%.

       Sales and revenues for the first quarter of 1999 totaled $1,924  million,
11% higher than the $1,727 million reported for the comparable  quarter in 1998.
Sales of  trucks,  mid-range  diesel  engines  and  service  parts for the first
quarter of 1999 totaled $1,837 million compared with $1,672 million reported for
the same period in 1998.

       Although the company's  retail  deliveries in the combined  United States
and Canadian Class 5 through 8 truck market  increased 5%, the company's  market
share for the first  quarter of 1999  decreased  to 25.5% from the 29.1%  market
share reported in 1998. (Sources: American Automobile Manufacturers Association,
Canadian  Vehicle  Manufacturers  Association  and  R.L.  Polk &  Company.)  The
company's  market  share was  constrained  by the fact that  continued  industry
demand  for heavy  trucks  outstripped  capacity  as well as by timing of retail
shipments associated with school bus and medium truck orders.

       Shipments of mid-range  diesel  engines by the company to other  original
equipment manufacturers during the first quarter of 1999 totaled 58,100 units, a
36%  increase  from the same  period of 1998.  Higher  shipments  to Ford  Motor
Company to meet  consumer  demand  for the light  trucks and vans which use this
engine was the  primary  reason for the  increase.  Service  parts sales of $194
million in the first quarter of 1999 were 5% higher than the prior year's level.

                                     - 10 -

<PAGE>

       Finance  and  insurance  revenue  increased  $17  million to $62  million
primarily  due to  higher  retail  financing  activity  and a  higher  level  of
wholesale financing activity.

       The increase in other income is primarily  due to a legal  settlement  in
favor of the company's insurance subsidiary.

       Costs and expenses. Manufacturing gross margin was 16.5% of sales for the
first  quarter  of 1999  compared  with 13.4% for the same  period in 1998.  The
increase  in gross  margin is  primarily  due to lower unit  costs and  improved
pricing.

       Consolidated  engineering and research expense increased $23 million from
first  quarter  1999  to  $58  million,   reflecting  the  company's  continuing
investment in its next generation vehicle (NGV) and next generation diesel (NGD)
programs.

       Consolidated  marketing  and  administrative  expense  increased  to $126
million  in 1999 from $98  million  in the  first  quarter  of 1998  principally
reflecting  investment in the company's integrated truck strategy which includes
expanding internationally and improving operational excellence.

       Liquidity and Capital Resources

       Cash flow is generated from the manufacture and sale of trucks, mid-range
diesel  engines and service  parts as well as product  financing  and  insurance
coverage provided to the company's dealers and retail customers by the financial
services  operations.   The  company's  current  debt  ratings  have  made  bank
borrowings and sales of finance receivables the most economic sources of funding
for the company. Insurance operations are self-funded.

       Cash used in  operations  during the first  quarter of 1999  totaled $328
million,  primarily  from a change in operating  assets and  liabilities of $470
million.  This change includes a $114 million decrease in other  liabilities due
to the payment of the company's profit sharing and performance  incentive awards
for  fiscal  1998  and a  $166  million  decrease  in  accounts  payable  due to
cyclically lower production within the first quarter.  This change also includes
an increase in accounts receivable of $116 million primarily due to the increase
in wholesale note and account  acquisitions over liquidations of $74 million and
a repurchase of $60 million in notes from the 1990 Dealer Note Trust.

       Investment  programs  provided  $475  million  in cash  reflecting  a net
decrease  in retail  notes  and  lease  receivables  of $202  million  and a net
decrease in marketable  securities of $354 million.  Other investment activities
used $23 million for property and equipment  leased to others and $48 million to
fund capital expenditures  principally for the NGV and NGD programs, to increase
mid-range diesel engine capacity and for product improvements.

                                     - 11 -

<PAGE>

       Financing activities used cash to reduce notes and debt outstanding under
the bank revolving  credit facility and  asset-backed and other commercial paper
programs by $86  million  and to reduce  long-term  debt  primarily  at Navistar
Financial  Corporation  (NFC) by a net $44  million.  These cash  outflows  were
offset  by $20  million  of  additional  borrowings  under  the  Mexican  credit
facility.

       Through the  asset-backed  markets,  NFC has been able to fund fixed rate
retail note  receivables  at rates offered to companies  with  investment  grade
ratings. During the first quarter, NFC sold $545 million of retail notes through
Navistar  Financial  Retail  Receivables  Corporation  (NFRRC) to a multi-seller
asset-backed   commercial   paper  conduit   sponsored  by  a  major   financial
institution.  At January 31, 1999, the remaining shelf registration available to
NFRRC for the public issuance of asset-backed securities was $2,972 million.

       At January 31, 1999, Navistar Financial Securities  Corporation (NFSC), a
wholly-owned  subsidiary  of NFC,  had a  revolving  wholesale  note  trust that
provides for the funding of $639 million of eligible wholesale notes. During the
next two  months $39  million  will  amortize  and the  commitment  will be $600
million.

       At January 31, 1999,  available  funding under the bank revolving  credit
facility and the  asset-backed  commercial  paper program was $219  million,  of
which $15 million provided  funding backup for the outstanding  short-term debt.
The remaining  $204  million,  when  combined  with  unrestricted  cash and cash
equivalents,  made $214 million  available to fund the general business purposes
of NFC.

       The company purchases  collateralized  mortgage  obligations  (CMOs) that
have  predetermined   fixed-principal  payment  patterns  which  are  relatively
certain.  At January 31,  1999,  these  instruments  totaled $86 million and the
unrecognized  gain was not  material.  At quarter  end, $37 million of a Mexican
subsidiary's receivables were pledged as collateral for bank borrowings.

       In November  1998,  NFC sold fixed rate retail  receivables on a variable
rate basis.  For the  protection of investors,  NFC issued an interest rate cap.
Under the terms of the  agreement,  NFC will make  payments  if  interest  rates
exceed certain  levels.  The notional  amount of the cap amortizes  based on the
expected  outstanding  principal balance of the sold retail  receivables.  As of
January 31, 1999 the notional  amount was $517 million and the interest rate cap
had a fair value of $1.8 million.

       At January  31,  1999,  NFC held  forward  treasury  locks with  notional
amounts  of  $100  million  in  anticipation  of  a  May  1999  sale  of  retail
receivables.  The  unrealized  gain on  these  forward  treasury  locks  was not
material.  In addition,  the company held Canadian dollar forward contracts with
notional  amounts of $95 million and other  derivative  contracts  with notional
amounts of $11  million.  The  unrealized  net loss on these  contracts  was not
material.

                                     - 12 -

<PAGE>

       Cash  flow  from  the  company's  manufacturing  and  financial  services
operations is currently  sufficient to cover planned investment in the business.
The company had outstanding  capital  commitments of $166 million at January 31,
1999,  primarily for the NGV and NGD programs,  and for increased  manufacturing
capacity at the Indianapolis engine plant.

       It is the  opinion of  management  that,  in the  absence of  significant
unanticipated cash demands current and forecasted cash flow will provide a basis
for  financing  operating  requirements  and  capital  expenditures.  Management
believes that collections on the outstanding  receivables  portfolios as well as
funds available from various funding sources will permit the financial  services
operations  to meet the  financing  requirements  of the  company's  dealers and
customers.

Year 2000

       As of February 28, 1999, the company  estimates that it was approximately
83% complete with the conversion or compliance  checking of its internal systems
including significant applications.  The company performed integrated testing of
major systems in December 1998 with  additional  testing  planned for July 1999.
Navistar currently anticipates that the modifications and testing process of all
significant applications will be substantially complete by August 1999, which is
prior to any anticipated impact on its operating systems.

       With  regard to the  supplier  portion  of the  project,  the  company is
currently  assessing  the Year 2000  readiness of  production  and service parts
suppliers  through a supplier survey process designed by an automotive  industry
trade association,  the Automotive Industry Action Group (AIAG).  Suppliers have
been  asked  to  respond  to a  compliance  questionnaire.  Responses  to  these
questionnaires  have been received from  approximately  45% of these  suppliers.
Based on these  responses,  the  company  believes  that the  majority  of these
suppliers  are  making  acceptable  progress  toward  Year 2000  readiness.  The
supplier  assurance  process is expected to be  substantially  complete by April
1999 and contingency plans will be developed for critical suppliers not assuring
compliance.  Audits of select  suppliers  are planned to continue  through  July
1999.

       The company's  total cost of the Year 2000 project,  which will be funded
through  operating  cash flows,  is estimated to be $34 million,  including  $24
million  of  estimated   expense  and  $10  million  of  capital   expenditures.
Approximately  $16 million has been  expensed and  approximately  $5 million has
been capitalized  through January 31, 1999. The remaining costs are estimated to
be incurred through fiscal year 2000.

       As part of its continuous  assessment  process,  the company will develop
contingency plans as necessary.  These plans could include,  but are not limited
to, material  banking,  use of alternate  suppliers and development of alternate
means to process  dealer  orders.  The company  plans to identify  all  critical
processes by April 1999 and plans to complete detailed  contingency  planning by
December 1999.

                                     - 13 -

<PAGE>

       The costs of the Year  2000  project  and the dates on which the  company
believes it will complete the Year 2000  modifications  and testing are based on
management's  best  estimates,   which  have  been  derived  utilizing  numerous
assumptions  regarding  future events,  including the continued  availability of
certain resources,  third party  modification plans and other factors.  However,
there can be no guarantee  that these  estimates  will be  achieved,  and actual
results could differ  materially from those currently  anticipated.  Examples of
factors that might cause such material  differences include, but are not limited
to, the availability and cost of personnel trained in this area, and the ability
to locate and correct all relevant  computer codes and embedded  technology,  as
well as other similar uncertainties. In addition, there can be no guarantee that
the systems or products of other entities,  including the company's  independent
dealers,  on which the company  relies will be converted on a timely  basis,  or
that  a  failure  to  convert  by  another  company,  or a  conversion  that  is
incompatible  with the  company's  systems,  would not have a  material  adverse
effect on the company.

       Navistar is using its best efforts to ensure that the Year 2000 impact on
its  critical  systems  and  processes  will not affect  its supply of  product,
quality or service. However, in the event that the company is unable to complete
its  remedial  actions  described  above  and is unable  to  implement  adequate
contingency plans in the event problems arise, there could be a material adverse
effect on the company's business, financial position or results of operations.

Business Environment

       Sales of Class 5  through  8  trucks  have  been  cyclical,  with  demand
affected by such economic factors as industrial production, construction, demand
for consumer  durable  goods,  interest  rates and the earnings and cash flow of
dealers and customers.  Reflecting the stability of the general economy,  demand
for new trucks remained strong during the first quarter of 1999.  Although truck
order receipts for the first quarter of 1999 decreased from the previous  year's
first quarter,  the company's order backlog increased to 65,700 units at January
31, 1999, from 60,500 units at January 31, 1998. Historically, retail deliveries
have  been  impacted  by the  rate at  which  new  truck  orders  are  received.
Therefore,   the  company  continually  evaluates  order  receipts  and  backlog
throughout the year and will balance production with demand as appropriate.

     Effective  February 1, 1999,  the  functional  currency  for the  company's
Mexican  subsidiaries  changed from the U.S.  dollar to the Mexican peso because
Mexico is no longer considered a highly inflationary  economy.  While management
does not expect the change in functional  currency to have a material  impact on
the company's  financial  position,  results of  operations  or cash flows,  the
ultimate  impact of this  change is  dependent  upon the  volume of U.S.  dollar
denominated  transactions,  changes  in  exchange  rates and the extent to which
currency risk may be hedged.

       In March  1999,  the  company  announced  that it had  finalized  a joint
venture with a Brazilian diesel engine producer to manufacture diesel engines in
South America.

                                     - 14 -

<PAGE>

        Navistar International Corporation and Consolidated Subsidiaries

                           PART II - OTHER INFORMATION
                           ---------------------------

Item 1.       Legal Proceedings

              Incorporated herein by reference from Item 3 - "Legal Proceedings"
              in the  company's  definitive  Form 10-K dated  December 22, 1998,
              Commission File No. 1-9618.

Item 6.       Exhibits and Reports on Form 8-K

                                                           10-Q Page
                                                           ---------
                (a)   Exhibits:

                       3.  Articles of Incorporation
                           and By-Laws.                        E-1

                       4.  Instruments Defining the
                           Rights of Security Holders,
                           Including Indentures                E-2

                      10.  Material Contracts                  E-4

                (b)   Reports on Form 8-K:

                      No  reports  on Form 8-K were  filed for the three  months
                      ended January 31, 1999.

                                     - 15 -

<PAGE>

                                    SIGNATURE
                                    ---------

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



NAVISTAR INTERNATIONAL CORPORATION
----------------------------------
           (Registrant)





/s/  Mark T. Schwetschenau
--------------------------
     Mark T. Schwetschenau
     Vice President and Controller
     (Principal Accounting Officer)


March 12, 1999

                                     - 16 -