<PAGE>

    PAGE 1


                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 July 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  August  31,  1999,  the  number  of  shares  outstanding  of the
registrant's common stock was 63,583,518.


<PAGE>


         PAGE 2


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



                                      INDEX
                                      -----

                                                                        Page
                                                                     Reference
                                                                     ---------

Part I. Financial Information:

      Item 1.  Financial Statements

      Statement of Income
         Three Months and Nine Months Ended July 31, 1999
            and 1998................................................     3

      Statement of Financial Condition
         July 31, 1999, October 31, 1998 and July 31, 1998.........      4

      Statement of Cash Flow
         Nine Months Ended July 31, 1999 and 1998..................      5

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

Supplemental Financial Information.................................     10

      Item 2.  Management's Discussion and Analysis of Results of
               Operations and Financial Condition..................     12

Part II.       Other Information:

      Item 1.  Legal Proceedings...................................     20

      Item 6.  Exhibits and Reports on Form 8-K....................     20

Signature .........................................................     21


<PAGE>


         PAGE 3


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

ITEM 1.  Financial Statements
<TABLE>
<CAPTION>
STATEMENT OF INCOME (Unaudited)
--------------------------------------------------------------------------------------------
Millions of dollars, except per share data
--------------------------------------------------------------------------------------------
                                                    Navistar International Corporation
                                                       and Consolidated Subsidiaries
                                            ------------------------------------------------
                                              Three Months Ended        Nine Months Ended
                                                    July 31                  July 31
                                            -----------------------   ----------------------
                                               1999         1998        1999        1998
                                            ----------   ----------   ----------  ----------
<S>                                         <C>          <C>         <C>         <C>
Sales and revenues
Sales of manufactured products............  $    1,797   $    1,804   $    5,849  $   5,456
Finance and insurance revenue.............          67           57          188        149
Other income..............................          14           13           52         38
                                            ----------   ----------   ----------  ---------

    Total sales and revenues..............       1,878        1,874        6,089      5,643
                                            ----------   ----------   ----------  ---------

Costs and expenses
Cost of products and services sold........       1,480        1,550        4,848      4,707
Postretirement benefits...................          45           40          159        128
Engineering and research expense..........          73           43          197        124
Marketing and administrative expense......         112           99          361        294
Interest expense..........................          32           31           99         77
Other expenses............................          11           30           47         63
                                            ----------   ----------   ----------  ---------

    Total costs and expenses..............       1,753        1,793        5,711      5,393
                                            ----------   ----------   ----------  ---------

        Income before income taxes........         125           81          378        250
        Income tax benefit (expense)......         130          (31)          34        (95)
                                            ----------   ----------   ----------  ---------

Net income................................         255           50          412        155

Less dividends on Series G Preferred stock           -            -            -         11
                                            ----------   ----------   ----------  ---------

Net income applicable to common stock.....  $      255   $       50   $      412  $     144
                                            ==========   ==========   ==========  =========

Earnings per share
    Basic.................................  $     3.94   $      .73   $     6.27  $    2.05
    Diluted...............................  $     3.86   $      .72   $     6.16  $    2.02

Average shares outstanding (millions)
    Basic.................................        64.9         68.6         65.8       69.9
    Diluted...............................        66.2         69.5         66.9       70.9
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>


<PAGE>


       PAGE 4


<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION (Unaudited)
-----------------------------------------------------------------------------------------------
Millions of dollars
-----------------------------------------------------------------------------------------------
                                                       Navistar International Corporation
                                                         and Consolidated Subsidiaries
                                               ------------------------------------------------
                                                  July 31         October 31         July 31
                                                   1999              1998              1998
                                               ------------      ------------      ------------
<S>                                            <C>               <C>               <C>
ASSETS
----------------------------------------------
Cash and cash equivalents..................... $        237      $        390      $        269
Marketable securities.........................          389               674               556
                                               ------------      ------------      ------------
                                                        626             1,064               825
Receivables, net..............................        1,976             2,146             1,583
Inventories...................................          743               505               553
Property, net of accumulated depreciation and
  amortization of  $1,111, $976 and $925 .....        1,266             1,106             1,007
Investments and other assets..................          273               207               193
Prepaid and intangible pension assets.........          243               238               344
Deferred tax asset, net.......................          966               912               842
                                               ------------      ------------      ------------

Total assets                                   $      6,093            $6,178      $      5,347
                                               ============      ============      ============

LIABILITIES AND SHAREOWNERS' EQUITY
----------------------------------------------
Liabilities
Accounts payable, principally trade........... $        993      $      1,273      $      1,051
Debt: Manufacturing operations................          473               450               440
      Financial services operations...........        1,587             1,672             1,122
Postretirement benefits liability.............          980               934               911
Other liabilities.............................        1,030             1,080             1,033
                                               ------------      ------------      ------------

        Total liabilities.....................        5,063             5,409             4,557
                                               ------------      ------------      ------------

Commitments and contingencies

Shareowners' equity
Series D convertible junior preference stock..            4                 4                 4
Common stock (75.3 million shares issued).....        2,139             2,139             2,138
Common stock held in treasury, at cost........         (340)             (214)             (184)
Retained earnings (deficit)...................         (431)             (829)             (971)
Accumulated other comprehensive loss..........         (342)             (331)             (197)
                                               ------------      ------------      ------------

        Total shareowners' equity.............        1,030               769               790
                                               ------------      ------------      ------------

Total liabilities and shareowners' equity..... $      6,093      $      6,178      $      5,347
                                               ============      ============      ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>


<PAGE>


         PAGE 5


STATEMENT OF CASH FLOW (Unaudited)
-------------------------------------------------------------------------------
For the Nine Months Ended July 31 (Millions of dollars)
-------------------------------------------------------------------------------
                                             Navistar International Corporation
                                                and Consolidated Subsidiaries
                                             ----------------------------------
                                                  1999                 1998
                                                --------             --------
Cash flow from operations
Net income..................................... $    412             $    155
Adjustments to reconcile net income
     to cash used in operations:
       Depreciation and amortization...........      143                  119
       Deferred income taxes...................      132                   95
       Deferred tax asset valuation
         allowance adjustment .................     (178)                   -
       Postretirement benefits funding
         less than (in excess of) expense......       40                 (283)
       Other, net..............................      (37)                 (32)
Change in operating assets and liabilities:
       Receivables.............................      (18)                 155
       Inventories.............................     (243)                 (59)
       Prepaid and other current assets........      (11)                 (10)
       Accounts payable........................     (287)                (101)
       Other liabilities.......................      (42)                 149
                                                --------             --------

Cash (used in) provided by operations..........      (89)                 188
                                                --------             --------

Cash flow from investment programs
Purchase of retail notes
  and lease receivables........................   (1,044)                (919)
Collections/sales of retail notes
   and lease receivables ......................    1,236                1,000
Purchase of marketable securities..............     (309)                (469)
Sales or maturities of marketable securities...      595                  274
Capital expenditures...........................     (214)                (180)
Property and equipment leased to others........      (81)                (111)
Investment in affiliates.......................      (55)                  (5)
Other investment programs, net.................      (23)                  (2)
                                                --------             --------

Cash provided by (used in)
  investment programs..........................      105                 (412)
                                                --------             --------

Cash flow from financing activities
Issuance of debt...............................      111                  440
Principal payments on debt.....................     (120)                (110)
Net decrease in notes and debt outstanding
    under bank revolving credit facility
    and commercial paper programs .............      (57)                (137)
Mexican credit facility........................       23                   73
Repurchase of common stock.....................     (126)                (159)
Proceeds from reissuance of Treasury shares....        -                   28
Redemption of Series G Preferred Stock.........        -                 (240)
Dividends paid.................................        -                  (11)
                                                --------             --------

Cash used in financing activities..............     (169)                (116)
                                                --------             --------

Cash and cash equivalents
    Decrease during the period.................     (153)                (340)
    At beginning of the year...................      390                  609
                                                --------             --------

Cash and cash equivalents
  at end of the period......................... $    237             $    269
                                                ========             ========

See Notes to Financial Statements.


<PAGE>


       PAGE 6

       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.

       Effective  February 1, 1999,  the  functional  currency of 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. The effect of this
change was not material.

Note B.  Supplemental Cash Flow Information

       Consolidated  interest  payments during the first nine months of 1999 and
1998 were $94 million and $73 million,  respectively.  Consolidated tax payments
made during the first nine  months of 1999 were $12  million.  Consolidated  tax
payments made during the same period last year 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.


<PAGE>


       PAGE 7

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

Note C.  Income Taxes (continued)

       As a result of continued strong industry demand, the continued successful
implementation of the company's manufacturing strategy, changes in the company's
operating  structure,  and  other  positive  operating  indicators,   management
reviewed its projected  future  taxable income and evaluated the impact of these
changes on its deferred tax asset valuation allowance. This review was completed
during the third quarter of 1999 and resulted in a reduction to the deferred tax
asset  valuation  allowance of $178  million  which  reduced  income tax expense
during the third quarter of 1999.

Note D.  Inventories

     Inventories are as follows:

                                       July 31        October 31       July 31
Millions of dollars                     1999             1998            1998
-------------------------------------------------------------------------------
Finished products.................  $       340     $        223    $       253
Work in process...................          197               69            114
Raw materials and supplies........          206              213            186
                                    -----------     ------------    -----------
Total inventories.................  $       743     $        505    $       553
                                    ===========     ============    ===========

Note E.  Financial Instruments

       In  November  1998,   NFC  sold  fixed  rate  retail   receivables  to  a
multi-seller   asset-backed  commercial  paper  conduit  sponsored  by  a  major
financial institution on a variable rate basis. For the protection of investors,
NFC issued an interest rate cap. The notional  amount of the cap amortizes based
on the expected  outstanding  principal balance of the sold retail  receivables.
Under the terms of the cap  agreement,  NFC will make payments if interest rates
exceed certain levels. As of July 31, 1999 the cap had a notional amount of $399
million and a fair value of $2 million.

     In June 1999, NFC sold $715 million of retail notes, net of $124 million of
unearned  finance  income,  recognizing  a gain of $6 million  on the sale.  The
proceeds of $685 million, net of underwriting fees and credit enhancements, were
used by NFC for general  working capital  purposes.  In anticipation of its June
1999 sale of retail receivables, NFC was a party to forward treasury locks, with
notional  amounts  of $500  million.  These  locks were  entered  into to reduce
exposure to future change in interest  rates.  These  positions were closed with
pricing of the sale and the immaterial gain was included in the gain on the sale
of receivables.

       In  September  1999,  NFC entered into a total of $150 million of forward
treasury locks in  anticipation  of a November 1999 sale of retail  receivables.
These locks were entered into to reduce  exposure to future  changes in interest
rates. NFC intends to close these positions on the pricing date of the sale. Any
resulting  gain or loss  will be  included  in the  gain or loss on the  sale of
receivables recognized in November 1999.


<PAGE>


       PAGE 8

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

Note E.  Financial Instruments (continued)

       As of July 31,  1999,  the  company  held German  mark and  Japanese  yen
forward  contracts  with  respective  notional  amounts of $42  million  and $13
million  related to  committed  capital  equipment  purchases.  The company held
Canadian dollar forward contracts with notional amounts of $85 million and other
derivative  contracts with notional  amounts of $18 million.  The unrealized net
gain on these contracts was not material.

       At quarter end, $31 million of a Mexican finance subsidiary's receivables
were pledged as collateral for bank borrowings.

Note F.  Earnings  Per Share

       Earnings per share was computed as follows:

                                  Three Months Ended         Nine Months Ended
                                        July 31                   July 31
                               -----------------------    ----------------------
Millions of dollars,
except per share data            1999          1998          1999         1998
----------------------------- ----------    ----------    ----------  ----------

Net income................... $      255    $       50    $      412   $     155
Less dividends on
  Series G Preferred Stock...          -             -             -          11
                              ----------    ----------    ----------   ---------
Net income applicable
  to common stock
    (Basic and Diluted)...... $      255    $       50    $      412   $     144
                              ==========    ==========    ==========   =========

Average shares
  outstanding (millions)
    Basic....................       64.9          68.6          65.8        69.9
    Dilutive effect of
      options outstanding
      and other dilutive
      securities.............        1.3            .9           1.1         1.0
                              ----------    ----------    ----------   ---------
    Diluted..................       66.2          69.5          66.9        70.9
                              ==========    ==========    ==========   =========

Earnings per share
    Basic.................... $     3.94    $      .73    $     6.27   $    2.05
    Diluted.................. $     3.86    $      .72    $     6.16   $    2.02

       Unexercised  employee stock options to purchase .1 million and .3 million
shares of Navistar  common stock during the three months ended July 31, 1999 and
1998, respectively, and to purchase .2 million and .4 million shares of Navistar
common stock during the nine months ended July 31, 1999 and 1998,  respectively,
were excluded from 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.


<PAGE>


       PAGE 9

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

Note G.  Preferred Share Purchase Rights Plan

       On April 20, 1999, the company's board of directors adopted a shareholder
rights plan  ("Rights  Plan") and  declared a rights  dividend of one  preferred
share  purchase  right (a "Right") for each  outstanding  share of common stock,
(the "Common  Shares"),  of the company to shareowners of record as of the close
of business on May 3, 1999.  Subject to the terms of the Rights Plan, each Right
entitles the registered  holder to purchase from the company one  one-thousandth
of a share of Series A Junior Participating  Preferred Stock of the company (the
"Preferred  Shares")  at a price of $175 per one  one-thousandth  of a Preferred
Share,  subject to adjustment.  The Rights are  exercisable  only if a person or
group (an "Acquiring  Person"),  acquires 15% or more of the outstanding  Common
Shares and  commences a tender offer for 15% or more of the  outstanding  Common
Shares. Upon any such occurrence, each Right will entitle its holder (other than
the Acquiring  Person and certain related  parties) to purchase,  at the Right's
then current  exercise price, a number of Common Shares having a market value of
two times such  price.  Similarly,  in the event the  company is  acquired  in a
merger or other business combination and is not the surviving corporation,  each
Right  (other  than Rights  owned by the  Acquiring  Person and certain  related
parties) shall  thereafter be exercisable for a number of shares of common stock
of the acquiring  company  having a market value of two times the exercise price
of the Right.  Subject to certain  conditions,  the Rights are redeemable by the
company's board of directors for $0.01 per Right and are exchangeable for Common
Shares. The Rights have no voting power and initially expire on May 3, 2009.

Note H.  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          Nine Months Ended
                                   July 31                    July 31
                            ----------------------    ----------------------
Millions of dollars            1999        1998          1999        1998
----------------------      ----------  ----------    ----------  ----------

Net income............      $      255  $       50    $      412  $      155
Other comprehensive
   income (loss)......              (2)         (4)          (11)         (2)
                            ----------  ----------    ----------  ----------

    Total comprehensive
      income...........     $      253  $       46    $      401  $      153
                            ==========  ==========    ==========  ==========


     In June 1999,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards  (SFAS) No. 137,  "Accounting  for
Derivative  Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133," which amended SFAS No. 133. This  statement  defers,
for one year,  the effective  date of SFAS No. 133,  "Accounting  for Derivative
Instruments and Hedging  Activities," to those fiscal years beginning after June
15, 2000.

<PAGE>


         PAGE 10

        Navistar International Corporation and Consolidated Subsidiaries

Supplemental Financial Information

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

<TABLE>
<CAPTION>
                                        Three Months Ended        Nine Months Ended
                                             July 31                   July 31
                                     -----------------------   ---------------------
Condensed Statement of Income          1999         1998          1999       1998
------------------------------------ ----------  ----------   ----------  ----------
<S>                                  <C>         <C>          <C>          <C>

Sales of manufactured products...... $   1,797   $    1,804   $    5,849  $    5,456
Other income........................        12           12           40          35
                                     ---------   ----------   ----------  ----------
    Total sales and revenues........     1,809        1,816        5,889       5,491
                                     ---------   ----------   ----------  ----------

Cost of products sold...............     1,469        1,542        4,822       4,686
Postretirement benefits.............        45           40          159         128
Engineering and research expense....        73           43          197         124
Marketing and administrative expense       100           94          322         271
Other expenses......................        28           46          102         104
                                     ---------   ----------   ----------  ----------
    Total costs and expenses........     1,715        1,765        5,602       5,313
                                     ---------   ----------   ----------  ----------

Income before income taxes
    Manufacturing operations........        94           51          287         178
    Financial services operations...        31           30           91          72
                                     ---------   ----------   ----------  ----------
        Income before income taxes..       125           81          378         250
        Income tax benefit (expense)       130          (31)          34         (95)
                                     ---------   ----------   ----------  ----------
Net income.......................... $     255   $       50   $      412  $      155
                                     =========   ==========   ==========  ==========
</TABLE>


                                               July 31   October 31    July 31
Condensed Statement of Financial Condition      1999        1998        1998
-------------------------------------------  ----------  ----------  ----------

Cash, cash equivalents
   and marketable securities...............  $      467  $      904  $      670
Inventories................................         722         490         537
Property and equipment, net................         993         883         788
Equity in nonconsolidated subsidiaries.....         381         327         324
Other assets...............................         808         810         829
Deferred tax asset, net....................         966         912         842
                                             ----------  ----------  ----------
        Total assets.......................  $    4,337  $    4,326  $    3,990
                                             ==========  ==========  ==========

Accounts payable, principally trade........  $      950  $    1,233  $      949
Postretirement benefits liability..........         972         927         903
Other liabilities..........................       1,385       1,397       1,348
Shareowners' equity........................       1,030         769         790
                                             ----------  ----------  ----------
        Total liabilities
          and shareowners' equity..........  $    4,337  $    4,326  $    3,990
                                             ==========  ==========  ==========


<PAGE>


         PAGE 11

        Navistar International Corporation and Consolidated Subsidiaries

Supplemental Financial Information  (continued)

Navistar  International  Corporation (with financial  services  operations on an
equity basis) in millions of dollars:
                                                         Nine Months Ended
                                                              July 31
                                                    -------------------------
Condensed Statement of Cash Flow                       1999           1998
--------------------------------------------------- ----------     ----------

Cash flow from operations
Net income......................................... $      412     $      155
Adjustments to reconcile net income
    to cash provided by operations:
       Depreciation and amortization...............        109             94
       Deferred income taxes.......................        132             95
       Deferred tax asset valuation allowance
          adjustment...............................       (178)             -
       Postretirement benefits funding less than
          (in excess of) expense...................         40           (283)
       Equity in earnings of investees, net of
          dividends received.......................        (17)            (4)
       Other, net..................................        (19)           (10)
Change in operating assets and liabilities.........       (552)            44
                                                    ----------     ----------
Cash (used in) provided by operations..............        (73)            91
                                                    ----------     ----------

Cash flow from investment programs
Purchase of marketable securities..................       (254)          (421)
Sales or maturities of marketable securities.......        536            221
Capital expenditures...............................       (214)          (180)
Receivable from financial services operations......         28             (8)
Investment in affiliates...........................        (57)            (5)
Other investment programs, net.....................        (20)             5
                                                    ----------     ----------
Cash provided by (used in) investment programs.....         19           (388)
                                                    ----------     ----------

Cash flow used in financing activities.............       (101)           (35)
                                                    ----------     ----------

Cash and cash equivalents
Decrease during the period.........................       (155)          (332)
At beginning of the year...........................        351            573
                                                    ----------     ----------
Cash and cash equivalents at end of the period..... $      196     $      241
                                                    ==========     ==========


<PAGE>


       PAGE 12

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."

       Third Quarter Ended July 31, 1999
       ---------------------------------

       The company  reported  net income of $255  million,  or $3.86 per diluted
common share for the third quarter ended July 31, 1999, compared with net income
of $50 million,  or $0.72 per diluted  common share for the  comparable  quarter
last year.  Net income for the third  quarter of 1999  included the benefit of a
$178 million reduction in the company's deferred tax asset valuation allowance.

       The  company's  manufacturing  operations  reported  income before income
taxes of $94 million  compared  with  pretax  income of $51 million in the third
quarter of 1998  reflecting  improved  gross  margins  on sales of  manufactured
products. The financial services operations' pretax income for the third quarter
of 1999 was $31 million,  consistent with the $30 million  reported in the prior
year.

Sales and Revenues. U.S. and Canadian industry retail sales of Class 5 through 8
trucks totaled  120,500 units in the third quarter of 1999,  which is 20% higher
than the 100,400  units sold  during  this  period in 1998.  Class 8 heavy truck
sales of 76,600 units during the third  quarter of 1999 were 27% higher than the
1998 level of 60,200 units.  Industry  sales of Class 5, 6 and 7 medium  trucks,
including school buses,  increased 9% to 43,800 units.  Industry sales of school
buses, which accounted for 18% of the medium truck market, increased slightly.

       Sales and revenues for the third quarter of 1999 totaled $1,878  million,
consistent with the $1,874 million reported for the comparable  quarter in 1998.
Sales of  trucks,  mid-range  diesel  engines  and  service  parts for the third
quarter of 1999 totaled $1,797 million compared with $1,804 million reported for
the same period in 1998.

       The company's  market share was  constrained  by the fact that  continued
industry demand for heavy trucks outstripped capacity.  Additionally, short term
disruptions  associated  with  realigning  work  assignments to meet  production
schedule  changes  and  process  improvements  resulted  in  the  loss  of  some
production  and a backlog of trucks not ready for  shipment to  customers.  This
resulted  in a  decrease  in market  share  from 27.9% in 1998 to 22.1% in 1999.
(Sources:  American  Automobile  Manufacturers  Association,   Canadian  Vehicle
Manufacturers Association, and R.L. Polk & Company.)


<PAGE>


         PAGE 13

       Shipments of mid-range  diesel  engines by the company to other  original
equipment  manufacturers  (OEMs) during the third quarter of 1999 totaled 68,500
units, a 44% increase from the same period of 1998. This increase  resulted from
higher  shipments to Ford Motor  Company to meet  consumer  demand for the light
trucks and vans which use this engine.

       Finance and insurance revenue of $67 million in the third quarter of 1999
increased 18% from 1998, primarily as a result of increased wholesale and retail
financing activities and increased operating lease balances.

       Nine Months Ended July 31, 1999
       -------------------------------

       Pretax income for the first nine months of 1999 was $378 million compared
with  $250  million  reported  for  the  same  period  of  1998.  The  company's
manufacturing  operations  reported  income  before income taxes of $287 million
during this  period,  compared  with $178  million  reported in 1998  reflecting
higher sales of manufactured products and improved gross margins on those sales.
The financial  services  operations'  pretax income for the first nine months of
1999 was $91 million,  an increase from the $72 million  reported in 1998.  This
change primarily reflects an increase in finance receivable balances and a legal
settlement in favor of the company's insurance subsidiary.

       Industry  retail sales of Class 5 through 8 trucks  during the first nine
months of 1999 totaled  348,100  units,  an increase from the 289,200 units sold
during this period in 1998.  Class 8 heavy truck sales of 210,100  units  during
the first  nine  months of 1999 were 24%  higher  than the 1998 level of 169,900
units. Industry sales of Class 5, 6 and 7 medium trucks, including school buses,
increased 16% to 138,000 units.  Industry sales of school buses, which accounted
for 19% of the medium truck market, increased 5%.

       Sales and revenues  during the first nine months of 1999  totaled  $6,089
million, an increase of 8% from 1998. Sales of trucks,  mid-range diesel engines
and  service  parts for the first nine  months of 1999  totaled  $5,849  million
compared with $5,456 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  by 5%, the  company's
market share for the first nine months of 1999 decreased to 25.9% from the 29.8%
reported in 1998.  The company's  market share was  constrained by the fact that
continued industry demand for heavy trucks outstripped capacity.

       The company shipped 198,900 mid-range diesel engines to other OEMs during
the first nine months of 1999 which was a 36%  increase  from the same period of
1998 due to higher shipments to Ford Motor Company.

       Finance and  insurance  revenue  increased  $39  million to $188  million
compared to the same period of 1998 primarily as a result of increased wholesale
and retail  financing  activities and increased  operating lease  balances.  The
increase in other income is primarily due to a legal  settlement in favor of the
company's insurance subsidiary.


<PAGE>


       PAGE 14

Costs and expenses.  Manufacturing gross margin was 18.3% of sales for the third
quarter of 1999 compared  with 14.5% for the same period in 1998.  This increase
is primarily due to improved pricing and operating  efficiencies.  Manufacturing
gross margin for the first nine months of 1999 was 17.6%  compared with 14.1% in
1998. This increase is primarily due to lower unit costs,  improved  pricing and
improved operating efficiencies.

       Consolidated  marketing  and  administrative  expense  increased  to $112
million in the third  quarter of 1999 from $99  million in the third  quarter of
1998 and  increased  to $361 million for the first nine months of 1999 from $294
million in the first nine months of 1998.  These increases were primarily due to
marketing   programs  and  the  operational   implementation  of  the  company's
integrated   truck  and  engine   strategies   ($13  million  and  $52  million,
respectively).

       Postretirement  benefits  expense  increased  to $45 million in the third
quarter of 1999 from $40 million in the third quarter of 1998,  primarily due to
higher retiree healthcare expense.  Postretirement benefits expense increased to
$159  million for the first nine months of 1999 from $128  million for the first
nine months of 1998,  primarily  due to higher  retiree  healthcare  expense and
higher  supplemental  trust profit sharing  provisions related to higher profits
($17 million and $12 million, respectively).

       Engineering  and research  expense  increased  $30 million from the third
quarter of 1998 to $73 million  and  increased  $73 million  from the first nine
months of 1998 to $197 million.  Approximately  75% of these increases  reflects
the company's  continuing  investment in its next  generation  vehicle (NGV) and
next generation diesel (NGD) programs.

       Other  expenses  for both the three months and nine months ended July 31,
1998 included $14 million of expenses  related to the secondary  public offering
of 19.9 million shares of the company's common stock which was completed in June
1998.

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 nine months of 1999 totaled $89
million  primarily from a net change in operating assets and liabilities of $601
million  offset by net income of $412  million.  In  addition,  there was a $100
million net change in noncash items  consisting of a $178 million  reversal of a
portion of the deferred tax asset valuation  allowance offset by $132 million of
deferred taxes and $146 million of other items,  principally  depreciation.  The
net change in operating assets and liabilities  included a $287 million decrease
in accounts  payable  primarily from the  seasonality of truck  production and a
$243  million  increase in  inventories  primarily  from a backlog of trucks not
ready for shipment to customers and an increase in used truck inventory.


<PAGE>


       PAGE 15

       Investment programs provided $105 million in cash primarily  reflecting a
net  decrease in retail  notes and lease  receivables  of $192 million and a net
decrease in marketable  securities of $286 million.  Other investment activities
used $81 million for property and equipment leased to others and $214 million to
fund capital expenditures  primarily for the NGV and NGD programs, for increased
mid-range diesel engine capacity,  and for increased  capacity,  infrastructure,
and facility enhancements at the Escobedo, Mexico plant.

       Financing  activities  used cash of $169  million  during  the first nine
months of 1999  primarily  for the  repurchase  of $126 million of common stock.
Cash was also used to reduce notes and debt outstanding under the bank revolving
credit facility and other  commercial  paper programs by $57 million,  offset by
$23 million of borrowings under the Mexican credit facility.

       Navistar Financial Corporation (NFC) has traditionally obtained the funds
to provide financing to Transportation's dealers and retail customers from sales
of finance  receivables,  commercial paper, short and long-term bank borrowings,
medium and long-term debt and equity capital. As of July 31, 1999, NFC's funding
consisted  of sold  finance  receivables  of  $2,550  million,  bank  and  other
borrowings of $1,137 million,  subordinated debt of $100 million,  capital lease
obligations of $286 million and equity of $282 million.

       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 nine months of 1999, NFC sold $1,260 million of retail
notes through  Navistar  Financial Retail  Receivables  Corporation  (NFRRC),  a
wholly  owned  subsidiary  of NFC.  As of July 31,  1999,  the  remaining  shelf
registration  available  to  NFRRC  for  the  public  issuance  of  asset-backed
securities was $2,257  million.  Also, as of July 31, 1999,  Navistar  Financial
Securities  Corporation,  a wholly  owned  subsidiary  of NFC,  had a  revolving
wholesale  note trust that  provides for the funding of $600 million of eligible
wholesale notes.

       At July 31, 1999,  available  funding under NFC's bank  revolving  credit
facility and the  asset-backed  commercial  paper facility was $220 million,  of
which $18 million was used to back short-term  debt. The remaining $202 million,
when combined with  unrestricted  cash and cash  equivalents,  made $209 million
available to fund the general business purposes of NFC.

       In  November  1998,   NFC  sold  fixed  rate  retail   receivables  to  a
multi-seller   asset-backed  commercial  paper  conduit  sponsored  by  a  major
financial institution on a variable rate basis. For the protection of investors,
NFC issued an interest rate cap. The notional  amount of the cap amortizes based
on the expected  outstanding  principal balance of the sold retail  receivables.
Under the terms of the cap  agreement,  NFC will make payments if interest rates
exceed certain  levels.  As of July 31, 1999,  the cap had a notional  amount of
$399 million and a fair value of $2 million.

       In June 1999, NFC sold $715 million of retail notes,  net of $124 million
of unearned  finance  income,  recognizing a gain of $6 million on the sale. The
proceeds of $685 million, net of underwriting fees and credit enhancements, were
used by NFC for general  working capital  purposes.  In anticipation of its June
1999 sale of retail receivables, NFC was a party to forward treasury locks, with
notional  amounts  of $500  million.  These  locks were  entered  into to reduce
exposure to future change in interest  rates.  These  positions were closed with
pricing of the sale and the immaterial gain was included in the gain on the sale
of receivables.


<PAGE>


       PAGE 16

       In  September  1999,  NFC entered into a total of $150 million of forward
treasury locks in  anticipation  of a November 1999 sale of retail  receivables.
These locks were entered into to reduce  exposure to future  changes in interest
rates. NFC intends to close these positions on the pricing date of the sale. Any
resulting  gain or loss  will be  included  in the  gain or loss on the  sale of
receivables recognized in November 1999.

       As of July 31, 1999 the company held German mark and Japanese yen forward
contracts  with  respective  notional  amounts of $42  million  and $13  million
related to committed  capital  equipment  purchases.  The company held  Canadian
dollar  forward  contracts  with  notional  amounts  of $85  million  and  other
derivative  contracts with notional  amounts of $18 million.  The unrealized net
gain on these contracts was not material.

       At quarter end, $31 million of a Mexican finance subsidiary's receivables
were pledged as collateral for bank borrowings.

       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 $376  million at July 31,
1999, primarily for the NGV and NGD programs.

       In May 1999, Moody's and Duff and Phelps raised the company's senior debt
ratings from Ba1 and BB+ to Baa3 and BBB-, respectively and raised the company's
subordinated  debt ratings from Ba3 and BB- to Ba2 and BB,  respectively.  NFC's
senior debt ratings  increased from Ba1 and BBB- to Baa3 and BBB,  respectively.
NFC's  subordinated  debt  ratings  were also raised from Ba3 and BB+ to Ba2 and
BBB-, respectively.

       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  sources  will  permit  the  financial  services
operations  to meet the  financing  requirements  of the  company's  dealers and
customers.

Year 2000

       As of July 31, 1999, the company  estimates that it was approximately 97%
complete  with the  conversion or  compliance  checking of its internal  systems
including   significant   applications.   The  company  has  completed  multiple
integration tests of major systems, with continuation of these efforts scheduled
through  September 1999.  Navistar currently  anticipates that the modifications
and  testing  process  of all  significant  applications  will be  substantially
complete by the end of September 1999, which is prior to any anticipated  impact
on its operating systems.

       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 76% 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  readiness  and  contingency   planning  process  was
approximately  88% complete as of July 31, 1999 with completion  expected by the
end of September  1999.  On site  assessments  were  conducted  for 154 critical
suppliers with favorable results.


<PAGE>


       PAGE 17

       The company continues to work with its independent  dealers on their year
2000 readiness and to monitor their progress. Compliance of all certified dealer
systems is expected to be substantially complete by December 1999.

       The company's  total cost of the Year 2000 project,  which will be funded
through  operating  cash flows,  is estimated to be $35 million,  including  $25
million  of  estimated   expense  and  $10  million  of  capital   expenditures.
Approximately  $21 million has been  expensed and  approximately  $6 million has
been capitalized  through July 31, 1999. The remaining costs are estimated to be
incurred through fiscal year 2000.

       As part  of its  continuous  assessment  process,  each  of the  business
locations  has  identified  the  critical   processes  that  are  essential  for
day-to-day operations. Contingency plans are being developed that define how the
company will continue to operate these critical business  processes in the event
of a Year 2000  problem.  These plans are to identify  when  contingent  actions
should be taken and to ensure that the  resources  necessary for response are in
place.  Preliminary detailed  contingency  planning has been completed.  Review,
cataloging and testing will continue prior to activation in December 1999.

       In  addition  to a central  command  center,  command  centers  have been
defined for the business  locations,  along with the  necessary  procedures  and
staffing  to  manage  pre and post Year 2000  activities.  Checklists  have been
developed as part of the  contingency  plans that will allow the command centers
to  communicate,  quickly  identify  any Year  2000  problems,  and to  initiate
corrective  actions  promptly.  The  infrastructure of the command centers is in
place.

       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.

New Accounting Pronouncements

     In June 1999,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards  (SFAS) No. 137,  "Accounting  for
Derivative  Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133," which amended SFAS No. 133. This  statement  defers,
for one year,  the effective  date of SFAS No. 133,  "Accounting  for Derivative
Instruments and Hedging  Activities," to those fiscal years beginning after June
15, 2000.

<PAGE>


       PAGE 18

Income Taxes

     The deferred tax assets are net of  valuation  allowances  since it is more
likely than not that some  portion of the deferred tax asset may not be realized
in  the  future  through  the  generation  of  taxable   income.   Analysis  has
historically  been performed on a quarterly basis to determine the amount of the
deferred tax asset.  Such  analysis is based on the premise that the company is,
and will  continue  to be, a going  concern  and that it is more likely than not
that  deferred tax benefits  will be realized  through the  generation of future
taxable income.  Management  reviews all available  evidence,  both positive and
negative,  to assess the  long-term  earnings  potential of the company  using a
number of  alternatives  to evaluate  financial  results in  economic  cycles at
various industry volume conditions based upon the company's  existing  operating
structure.  Continued  strong  demand in the  United  States  and Canada led the
company to raise its forecast for  industry  demand for heavy and medium  trucks
and school buses to a combined total of between  430,000 and 460,000 units. As a
result  of  this  increase,  the  continued  successful  implementation  of  the
company's manufacturing strategy,  changes in the company's operating structure,
and other  positive  operating  indicators,  management  reviewed its  projected
future  taxable income and evaluated the impact of these changes on its deferred
tax asset  valuation  allowance.  This  review  was  completed  during the third
quarter of 1999 and resulted in a reduction to the deferred tax asset  valuation
allowance of $178 million  which has been  recorded as a reduction in income tax
expense.

Business Environment

       Sales of Class 5 through 8 trucks have historically  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 third quarter of 1999, although
a decrease in the number of new truck orders has decreased  the company's  order
backlog to 53,700  units at July 31,  1999 from 68,600  units at July 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 balances  production with demand as
appropriate.

       Strong demand for International brand trucks coupled with record industry
demand continues to outpace Navistar's near term capacity.  Process improvements
and capacity  expansions are being  implemented to enhance the company's ability
to meet customer demand for its products.

       Continued  economic  strength in the United States and Canada has led the
company to increase its demand estimates.  The company  currently  projects 1999
United  States and  Canadian  Class 8 heavy  truck  demand  between  263,000 and
285,000 units. Class 5, 6 and 7 medium truck demand,  excluding school buses, is
forecast between 135,000 and 142,000 units.  Demand for school buses is forecast
between 32,000 and 33,000 units,  consistent with 1998.  Mid-range diesel engine
shipments  by the  company  to  original  equipment  manufacturers  in 1999  are
expected to be 285,600 units, 34% higher than in 1998.


<PAGE>


       PAGE 19

       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.  In April 1999,  the company  announced that it will invest $250
million to produce new high technology diesel engines in Huntsville, Alabama.

       On June 7, 1999,  the company  announced  that  employees  represented by
Local 127 of the Canadian  Auto Workers voted to ratify a new  three-year  labor
agreement  nearly  five  months  ahead  of  schedule.  The new  contract  is now
effective and extends  through June 1, 2002.  Increased  labor and pension costs
are  expected  to  be  offset  by  work  rule  changes  that  provide  increased
manufacturing flexibility.


<PAGE>


     PAGE 20


        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 July 31, 1999.


<PAGE>


     PAGE 21


                                    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)


September 13, 1999