```
**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 April 30, 2003

                                                         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.)

                                        4201 Winfield Road, P.O. Box 1488
                                           Warrenville, Illinois 60555
                        -----------------------------------------------------------------
                                  (Address of principal executive offices, Zip Code)

                         Registrant's telephone number, including area code (630) 753-5000

         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 May 30, 2003, the number of shares outstanding of the registrant's common stock was 68,338,314.

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 Six Months Ended April 30, 2003 and 2002..............................              3

      Statement of Financial Condition
         April 30, 2003, October 31, 2002 and April 30, 2002....................................              4

      Statement of Cash Flow
         Six Months Ended April 30, 2003 and 2002...............................................              5

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

Additional Financial Information.................................................................             25

      Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations............................................             27

      Item 3.  Quantitative and Qualitative Disclosures
                  About Market Risk..............................................................             37

      Item 4.  Controls and Procedures...........................................................             37

Part II.  Other Information:

      Item 1.  Legal Proceedings.................................................................             38

      Item 2.  Changes in Securities and Use of Proceeds.........................................             38

      Item 4.  Submission of Matters to a Vote of Security Holders...............................             39

      Item 6.  Exhibits and Reports on Form 8-K..................................................             39

Signature                                                                                                     40

Certifications...................................................................................             41

PAGE 3
                                               **PART I - FINANCIAL INFORMATION
                                               ------------------------------
ITEM 1.  Financial Statements**

STATEMENT OF INCOME (Unaudited)
Millions of dollars, except per share data
------------------------------------------------------------------------------------------------------------------------------

                                                                             Navistar International Corporation
                                                                               and Consolidated Subsidiaries
                                                               ---------------------------------------------------------------
                                                                     Three Months Ended                 Six Months Ended
                                                                          April 30                          April 30
                                                               -----------------------------------------------------------------
                                                                   2003             2002             2003             2002
                                                               --------------  ----------------  --------------  ---------------
Sales and revenues
Sales of manufactured products..............................   $   1,806       $   1,596         $   3,287       $   2,978
Finance and insurance revenue...............................          53              72               145             149
Other income                                                           5               4                10              10
                                                               ---------       ---------         ---------       ---------
        Total sales and revenues............................       1,864           1,672             3,442           3,137
                                                               ---------       ---------         ---------       ---------

Costs and expenses
Cost of products and services sold..........................       1,588           1,382             3,008           2,630
Postretirement benefits expense.............................          71              58               154             116
Engineering and research expense............................          61              65               118             129
Selling, general and administrative expense.................         122             128               246             261
Interest expense............................................          33              38                71              77
Other expense                                                          7               6                18              16
                                                               ---------       ---------         ---------       ---------
        Total costs and expenses............................       1,882           1,677             3,615           3,229
                                                               ---------       ---------         ---------       ---------

Loss from continuing operations before income taxes.........         (18)             (5)             (173)            (92)
Income tax benefit..........................................          (6)             (3)              (63)            (37)
                                                               ---------       ---------         ---------       ---------
        Loss from continuing operations.....................         (12)             (2)             (110)            (55)
Loss from discontinued operations...........................          (2)             (2)               (3)             (5)
                                                               ---------       ---------         ---------       ---------

Net loss ...................................................   $     (14)      $      (4)        $    (113)      $     (60)
                                                               =========       =========         =========       =========

--------------------------------------------------------------------------------------------------------------------------------

Basic earnings (loss) per share
        Continuing operations...............................   $   (0.18)      $   (0.04)        $   (1.64)      $   (0.92)
        Discontinued operations.............................       (0.03)          (0.03)            (0.04)          (0.08)
                                                               ---------       ---------         ---------       ---------
               Net loss.....................................   $   (0.21)      $   (0.07)        $   (1.68)      $   (1.00)
                                                               ============    =========         ============    =========

Diluted earnings (loss) per share
        Continuing operations...............................   $   (0.18)      $   (0.04)        $   (1.64)      $   (0.92)
        Discontinued operations.............................       (0.03)          (0.03)            (0.04)          (0.08)
                                                               ---------       ---------         ---------       ---------
               Net loss.....................................   $   (0.21)      $   (0.07)        $   (1.68)      $   (1.00)
                                                               ============    =========         ============    ============

Average shares outstanding (millions)
        Basic  .............................................        68.4            60.4              67.3            60.1
        Diluted                                                     68.4            60.4              67.3            60.1

--------------------------------------------------------------------------------------------------------------------------------

See Notes to Financial Statements.

PAGE 4

**STATEMENT OF FINANCIAL CONDITION (Unaudited)**
Millions of dollars
---------------------------------------------------------------------------------------------------------------------------
                                                                              Navistar International Corporation
                                                                                 and Consolidated Subsidiaries
                                                                     -----------------------------------------------------
                                                                        April 30           October 31         April 30
                                                                          2003                2002              2002
                                                                     ----------------    ----------------   --------------
ASSETS

Current assets
        Cash and cash equivalents...............................       $     463         $      620           $     558
        Marketable securities...................................              85                  -                  39
        Receivables, net........................................             975              1,054                 748
        Inventories.............................................             555                595                 644
        Deferred tax asset, net.................................             256                242                 153
        Other assets............................................             144                 97                 133
                                                                       ---------         ----------           ---------
Total current assets............................................           2,478              2,608               2,275
                                                                       ---------         ----------           ---------

Marketable securities...........................................             240                116                 526
Finance and other receivables, net..............................           1,005              1,214                 931
Property and equipment, net.....................................           1,314              1,479               1,676
Investments and other assets....................................             323                177                 201
Prepaid and intangible pension assets...........................              61                 63                 277
Deferred tax asset, net.........................................           1,356              1,286                 867
                                                                       ---------         ----------           ---------

Total assets                                                           $   6,777         $    6,943           $   6,753
                                                                       =========         ==========           =========

LIABILITIES AND SHAREOWNERS' EQUITY

Liabilities
Current liabilities
        Notes payable and current maturities of long-term debt..       $     250         $      358           $     493
        Accounts payable, principally trade.....................           1,018              1,020                 946
        Other liabilities.......................................           1,028              1,021                 745
                                                                       ---------         ----------           ---------
Total current liabilities.......................................           2,296              2,399               2,184
                                                                       ---------         ----------           ---------

Debt:   Manufacturing operations................................             882                747                 799
        Financial services operations...........................           1,426              1,651               1,436
Postretirement benefits liability...............................           1,360              1,354                 850
Other liabilities...............................................             541                541                 392
                                                                       ---------         ----------           ---------
        Total liabilities.......................................           6,505              6,692               5,661
                                                                       ---------         ----------           ---------

Commitments and contingencies

Shareowners' equity
Series D convertible junior preference stock....................               4                  4                   4
Common stock and additional paid in capital
         (75.3 million shares issued)...........................           2,120              2,146               2,139
Retained earnings (deficit).....................................            (906)              (721)               (244)
Accumulated other comprehensive loss............................            (723)              (705)               (333)
Common stock held in treasury, at cost
        (7.0 million, 14.8 million and 14.9 million shares held)            (223)              (473)               (474)
                                                                       ---------         ----------           ---------
        Total shareowners' equity...............................             272                251               1,092
                                                                       ---------         ----------           ---------

Total liabilities and shareowners' equity.......................       $   6,777         $    6,943           $   6,753
                                                                       =========         ==========           =========

--------------------------------------------------------------------------------------------------------------------------

See Notes to Financial Statements.

PAGE 5

**STATEMENT OF CASH FLOW** (Unaudited)
Millions of dollars
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

                                                                                        Navistar International Corporation
                                                                                           and Consolidated Subsidiaries
                                                                                     ------------------------------------------
                                                                                             Six Months Ended April 30
                                                                                     ------------------------------------------
                                                                                           2003                     2002
                                                                                     -----------------        -----------------
Cash flow from operations
Net loss  ........................................................................   $          (113)         $           (60)
Adjustments to reconcile net loss to cash used in operations:
       Depreciation and amortization..............................................               108                      109
       Deferred income taxes......................................................               (87)                     (32)
       Postretirement benefits funding less than (in excess of) expense...........               (23)                      15
       Other, net.................................................................               (53)                     (69)
    Change in operating assets and liabilities:
       Receivables................................................................                (8)                      95
       Inventories................................................................                23                       (9)
       Prepaid and other current assets...........................................               (56)                     (35)
       Accounts payable...........................................................                 4                     (169)
       Other liabilities..........................................................                43                       29
                                                                                     ---------------          ---------------
    Cash used in operations.......................................................              (162)                    (126)
                                                                                     ---------------          ---------------

Cash flow from investment programs
Purchases of retail notes and lease receivables...................................              (586)                    (553)
Collections/sales of retail notes and lease receivables...........................               914                      899
Purchases of marketable securities................................................              (258)                    (366)
Sales or maturities of marketable securities......................................                49                       64
Proceeds from sale of business....................................................                 -                       63
Capital expenditures..............................................................               (87)                    (114)
Proceeds from sale-leasebacks.....................................................                 -                        5
Property and equipment leased to others...........................................                24                      (30)
Capitalized interest and other....................................................                 3                       (4)
                                                                                     ---------------          ---------------
    Cash provided by (used in) investment programs................................                59                      (36)
                                                                                     ---------------          ---------------

Cash flow from financing activities
Issuance of debt..................................................................               218                      257
Principal payments on debt........................................................              (223)                     (94)
Net decrease in notes and debt outstanding under bank revolving credit
    facility and commercial paper programs........................................              (196)                    (291)
Proceeds from sale of stock to benefit plans......................................               175                        -
Premiums on call options, net.....................................................               (25)                       -
Debt issuance costs and other financing activities................................                (3)                      26
                                                                                     ---------------          ---------------
    Cash used in financing activities.............................................               (54)                    (102)
                                                                                     ---------------          ---------------

Cash and cash equivalents
    Decrease during the period....................................................              (157)                    (264)
    At beginning of the period....................................................               620                      822
                                                                                     ---------------          ---------------
Cash and cash equivalents at end of the period....................................   $           463          $           558
                                                                                     ===============          ===============

-------------------------------------------------------------------------------------------------------------------------------

See Notes to Financial Statements.

PAGE 6
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note A.  Summary of Accounting Policies**

     Navistar International Corporation (NIC) is a holding company whose principal operating subsidiary is
International Truck and Engine Corporation (International).  As used hereafter, "company" or "Navistar" refers to
Navistar International Corporation and its consolidated subsidiaries.  Navistar operates in three principal
industry segments:  truck, engine (collectively called "manufacturing operations"), and financial services.  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 2002 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 condition, results of operations and cash
flow for the periods presented.  Interim  results are not necessarily indicative of results for the full year.
Certain 2002 amounts have been reclassified to conform with the presentation used in the 2003 financial
statements.

     The disposal of the domestic  truck business in Brazil has been accounted for as discontinued operations in
accordance with Statement of Financial Accounting Standards No. 144 (SFAS 144), "Accounting for the Impairment or
Disposal of Long-Lived Assets."  Accordingly, the operating results of this business have been classified as
"Discontinued operations" and prior periods have been restated.  See Note I for further information.

     As a result of the 2002 Plan of Restructuring as further described in Note H, substantially all of the
participants of the company's pension plans are inactive.  Accordingly, effective February 1, 2003, cumulative
unrecognized gains and losses related to pension  benefits are amortized over the remaining life expectancy of the
participants in the plans.  The company previously recognized these costs over the remaining service life of
employees.  The change in amortization period did not have a material impact on the results of operations for the
three and six month periods ended April 30, 2003.

PAGE 7
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note A.  Summary of Accounting Policies (continued)**

     Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation"
and Statement of Financial Accounting Standards No. 148 (SFAS 148), "Accounting for Stock-Based Compensation -
Transition and Disclosure," encourage, but do not require, companies to record compensation cost for stock-based
employee compensation plans at fair value.  The company has chosen to continue to account for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations.  Accordingly, no compensation cost has been recognized for fixed stock
options because the exercise prices of the stock options equal the market value of the company's common stock at
the date of grant.  Further disclosure about the company's stock compensation plans can be found in Note 20 to
the company's 2002 Annual Report on Form 10-K.  The following  table  illustrates the effect on the company's net
loss and earnings (loss) per share if the company had applied the fair value recognition provision of SFAS 123 in
accordance with the disclosure provisions of SFAS 148.

                                                               Three Months Ended             Six Months Ended
                                                                    April 30                      April 30
                                                           ---------------------------   ----------------------------
Millions of dollars                                           2003           2002           2003            2002
--------------------------------------------------------   ------------  -------------   ------------   -------------

Net loss, as reported..................................    $     (14)    $      (4)      $    (113)     $     (60)
Deduct:  Total stock-based employee
        compensation expense determined under
        fair value based method for all awards, net
        of related tax effects.........................           (3)           (3)             (6)            (5)
                                                           ---------     ---------       ---------      ---------
Pro forma net loss.....................................    $     (17)    $      (7)      $    (119)     $     (65)
                                                           =========     =========       =========      =========

Earnings (loss) per share:
        Basic - as reported                                $   (0.21)    $   (0.07)      $   (1.68)     $   (1.00)
        Basic - pro forma                                  $   (0.25)    $   (0.12)      $   (1.76)     $   (1.09)

        Diluted - as reported                              $   (0.21)    $   (0.07)      $   (1.68)     $   (1.00)
        Diluted - pro forma                                $   (0.25)    $   (0.12)      $   (1.76)     $   (1.09)

Note B. New Accounting Pronouncements

     In November 2002, the Financial Accounting  Standards  Board (FASB) issued  Interpretation  No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others." FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain  guarantees that it has issued.  It also requires a guarantor to
recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing
the  guarantee.  The initial recognition and  measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002.  The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,  2002.  The company has provided
disclosures about guarantees in Note K.

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This
interpretation  addresses consolidation requirements of variable interest entities.  Transferors to qualified
special purpose entities (QSPEs) subject to the reporting requirements of Statement of Financial Accounting
Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets  and  Extinguishments of
Liabilities," are excluded from the scope of this interpretation.  The company currently sells receivables  to
entities meeting the requirements of QSPEs.

PAGE 8
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note B.  New Accounting Pronouncements (continued)**

     In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," which amends and clarifies accounting and reporting for
certain derivative instruments.  This statement is effective for contracts entered into or modified after June
30, 2003, and for hedging relationships designated after June 30, 2003, and is to be applied  prospectively.  The
company is evaluating the impact of this standard on its financial condition, results of operations and cash
flows.

     In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity," which establishes standards for how
an issuer classifies and measures certain financial instruments with characteristics of both liabilities and
equity.  This statement is effective for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  The company
is evaluating the impact of this new standard on its financial condition, results of operations and cash flows.

Note C.  Supplemental Cash Flow Information

     Consolidated interest payments during the first six months of 2003 and 2002 were $74 million and $81
million, respectively.  Consolidated tax payments made during the first six months of 2003 and 2002 were not
significant.

Note D.  Income Taxes

     The Statement of Income reflects the tax benefit of current Net Operating Losses (NOL), net of valuation
reserves, while the cumulative benefit of NOL carryforwards is recognized as a deferred tax asset in the
Statement of Financial Condition.  Cash payment of income taxes may be required for certain state income, foreign
income and withholding and federal alternative minimum taxes.  Until the company has utilized its significant NOL
carryforwards, the cash payment of United States (U.S.) federal and state income taxes will be minimal.

Note E.  Inventories

     Inventories are as follows:
                                                                      April 30         October 31         April 30
Millions of dollars                                                     2003              2002              2002
----------------------------------------------------------------------------------------------------------------------

Finished products..............................................    $       310       $       313       $      403
Work in process................................................             58                65               50
Raw materials and supplies.....................................            187               217              191
                                                                   -------------     --------------    -------------
        Total inventories......................................    $       555       $       595       $      644
                                                                   =============     ==============    =============

Note F.  Sales of Receivables

     Navistar Financial Corporation's (NFC) primary business is to provide wholesale, retail and lease financing
for new and used trucks sold by International and International's dealers and, as a result, NFC's finance
receivables and leases have significant concentration in the trucking industry.  NFC retains as collateral an
ownership interest in the equipment associated with leases and a security interest in equipment associated with
wholesale notes and retail notes.

PAGE 9
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note F.   Sales of Receivables (continued)**

     NFC securitizes and sells receivables through Navistar Financial Retail Receivables Corporation (NFRRC),
Navistar Financial Securities Corporation (NFSC), Truck Retail Accounts Corporation (TRAC) and Truck Engine
Receivables Financing Corporation (TERFCO), all special purpose corporations (SPCs) and wholly owned subsidiaries
of NFC. The sales of receivables in each  securitization  constitute  sales under accounting  principles  generally
accepted  in the United  States of America, with the result that the sold receivables are removed from NFC's
balance sheet and the investor's interests in the related trust or conduit are not reflected as liabilities.

     NFRRC, NFSC, TRAC and TERFCO have limited recourse on the sold receivables and their assets are available to
satisfy the claims of their creditors prior to such assets becoming available for their own uses or to NFC or
affiliated companies.  The terms of receivable sales generally  require NFC to provide credit enhancements in the
form of over collateralizations and/or cash reserves with the trusts and conduits.  The use of such cash reserves
by NFC is restricted under the terms of the securitized sales agreements.  The maximum exposure under all
receivable sale recourse provisions as of April 30, 2003, was $313 million.  The allowance for losses allocated
to sold  receivables totaled $13 million, $14 million and $18 million at April 30, 2003, October 31, 2002 and
April 30, 2002, respectively.

     The SPCs'  retained  interests in the related trusts or assets held by the trusts are included in "Finance and
other  receivables"  on the Statement of Financial  Condition.  The carrying  amounts of these  retained  interests
approximate  fair value and were $313  million,  $345 million and $401 million at April 30, 2003,  October 31, 2002
and April 30, 2002, respectively.

     Management estimates the prepayment speed for the receivables sold and the discount rate used to present
value the interest-only receivables in order to calculate the gain or loss.  Estimates of prepayment speeds and
discount rates are based on historical experience and  other factors and are made separately for each
securitization transaction.  In addition, NFC estimates the fair value of the interest-only receivables on a
quarterly basis.  The fair value of the interest-only receivables is based on updated estimates of  prepayment
speeds and discount rates.

     Key economic assumptions used in measuring the interest-only receivables at the date of the sale for sales
of retail notes and finance leases  completed during the quarter ended April 30, 2003, were a prepayment speed of
1.4, a weighted average life of 40 months and an interest-only receivables discount rate of 5.35%.  For those
sales completed during the quarter ended April 30, 2002, the assumptions used were a prepayment speed of 1.4 to
1.6, a weighted average life of 40 months and an interest-only receivables discount rate of 6.93%.

     Sold receivable balances are summarized below.

                                                            April 30          October 31           April 30
    Millions of dollars                                       2003               2002                2002
    ---------------------------------------------------- ---------------- -- -------------- --- ---------------
    Retail notes, net of unearned income...............      $  1,718            $  1,522           $  2,078
    Finance leases, net of unearned income.............            24                   -                  -
    Wholesale notes....................................           857                 788                694
    Retail accounts....................................           131                 127                200
                                                            ---------           ---------          ---------
             Total.....................................      $  2,730            $  2,437           $  2,972
                                                             ========            ========           ========

PAGE 10
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note F.   Sales of Receivables (continued)**

     Serviced portfolio balances are summarized below.

                                                            April 30          October 31           April 30
    Millions of dollars                                       2003               2002                2002
    ---------------------------------------------------- ---------------- -- -------------- --- ---------------
    Gross serviced receivables:
         Retail notes..................................      $  2,522            $  2,529           $  2,516
         Finance leases................................           193                 206                218
         Wholesale notes...............................           910                 839                745
         Accounts                                                 359                 384                351
                                                            ---------           ---------          ---------
             Total gross serviced receivables..........         3,984               3,958              3,830
    Net investment in operating leases.................           204                 248                280
                                                            ---------           ---------          ---------
             Total serviced portfolio..................      $  4,188            $  4,206           $  4,110
                                                             ========            ========           ========

      Additional  financial  data for the gross  serviced  portfolio as of April 30,  2003,  and for the six months
then ended is as follows:
                                                                         Finance and
                                                          Retail          Operating          Wholesale
Millions of dollars                                       Notes             Leases             Notes          Accounts
------------------------------------------------------- ----------- --- --------------- -- -------------- -- ------------
Balances with payments past due over 60 days.........    $      18       $       5          $       1         $       6
Credit losses, net of recoveries.....................            7               1                  -                 -

     The following table summarizes certain cash flows received from (paid to) securitization trusts/conduits.

                                                                  Six Months Ended
                                                                      April 30
                                                             ---------------------------
Millions of dollars                                             2003           2002
------------------------------------------------------------ ----------- -- ------------
Proceeds from sales of finance receivables.................  $     850      $     893
Proceeds from sales of finance receivables into
     revolving facilities..................................      2,411          2,240
Servicing fees received....................................         13             12
Repurchase of receivables in breach of terms...............        (20)             -
Cash used in exercise of purchase option...................        (64)           (45)
All other cash received from trusts........................         88            123

Note G.  Debt

     In December 2002, the company  completed the private placement of $190 million of senior convertible bonds due
2007.  The bonds were priced to yield 2.5% with a conversion premium of 30% on a closing price of $26.70.
Simultaneous with the issuance of the convertible bonds, the company entered into two call option derivative
contracts, the consequences of which will allow the company to minimize share dilution upon conversion of the
convertible debt from the conversion price of the bond up to a 100% premium over the share price at issuance.  The
net premium paid for the call options was $25 million.  In February  2003, $100 million of the net proceeds from the
$190 million offering was used to repay the aggregate principal amount of the 7% senior notes due February 2003.
The remaining funds were used to repay other existing debt, replenish cash balances that were used to repay other
debt that matured in fiscal 2002 and to pay fees and expenses related to the offering.

PAGE 11
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note H.  Restructuring and Other Non-recurring Charges**

2000 and 2002 Restructuring Charges
-----------------------------------

     In October 2000, the company incurred charges for restructuring, asset write-downs and other exit costs
eventually totaling $309 million, after $3 million in net adjustments in 2001 and 2002, as part of an overall
plan to restructure its manufacturing  and corporate operations (2000 Plan of Restructuring).  The major
restructuring, integration and cost reduction  initiatives, which were substantially complete as of November 30,
2001, included in the 2000 Plan of Restructuring are as follows:

o        Replacement of steel cab  trucks with a new line of High Performance Vehicles (HPV) and
         a concurrent realignment of the company's truck manufacturing facilities
o        Closure of certain operations
o        Launch of the next generation technology diesel engines (NGD)
o        Consolidation of corporate operations
o        Realignment of the bus and truck dealership network and termination of various dealerships' contracts

     In October 2002, the company's board of directors approved a separate restructuring plan (2002 Plan of
Restructuring) and the company incurred charges for restructuring, asset and inventory  write-downs and other exit
costs totaling $372 million.  In addition, the company incurred non-recurring charges of $170 million related to
its V-6 diesel engine program and $60 million in losses (net of tax) from discontinued operations associated with
its exit of the Brazil domestic truck market (see Note I).

     The following are the major restructuring, integration and cost reduction initiatives included in the 2002
Plan of Restructuring:

o        Closure of facilities and exit of certain activities including the Chatham, Ontario heavy
         truck assembly facility, the Springfield, Ohio body plant and a manufacturing production
         line within one of the company's plants
o        Offer of an early retirement program to certain union represented employees
o        Completion of the launch of the HPV and NGD product programs

       Of the 2002 pre-tax  restructuring, other non-recurring charges and adjustments of $544 million, $157
million represented non-cash charges.

     Through April 30, 2003, approximately $596 million in charges related to the 2000 and 2002 Plans of
Restructuring and the 2002 non-recurring charges have been incurred.  Curtailment losses of $169 million related
to the company's  postretirement benefit plans have been reclassified as a non-current postretirement benefits
liability.  The remaining restructuring and other non-recurring charges liability of $255 million is expected to
be funded from existing cash balances and internally generated cash flows from operations.

PAGE 12
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note H.  Restructuring and Other Non-recurring Charges (continued)**

2000 and 2002 Restructuring Charges (continued)
-----------------------------------------------

     A description of the significant components of the 2000 and 2002 restructuring charges is as follows:

     The 2000 Plan of Restructuring included the reduction of approximately 1,900 employees from the workforce,
primarily in North  America.  At October 31, 2002, the remaining $18 million balance of the total net charge of
$75  million was adjusted as part of the $94  million charge for severance  and benefits related to the 2002
restructuring charge.  Pursuant to the 2002 Plan of Restructuring, an additional 3,500 positions will be
eliminated throughout the company, primarily in North America.  During the six months ended April 30, 2003,
approximately $24 million was paid for severance and other benefits to approximately 1,400 employees as a result
of the two Plans of Restructuring, of which $12 million was paid in the second  quarter.  The severance and other
benefits balance represents costs related to future payments due to the company's contractual severance
obligations.

     Lease termination costs related to the 2000 Plan of Restructuring include future obligations under long-term
non-cancelable lease agreements at facilities being vacated following workforce reductions.   This charge
primarily consisted of the estimated lease costs, net of probable sublease income, associated with the
cancellation of the company's corporate office lease at NBC Tower in Chicago, Illinois, which expires in 2010.
As of April 30, 2003, $10 million of the total net charge of $38 million has been incurred for lease termination
costs, of which $1 million was incurred during the quarter.

     The 2000 Plan of Restructuring included the effect of the sale of Harco National Insurance Company (Harco).
On November 30, 2001, NFC completed the sale of Harco to IAT Reinsurance Syndicate Ltd. (IAT), a Bermuda
reinsurance company.  During the six months ended April 30, 2003, $2 million of payments related to exit costs
were incurred.  All of these payments were made in the first quarter.

     Dealer  termination costs related to the 2000 Plan of Restructuring include the termination of certain dealer
contracts in connection  with the  realignment of the company's bus distribution  network, and other litigation
costs to  implement the 2000 restructuring initiatives.  Other exit costs  principally  include  $25  million of
contractually obligated exit and closure costs incurred as a result of the planned closure of both the Chatham
Assembly Plant and the Springfield Body Plant.  As of April 30, 2003, $25 million of the total net charge of $68
million has been paid for dealer termination and other exit costs, of which $1 million was incurred during the
quarter.

Other Non-Recurring Charges
---------------------------

     In addition to the 2002 Plan of Restructuring charges, the company recorded non-recurring charges of $170
million primarily related to the discontinuance of the company's V-6 diesel engine program with Ford Motor
Company (Ford).  In October 2002, Ford advised the company that its current  business case for a V-6 diesel engine
in the specified vehicles was not viable and discontinued its program for the use of these engines.  As a result,
the company determined that the timing  of the commencement of the V-6 diesel engine program was neither
reasonably predictable nor probable.  The  non-recurring  pre-tax charge of $167 million in 2002 included the
write-off of deferred  pre-production costs, the write-down to fair value of certain V-6 diesel engine-related
fixed assets that were abandoned, an accrual for future lease obligations under non-cancelable operating leases
for certain V-6 diesel engine assembly assets that will not be used by the company, an accrual for amounts
contractually owed to suppliers related to the V-6 diesel engine program and the write-down to fair value of
certain other assets.

PAGE 13
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note H.  Restructuring and Other Non-recurring Charges (continued)**

Other Non-Recurring Charges (continued)
---------------------------------------

     The company worked with Ford to negotiate a reimbursement  of its investment and development costs as well as
any amounts owed to the company's suppliers.  While the company believed that it was legally entitled to such
reimbursement under the agreement, Ford did not agree to any such reimbursement of the company's investment and
development costs. No anticipated recovery has been recorded as part of the $167 million pre-tax charge.  As of
April 30, 2003, of the total net charge of $170 million, $76 million has been incurred primarily related to the
write-off or write-down tofair value of fixed assets and for the payment of lease obligations of which $2
million was incurred during the quarter.

     Components of the company's restructuring plans and other non-recurring charges, including the plans
initiated in both 2002 and 2000, are shown in the following table.

                                                          Balance                            Balance
                                                         October 31          Amount          April 30
        Millions of dollars                                 2002            Incurred           2003
        ----------------------------------------------- ----------------- -------------- ----------------
        Severance and other benefits.................     $  112          $ (24)         $  88
        Lease terminations...........................         30             (2)            28
        Loss on sale of business.....................          4             (2)             2
        Dealer terminations and other exit costs.....         46             (3)            43
        Other non-recurring charges..................        104            (10)            94
                                                          ------          --------       --------
             Total...................................     $  296          $ (41)         $ 255
                                                          ======          =====          ========

     In April 2003, the company reached a comprehensive agreement with Ford concerning termination of its V-6
diesel engine program.  The terms of the agreement include compensation to neutralize certain current and future
V-6 diesel engine program related costs not accrued for as part of the 2002 non-recurring charge, resolution of
ongoing pricing related to the company's V-8 diesel engine program and a release by the parties of all of their
obligations under the V-6 diesel engine contract.  The company will continue as Ford's exclusive supplier of V-8
diesel engines through 2012 for use in its over 8,500 lb. gross vehicle weight pick-up trucks, vans and SUVs for
North America.  The agreement did not have a material net impact on the company's financial position or results
of operations for the three and six month periods ended April 30, 2003.

Note I.  Discontinued Operations

     In October 2002, the company announced its decision to discontinue the domestic truck business in Brazil
(Brazil Truck) effective October 31, 2002. In connection with this discontinuance, the company recorded a loss
on disposal of $46 million  in fiscal 2002.  The loss related  to the write-down of assets to fair value,
contractual settlement costs for the termination of the dealer contracts, severance and other benefits costs, and
the write-off of Brazil Truck's cumulative translation adjustment due to the company's substantial liquidation of
its investment in Brazil Truck.  The disposal of Brazil Truck has been  accounted for as  discontinued  operations
in accordance  with  SFAS 144.  Accordingly, the  operating  results of Brazil Truck have been classified as
"Discontinued operations" and prior periods have been restated.

PAGE 14
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note J.  Financial Instruments**

     The company uses derivative financial instruments as part of its overall interest rate and foreign currency
risk management strategy as further described under Item 7A and in Note 13 to the 2002 Annual Report on Form 10-K.

     The financial services operations manage exposure to fluctuations in interest rates by limiting the amount
of fixed rate assets funded with variable rate debt.  This is accomplished  by selling fixed rate receivables on a
fixed rate basis and by utilizing derivative financial instruments.  These derivative  financial instruments may
include interest rate swaps, interest rate caps and forward contracts.  The fair value of these instruments is
estimated based on quoted market prices and is subject to market risk as the instruments may become less valuable
due to changes in market conditions or interest rates.  NFC manages  exposure to counter-party credit risk by
entering into derivative financial instruments  with major financial  institutions that can be expected to fully
perform under the terms of such agreements.  NFC does not  require collateral or other security to support
derivative financial instruments with credit risk.  NFC's counter-party credit exposure is limited to the
positive fair value of contracts at the reporting date.  As of April 30, 2003,  NFC's derivative financial
instruments had a negative net fair value.  Notional amounts of derivative financial instruments do not represent
exposure to credit loss.

     At April 30, 2003, the notional amounts and fair values of the company's derivatives are presented in the
following table, in  millions.  The fair values of all these derivatives are recorded in other assets or other
liabilities on the Statement of Financial Condition.

      Inception Date             Maturity Date           Derivative Type          Notional Amount       Fair Value
------------------------------------------------------------------------------- ---------------------------------------
------------------------------------------------------------------------------- ---------------------------------------

January 1999 -              May 2003 -              Interest Rate Swaps         $         394       $       (4)
April 2003                  March 2007

October 2000 -              October 2003 -          Interest Rate Caps                  1,014                -
November2002                November 2012

February 2003 -             February 2005 -         Forward Starting Swaps                900                (6)
April 2003                  July2005

February 2003 -             May 2003                Foreign Currency                       10                (1)
March 2003                                          Forward Contracts

April 2003                  October 2003            Cross Currency Swaps                   15                (1)

     In November 2002, NFC entered into an interest rate swap agreement in connection  with a sale of retail notes
and lease receivables.  The purpose of the swap was to convert the floating rate portion of the  asset-backed
securities issued into fixed rate interest to match the interest basis of the receivables pool sold to the owner
trust and to protect NFC from  interest rate volatility.  The notional amount of this swap is calculated as the
difference between the actual pool  balances and the  projected  pool  balances.  At April 30, 2003, the notional
amount was zero.  The outcome of the swap results in NFC paying a fixed rate of interest on the projected balance
of the pool.  To the extent that actual pool balances differ from the projected  balances, NFC has retained
interest rate exposure on this difference.  This transaction is accounted for as a non-hedging  derivative
instrument and gains and losses are recorded in other income.

PAGE 15
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note J.  Financial Instruments (continued)**

     During the second quarter of 2003, NFC entered into several forward starting swap contracts with aggregate
notional amounts of $900 million in connection with anticipated sales of retail notes and finance leases.  NFC
recognized a pre-tax loss of $6 million related to these contracts.  The purpose of these swaps is to limit NFC's
interest rate risk exposure during the period it is accumulating receivables for the  anticipated sales of
receivables.

     In addition to those instruments described  above, the company entered into two call option derivative
contracts in connection with the issuance of the $190 million senior convertible notes in December 2002.  The
purchased call option and written call option will allow the company to minimize share dilution associated  with
the convertible debt from the conversion price of the bond up to a 100% premium over the share price at
issuance.  In accordance with EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock," the company has recorded these instruments in permanent equity,
and will not recognize subsequent changes in fair value as long as the instruments remain classified as equity.
The net premium paid for the call options was $25 million.

Note K.  Guarantees

     The company and its subsidiaries occasionally  provide guarantees that could obligate them to make future
payments if the primary entity fails to perform under its contractual obligations.  The company has not recorded
a liability for these guarantees.  The company has no recourse as guarantor in case of default.

     In connection with the $400 million 9 3/8% Senior Notes due 2006 that were issued by the company in May
2001, International provided a full and unconditional guarantee of this indebtedness along with guarantees on the
$250 million 8% Senior Subordinated Notes due 2008 that  were issued  by the company in February 1998.
International has also provided a guarantee on the $190 million 2 1/2% Senior Convertible Notes due 2007 that were
issued by thecompany in December 2002.

     The company provided a guarantee on the $19 million 9.95% Senior Notes due 2011 that International issued in
June 2001.  As of April 30, 2003, the outstanding balance on this debt was $18 million.

     The company and  International are obligated under certain agreements with public and private lenders of NFC
to maintain the subsidiary's income before interest expense and income taxes at not less than 125% of its total
interest expense.  No income maintenance payments were required for the six months ended April 30, 2003.

     The company guarantees a total of $393  million of lines of credit made available to its Mexican finance
subsidiaries by third parties and NFC. At April 30,  2003, outstanding loans under the lines of credit totaled
$120 million.  The lines of credit have various maturity dates with June 2007 being the longest maturity  date
from a third party.

     The company also guarantees many of the operating leases of its operating subsidiaries.  The leases have
various expiration dates that extend through June 2014. The remaining  maximum  obligations under these leases as
of April 30, 2003, totaled approximately $706 million.

     The company and International also guarantee real estate operating leases of International and of the
subsidiaries  of the company.  The leases have various  maturity dates  extending out through 2013. As of April 30,
2003, the total remaining obligation under these leases is approximately $28 million.

PAGE 16
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note K.  Guarantees (continued)**

     The company and NFC have issued residual value guarantees in connection with various operating leases.  The
amount of the guarantees is undeterminable because in some instances, neither the company nor NFC is responsible
for the entire amount of the guaranteed lease residual.  The company's and NFC's guarantees are contingent upon
the fair value of the leased assets at the end of the lease  term.  The excess of the guaranteed lease residual
value over the fair value of the residual represents the amount of the company's and NFC's exposure.

     NFC has an $820 million contractually committed bank revolving credit facility that will mature in December
2005.  Under this agreement, the company's Mexican  finance subsidiaries are permitted to borrow up to $100
million in the aggregate.  Such borrowings by the Mexican finance subsidiaries are guaranteed by the company and
NFC.  As of April 30, 2003, the outstanding balance on this portion of the facility was $40 million.

     In October  2002, NFC entered into an agreement to guarantee the 200 million  peso-denominated bank facility
of two of the company's Mexican finance subsidiaries.  The due date of the longest loan maturity is May 2006. As
of April 30, 2003, the total outstanding balance of the debt was equivalent to $19 million, or 200 million pesos.

     In May 2002, NFC entered into an agreement to guarantee the peso-denominated line of credit of two of the
Mexican finance subsidiaries up to the amount of 600 million pesos, equivalent to $58 million.  The due date of
the longest loan  maturity is March 2006.  As of April 30, 2003, the total outstanding balance of the debt was
equivalent to $19 million.

     In November 2001, NFC entered into an agreement to guarantee the 500 million peso-denominated medium term
note of one of the  Mexican finance subsidiaries.  The due date is  November 2004.  As of April  30, 2003,  the
outstanding balance of peso-denominated debt was $49 million, or 500 million pesos.

     As of April 30, 2003, NFC had guaranteed derivative contracts for foreign currency forwards, interest rate
swaps and cross currency swaps related to two of the company's Mexican finance subsidiaries.  NFC is liable up to
the fair market value of these derivative contracts only in cases of default by the two Mexican finance
subsidiaries.  The notional amount available on this date under these derivative contracts is $25 million in
foreign currency forwards and $52 million in interest rate swaps and cross currency  swaps. As of April 30, 2003,
the outstanding  balances related to these forwards and swaps were $10 million of foreign currency forwards and
$49 million of interest rate swaps and cross currency  swaps, and the fair market values of these outstanding
balances were both $1 million.

     As part of the sale of Harco to IAT, NFC has agreed to guarantee the adequacy of Harco's loss reserves as of
November 30, 2001, the closing date of the sale.  There is no limit to the potential amount of future  payments
required under this agreement, which is scheduled  to expire in November 2008.  As security for its obligation
under this agreement,  NFC has escrowed $5 million,  which will become available for use in February 2004.  The
carrying amount of the liability  under this guarantee is estimated at $2 million as of April 30, 2003.
Management believes this reserve is adequate to cover any future potential payments to IAT.

     At April 30, 2003, the Canadian operating subsidiary was contingently liable for $307 million of retail
customers' contracts and $39 million of retail leases that are financed by a third party.  The Canadian operating
subsidiary is responsible for the residual  values of these  financing  arrangements.  These  contract  amounts
approximate the resale market value of the collateral underlying the note liabilities.

PAGE 17
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note K.  Guarantees (continued)**

     In addition, the company entered into various guarantees for purchase commitments, credit guarantees and
buyback programs with various expiration dates that total approximately $87 million.  In the ordinary course of
business, the company also provides routine indemnifications and other guarantees whose terms range in duration
and often are not explicitly  defined.  The company does not believe these will have a material impact on the
results of operations or financial condition of the company.

Product Warranty
----------------

     Provisions for estimated  expenses related to product warranty are made at the time products are sold. These
estimates are established using historical information about the nature, frequency and average cost of warranty
claims.  Management actively studies trends of warranty claims and takes action to improve vehicle quality and
minimize warranty claims.  Management believes that the warranty reserve is appropriate;  however, actual claims
incurred could differ from the original estimates, requiring adjustments to the reserve.

     Changes in the product warranty accrual for the six months ended April 30, 2003, were as follows:

     Millions of dollars
     -------------------------------------------------------------------------------------------------
     Balance, beginning of period...............................................      $         185
     Change in liability for warranties issued during the period................                 68
     Change in liability for preexisting warranties.............................                 (2)
     Payments made..............................................................                (85)
                                                                                      -------------
     Balance, end of period.....................................................      $         166
                                                                                      =============

Note L.  Legal Proceedings and Environmental Matters

     The company and its subsidiaries are subject to various claims arising in the ordinary course of business,
and are parties to various legal proceedings  that constitute ordinary routine litigation incidental to the
business of the company and its subsidiaries.  In the opinion of the company's management, none  of  these
proceedings or claims is material to the business or the financial condition of the company.

     The company has been named a potentially responsible party (PRP), in conjunction with other parties, in a
number of cases arising under an environmental protection law, the  Comprehensive  Environmental  Response,
Compensation, and Liability Act, popularly known as the Superfund law. These cases involve sites that allegedly
have received wastes from current or former  company  locations.  Based on  information  available to the company
which, in most cases, consists of data related to quantities and characteristics of material generated at, or
shipped to, each site as well as cost estimates from PRPs and/or federal or state regulatory agencies for the
cleanup of these sites, a reasonable estimate is calculated of the company's  share, if any, of the probable costs
and is provided for in the financial statements.  These obligations are generally recognized no later than
completion of the remedial  feasibility  study and are not discounted to their present value.  The company  reviews
its accruals on a regular basis and  believes that, based on these calculations, its share of the  potential
additional costs for the cleanup of each site will not have a material effect on the company's financial results.

PAGE 18
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note M.  Segment Data**

     Reportable operating segment data is as follows:
                                                                                         Financial
Millions of dollars                                    Truck            Engine           Services           Total
------------------------------------------------- ---------------- ------------------ ---------------- -----------------

                                                                  For the quarter ended April 30, 2003
                                                  ----------------------------------------------------------------------

External revenues...............................     $   1,255        $     551          $      55        $  1,861
Intersegment revenues...........................             -              126                  9             135
                                                     ---------        ---------          ---------        ---------
     Total revenues.............................     $   1,255        $     677          $      64        $  1,996
                                                     =========        =========          =========        ========

Segment profit (loss)...........................     $     (23)       $      47          $      13        $     37

                                                                 For the six months ended April 30, 2003
                                                  ----------------------------------------------------------------------

External revenues...............................     $   2,346        $     941          $     149        $   3,436
Intersegment revenues...........................             -              236                 17              253
                                                     ---------        ---------          ---------        ---------
     Total revenues.............................     $   2,346        $   1,177           $    166        $   3,689
                                                     =========        =========           =========        =========

Segment profit (loss)...........................     $    (119)       $      12          $      61        $     (46)

                                                                          As of April 30, 2003
                                                  ----------------------------------------------------------------------

Segment assets..................................     $   1,549        $     982          $   2,247        $   4,778

                                                                  For the quarter ended April 30, 2002
                                                  ----------------------------------------------------------------------

External revenues...............................     $   1,143        $     453          $      74        $   1,670
Intersegment revenues...........................             -              118                  9              127
                                                     ---------        ---------          ---------        ---------
     Total revenues.............................     $   1,143        $     571          $      83        $   1,797
                                                     =========        =========          =========        =========

Segment profit (loss)...........................     $     (44)       $      61          $      23        $      40

                                                                 For the six months ended April 30, 2002
                                                  ----------------------------------------------------------------------

External revenues...............................     $   2,085        $     893          $     154        $   3,132
Intersegment revenues...........................             -              215                 18              233
                                                     ---------        ---------          ---------        ---------
     Total revenues.............................     $   2,085        $   1,108           $    172        $   3,365
                                                     =========        =========           =========       =========

Segment profit (loss)..........................      $    (155)       $     103          $      54        $       2

                                                                          As of April 30, 2002
                                                  ----------------------------------------------------------------------

Segment assets..................................     $   1,827        $   1,080          $   2,415        $   5,322

PAGE 19
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note M.  Segment Data (continued)**

     Reconciliation  to the consolidated  financial  statements as of and for the three months and six months ended
April 30 is as follows:

                                                              Three Months Ended                Six Months Ended
                                                                   April 30                         April 30
                                                          ----------------------------    -----------------------------

Millions of dollars                                           2003             2002           2003             2002
------------------------------------------------------    -------------    -----------    ------------     ------------

Segment sales and revenues...........................     $    1,996       $    1,797     $    3,689       $    3,365
Other income.........................................              3                2              6                5
Intercompany.........................................           (135)            (127)          (253)            (233)
                                                          ----------       ----------     ----------       ----------
Consolidated sales and revenues......................     $    1,864       $    1,672     $    3,442       $    3,137
                                                          ==========       ==========     ==========       ==========

Segment profit (loss)..............................(l     $       37       $       40     $      (46)      $        2
Restructuring adjustment.............................              -                -              -                1
Corporate items......................................            (43)             (32)           (99)             (69)
Manufacturing net interest expense...................            (12)             (13)           (28)             (26)
                                                          ----------       ----------     ----------       ----------
Consolidated pre-tax loss from continuing
     Operations......................................     $      (18)      $       (5)    $     (173)      $      (92)
                                                          ==========       ==========     ==========       ==========

Segment assets.......................................     $    4,778       $    5,322
Cash and marketable securities.......................            361              400
Deferred taxes.......................................          1,612            1,020
Corporate intangible pension assets..................             12               74
Other corporate and eliminations.....................             14              (63)
                                                          ----------       ----------
Consolidated assets..................................     $    6,777       $    6,753
                                                          ==========       ==========

Note N.  Common Shareowners' Equity

     In November 2002, the company completed the sale of a total of 7,755,030 shares of its common stock held in
Treasury, par value $0.10 per share, at a price of $22.566 per share, for an aggregate  purchase price of $175
million to the three employee benefit plan trusts of International.  The securities were offered and sold in
reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933
and Rule 506 under Regulation  D.  The proceeds from the sale of the stock will be used primarily to fund the
company's retirement plans in 2003.

Note O.  Comprehensive Income

     The  components of comprehensive income (loss) for the three  months and six months ended April 30 are as
follows:

                                                               Three Months Ended             Six Months Ended
                                                                    April 30                      April 30
                                                           ---------------------------   ----------------------------
Millions of dollars                                            2003           2002           2003            2002
--------------------------------------------------------   ------------  -------------   ------------   -------------

Net loss ..............................................    $    (14)     $     (4)       $   (113)      $    (60)
Other comprehensive income (loss)......................          (4)            6             (18)             6
                                                           --------      --------        --------       --------
        Total comprehensive income (loss) .............    $    (18)     $      2        $   (131)      $    (54)
                                                           ========      ========        ========       ========

PAGE 20
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note P.  Earnings Per Share**

     Earnings (loss) per share was computed as follows:

                                                               Three Months Ended              Six Months Ended
                                                                    April 30                       April 30
                                                           ----------------------------  -----------------------------
Millions of dollars,                                           2003          2002             2003          2002
except share and per share data
---------------------------------------------------------------------------------------  -----------------------------

Loss from continuing operations........................    $      (12)   $       (2)     $     (110)    $      (55)
Loss from discontinued operations......................            (2)           (2)             (3)            (5)
                                                           ----------    ----------      ----------     ----------
        Net loss.......................................    $      (14)   $       (4)     $     (113)    $      (60)
                                                           ==========    ============    ==========     ===========

Average shares outstanding (millions)
        Basic  ........................................          68.4          60.4            67.3           60.1
        Diluted                                                  68.4          60.4            67.3           60.1

Basic earnings (loss) per share
Continuing operations..................................    $    (0.18)   $    (0.04)     $    (1.64)    $    (0.92)
Discontinued operations................................         (0.03)        (0.03)          (0.04)         (0.08)
                                                           ----------    ----------      ----------     ----------
        Net loss.......................................    $    (0.21)   $    (0.07)     $    (1.68)    $    (1.00)
                                                           ============  ============    ============   ===========

Diluted earnings (loss) per share
Continuing operations..................................    $    (0.18)   $    (0.04)     $    (1.64)    $    (0.92)
Discontinued operations................................         (0.03)        (0.03)          (0.04)         (0.08)
                                                           ----------    ----------      ----------     ----------
        Net loss.......................................    $    (0.21)   $    (0.07)     $    (1.68)    $    (1.00)
                                                           ============  ============    ============   ===========

     The computation of diluted shares outstanding for the six months ended April 30, 2003 and 2002,  excludes
incremental shares of 8.1 million and 2.1 million,  respectively, related to employee stock options, convertible
debt and other dilutive securities.  These shares are excluded due to their anti-dilutive effect as a result of
the company's losses for the first half of 2003 and 2002.

PAGE 21
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note Q.  Condensed Consolidating Guarantor and Non-Guarantor Financial Information**

     The following tables set forth the condensed  consolidating Statements of Financial Condition as of April 30,
2003 and 2002, and the Statements of Income and Cash Flow for the six months ended April 30, 2003 and 2002.  The
following information is included as a result of the guarantee of the 9 3/8% senior notes due 2006 by
International, exclusive of its subsidiaries.  International is a direct wholly owned subsidiary of  NIC.
International,  exclusive of its subsidiaries, also guarantees NIC's obligations under its 21/2% senior convertible
notes due 2007 and 8% senior subordinated  notes due 2008.  None of NIC's other subsidiaries guarantee any of
these notes.  Each of the guarantees is full and unconditional.  Separate financial statements and other
disclosures concerning International have not been presented because management believes that such information is
not material to investors.  NIC includes the consolidated financial results of the parent company only, with all
of its wholly owned subsidiaries accounted for under the equity method.  International, for purposes of this
disclosure only, includes the consolidated financial results of its wholly owned subsidiaries accounted for under
the equity method.  "Non-Guarantor Companies and Eliminations" includes the consolidated financial results of all
other non-guarantor subsidiaries including  the elimination entries for all intercompany transactions.  All
applicable  corporate expenses have been  allocated  appropriately  among  the guarantor and non-guarantor
subsidiaries.

     NIC files a consolidated  U.S. federal income tax return which includes International and its  U.S.
subsidiaries.  International has a tax allocation agreement (Tax Agreement) with NIC which requires International
to compute its separate federal income tax expense based on its adjusted book income.  Any  resulting tax
liability is paid to NIC. In addition, under the Tax Agreement, International is required to pay to NIC any tax
payments received from  its subsidiaries.  The effect of the Tax Agreement is to allow NIC, rather than
International, to utilize U.S. operating income/losses and NIC operating loss carryforwards.

PAGE 22
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note Q.  Condensed Consolidating Guarantor and Non-Guarantor Financial Information (continued)**

                                                                                                           Non-Guarantor
                                                                                                           Companies and
       Millions of dollars                                                   NIC         International     Eliminations      Consolidated
       ---------------------------------------------------------------------------------------------------------------------------------

CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE SIX MONTHS ENDED APRIL 30, 2003
-----------------------------------------------------------------------------------

Sales and revenues............................................            $         1     $       2,592    $         849      $      3,442
                                                                        -------------     -------------    -------------      ------------

Cost of products and services sold............................                     13             2,431              564             3,008
All other operating expenses..................................                    (11)              525               93               607
                                                                        -------------     -------------    -------------      ------------
    Total costs and expenses..................................                      2             2,956              657             3,615
                                                                        -------------     -------------    -------------      ------------

Equity in income (loss) of non-consolidated subsidiaries......                   (172)              175               (3)                -
                                                                        -------------     -------------    -------------      ------------

Income (loss) from continuing operations before income taxes..                  (173)              (189)            189              (173)
Income tax expense (benefit)..................................                    63)                21             (21)              (63)
                                                                       -------------      -------------   -------------      ------------
Income (loss) from continuing operations......................                  (110)              (210)            210              (110)
                                                                       -------------      -------------   -------------      ------------

Loss from discontinued operations.............................                   (3)                  -               -                (3)
                                                                      -------------       -------------   -------------      ------------

Net income (loss).............................................        $        (113)      $        (210)  $         210      $       (113)
                                                                      =============       =============   =============      ============

CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL CONDITION AS OF APRIL 30, 2003
-----------------------------------------------------------------------------

Assets
Cash and marketable securities................................        $         241       $           7   $         540      $        788
Receivables, net..............................................                    6                 156           1,818             1,980
Inventories...................................................                    -                 300             255               555
Property and equipment, net...................................                    -                 786             528             1,314
Investment in affiliates......................................               (2,793)                827           1,966                 -
Deferred tax asset and other assets...........................                1,620                 150             370             2,140
                                                                      -------------       -------------   -------------      ------------
    Total assets..............................................        $        (926)      $       2,226   $       5,477      $      6,777
                                                                      =============       =============   =============      ============

Liabilities and Shareowners' Equity
Debt .........................................................        $         840       $          19   $       1,699      $      2,558
Postretirement benefits liability.............................                    -               1,452             162             1,614
Amounts due (from) to affiliates..............................               (2,296)              2,184             112                 -
Other liabilities.............................................                  258               1,605             470             2,333
                                                                      -------------       -------------   -------------      ------------
    Total liabilities.........................................               (1,198)              5,260           2,443             6,505
                                                                      -------------       -------------   -------------      ------------

Shareowners' equity (deficit).................................                  272              (3,034)          3,034               272
                                                                      -------------       -------------   -------------      ------------

Total liabilities and shareowners' equity.....................        $        (926)      $       2,226   $       5,477      $      6,777
                                                                      =============       =============   =============      ============

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW FOR THE SIX MONTHS ENDED APRIL 30, 2003
--------------------------------------------------------------------------------------

Cash provided by (used in) operations.........................        $        (391)      $          65   $         164      $       (162)
                                                                      -------------       -------------   -------------      ------------

Cash flow from investment programs
Purchases, net of collections, of finance receivables.........                    -                   -             328               328
Net increase in marketable securities.........................                  (45)                  -            (164)             (209)
Capital expenditures..........................................                    -                 (73)            (14)              (87)
Other investing activities....................................                   (9)                  8              28                27
                                                                      -------------       -------------   -------------      ------------
Cash provided by (used in) investment programs................                  (54)                (65)            178                59
                                                                      -------------       -------------   -------------      ------------

Cash flow from financing activities
Net borrowings (repayments) of debt...........................                   52                  (2)           (251)             (201)
Other financing activities....................................                  174                   1             (28)              147
                                                                      -------------       -------------   -------------      ------------
Cash provided by (used in) financing activities...............                  226                  (1)           (279)              (54)
                                                                      -------------       -------------   -------------      ------------

Cash and cash equivalents
Increase (decrease) during the period.........................                 (219)                 (1)             63              (157)
At beginning of the period....................................                  415                   8             197               620
                                                                      -------------       -------------   -------------      ------------
Cash and cash equivalents at end of the period................        $         196       $           7   $         260      $        463
                                                                      =============       =============   =============      ============

PAGE 23
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note Q.  Condensed Consolidating Guarantor and Non-Guarantor Financial Information (continued)**

                                                                                                        Non-Guarantor
                                                                                                        Companies and
       Millions of dollars                                                   NIC       International     Eliminations      Consolidated
       ---------------------------------------------------------------------------------------------------------------------------------

CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE SIX MONTHS ENDED APRIL 30, 2002
-----------------------------------------------------------------------------------

Sales and revenues............................................       $           3      $       2,417   $         717      $      3,137
                                                                     -------------      -------------   -------------      ------------

Cost of products and services sold............................                   8              2,207             415             2,630
All other operating expenses..................................                 (12)               475             136               599
                                                                     -------------      -------------   -------------      ------------
    Total costs and expenses..................................                 (4)              2,682             551             3,229
                                                                     -------------      -------------   -------------      ------------

Equity in income (loss) of non-consolidated subsidiaries......                 (99)               126             (27)                -
                                                                     -------------      -------------   -------------      ------------

Income (loss) from continuing operations before income taxes..                 (92)              (139)            139               (92)
Income tax expense (benefit)..................................                 (37)                12             (12)              (37)
                                                                     -------------      -------------   -------------      ------------
Income (loss) from continuing operations......................                 (55)              (151)            151               (55)
                                                                     -------------      -------------   -------------      ------------

Loss from discontinued operations.............................                 (5)                  -               -                (5)
                                                                    -------------       -------------   -------------      ------------

Net income (loss).............................................       $         (60)     $        (151)  $         151      $        (60)
                                                                     =============      =============   =============      ============

CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL CONDITION AS OF APRIL 30, 2002
-----------------------------------------------------------------------------

Assets
Cash and marketable securities................................       $         375     $           5   $         743      $      1,123
Receivables, net..............................................                   6                87           1,586             1,679
Inventories...................................................                   -               314             330               644
Property and equipment, net...................................                   -               893             783             1,676
Investment in affiliates......................................              (1,235)              989             246                 -
Deferred tax asset and other assets...........................               1,011               281             339             1,631
                                                                     -------------     -------------   -------------      ------------
    Total assets..............................................       $         157     $       2,569   $       4,027      $      6,753
                                                                     =============     =============   =============      ============

Liabilities and shareowners' equity
Debt .........................................................       $         821     $          21   $       1,886      $      2,728
Postretirement benefits liability.............................                   -             1,004             101             1,105
Amounts due (from) to affiliates..............................              (1,893)            1,693             200                 -
Other liabilities.............................................                 137             1,284             407             1,828
                                                                     -------------     -------------   -------------      ------------
    Total liabilities.........................................                (935)            4,002           2,594             5,661
                                                                     -------------     -------------   -------------      ------------

Shareowners' equity (deficit).................................               1,092            (1,433)          1,433             1,092
                                                                     -------------     -------------   -------------      ------------

Total liabilities and shareowners' equity.....................       $         157     $       2,569   $       4,027      $      6,753
                                                                     =============     =============   =============      ============

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW FOR THE SIX MONTHS ENDED APRIL 30, 2002
--------------------------------------------------------------------------------------

Cash provided by (used in) operations.........................       $        (299)    $          58   $         115      $       (126)
                                                                     -------------     -------------   -------------      ------------

Cash flow from investment programs
Purchases, net of collections, of finance receivables.........                   -                 -             346               346
Net (increase) decrease in marketable securities..............                  26                 -            (328)             (302)
Capital expenditures..........................................                   -               (94)            (20)             (114)
Other investing activities....................................                (106)               35             105                34
                                                                     -------------     -------------   -------------      ------------
Cash provided by (used in) investment programs................                 (80)              (59)            103               (36)
                                                                     -------------     -------------   -------------      ------------

Cash flow from financing activities
Net repayments of debt........................................                   -                 -            (128)             (128)
Other financing activities....................................                  82                 -             (56)               26
                                                                     -------------     -------------   -------------      ------------
Cash provided by (used in) financing activities...............                  82                 -            (184)             (102)
                                                                     -------------     -------------   -------------      ------------

Cash and cash equivalents
Increase (decrease) during the period.........................                (297)               (1)             34              (264)
At beginning of the period....................................                 658                 6             158               822
                                                                     -------------     -------------   -------------      ------------
Cash and cash equivalents at end of the period................       $         361     $           5   $         192      $        558
                                                                     =============     =============   =============      ============

PAGE 24
                         **Navistar International Corporation and Consolidated Subsidiaries
                                     Notes to Financial Statements (Unaudited)

Note Q.  Condensed Consolidating Guarantor and Non-Guarantor Financial Information (continued)**

                                                                                                  Non-Guarantor
                                                                                                  Companies and
Millions of dollars                                                  NIC         International     Eliminations      Consolidated
--------------------------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL CONDITION AS OF OCTOBER 31, 2002
-------------------------------------------------------------------------------

Assets
Cash and marketable securities...........................        $       415    $          8      $        313      $        736
Receivables, net.........................................                  6             104             2,158             2,268
Inventories..............................................                  -             300               295               595
Property and equipment, net..............................                  -             770               709             1,479
Investment in affiliates.................................             (2,539)            720             1,819                 -
Deferred tax asset and other assets......................              1,476             101               288             1,865
                                                                ------------    ------------      ------------      ------------
    Total assets.........................................       $       (642)   $      2,003      $      5,582      $      6,943
                                                                ============    ============      ============      ============

Liabilities and shareowners' equity
Debt.....................................................       $        788    $         21      $      1,947      $      2,756
Postretirement benefits liability........................                  -           1,483               149             1,632
Amounts due (from) to affiliates.........................             (1,872)          1,817                55                 -
Other liabilities........................................                191           1,472               641             2,304
                                                                ------------    ------------      ------------      ------------
    Total liabilities....................................               (893)          4,793             2,792             6,692
                                                                ------------    ------------      ------------      ------------

Shareowners' equity (deficit)............................                251          (2,790)            2,790               251
                                                                ------------    ------------      ------------      ------------
Total liabilities and shareowners' equity................       $       (642)   $      2,003      $      5,582      $      6,943
                                                                ============    ============      ============      ============

Note R.  Subsequent Events

     In May 2003, the company  announced that as a result of discussions  with the National  Automobile,  Aerospace
and Agricultural  Implement  Workers of Canada,  or CAW, it has reached a conditional  understanding on a plan that
would  keep the  company's  Chatham,  Ontario  plant  open if certain  conditions  are met.  The plan is subject to
review and approval by company  management  and Navistar's  board of directors.  Accordingly,  no adjustments  have
been made to the 2002 Plan of Restructuring  as of April 30, 2003, as a result of this  conditional  understanding.
The company has previously announced its intention to close the plant on July 18, 2003.

     In June 2003, NFC sold $394 million of retail notes and lease  receivables.  The gain  recognized on this sale
was $21 million.

PAGE 25
                         **Navistar International Corporation and Consolidated Subsidiaries

Additional Financial Information (Unaudited)**

The following additional financial information is provided based upon the continuing interest of certain
shareholders and creditors.

Navistar International Corporation (with financial services operations on an equity basis)
Millions of dollars

                                                              Three Months Ended                 Six Months Ended
                                                                   April 30                          April 30
                                                       ---------------------------------  --------------------------------
Condensed Statement of Income                               2003              2002             2003             2002
-----------------------------------------------------  ----------------  ---------------  ----------------  --------------
-----------------------------------------------------

Sales of manufactured products......................   $       1,806     $       1,596    $       3,287     $       2,978
Other income........................................               4                 2                7                 5
                                                       -------------     -------------    -------------     -------------
    Total sales and revenues........................           1,810             1,598            3,294             2,983
                                                       -------------     -------------    -------------     -------------

Cost of products sold...............................           1,573             1,365            2,976             2,598
Postretirement benefits expense.....................              70                58              153               115
Engineering and research expense....................              61                65              118               129
Selling, general and administrative expense.........             106               108              214               224
Other expense.......................................              30                30               66                64
                                                       -------------     -------------    -------------     -------------
    Total costs and expenses........................           1,840             1,626            3,527             3,130
                                                       -------------     -------------    -------------     -------------

Income (loss) from continuing operations
    before income taxes:
        Manufacturing operations....................             (30)              (28)            (233)             (147)
        Financial services operations...............              12                23               60                55
                                                       -------------     -------------    -------------     -------------
          Loss from continuing operations
             before income taxes....................             (18)               (5)            (173)              (92)
          Income tax benefit........................              (6)               (3)             (63)              (37)
                                                       -------------     -------------    -------------     -------------
        Loss from continuing operations.............             (12)               (2)            (110)              (55)
Loss from discontinued operations...................              (2)               (2)              (3)               (5)
                                                       -------------     -------------    -------------     -------------

Net loss ...........................................   $         (14)    $          (4)   $        (113)    $         (60)
                                                       =============     =============    =============     =============

                                                                      April 30           October 31          April 30
Condensed Statement of Financial Condition                              2003                2002               2002
-----------------------------------------------------------------  ----------------   -----------------   ----------------

Cash, cash equivalents and marketable securities................   $         452      $         549       $         450
Inventories.....................................................             530                566                 594
Property and equipment, net.....................................           1,092              1,208               1,370
Equity in non-consolidated subsidiaries.........................             480                448                 438
Other assets....................................................             860                683                 995
Deferred tax asset, net.........................................           1,611              1,526               1,016
                                                                   -------------      -------------       -------------
        Total assets............................................   $       5,025      $       4,980       $       4,863
                                                                   =============      =============       =============

Accounts payable, principally trade.............................   $         979      $         970       $         905
Postretirement benefits liability...............................           1,601              1,618               1,092
Debt............................................................             911                897                 940
Other liabilities...............................................           1,262              1,244                 834
Shareowners' equity.............................................             272                251               1,092
                                                                   -------------      -------------       -------------
        Total liabilities and shareowners' equity...............   $       5,025      $       4,980       $       4,863
                                                                   =============      =============       =============
PAGE 26
                         **Navistar International Corporation and Consolidated Subsidiaries

Additional Financial Information (Unaudited) (continued)**

Navistar International Corporation (with financial services operations on an equity basis)
Millions of dollars
                                                                                              Six Months Ended
                                                                                                  April 30
                                                                                  -----------------------------------------
Condensed Statement of Cash Flow                                                       2003                     2002
--------------------------------------------------------------------------        ----------------        -----------------
Cash flow from operations
Net loss  .................................................................       $        (113)          $         (60)
Adjustments to reconcile net loss to cash used in operations:
       Depreciation and amortization.......................................                  80                      77
       Deferred income taxes...............................................                 (89)                    (32)
       Postretirement benefits funding less than
               (in excess of) expense......................................                 (23)                    15
       Equity in earnings of investees, net of dividends received..........                 (32)                    (33)
       Other, net..........................................................                 (23)                    (53)
Change in operating assets and liabilities.................................                 (14)                   (139)
                                                                                  -------------           -------------
Cash used in operations....................................................                (214)                   (225)
                                                                                  -------------           -------------

Cash flow from investment programs
Purchases of marketable securities.........................................                (125)                    (29)
Sales or maturities of marketable securities...............................                  49                      55
Capital expenditures.......................................................                 (86)                   (111)
Proceeds from sale-leasebacks..............................................                   -                       5
Receivable from financial services operations..............................                  38                     (79)
Capitalized interest and other.............................................                   5                      (3)
                                                                                  -------------           -------------
Cash used in investment programs...........................................                (119)                   (162)
                                                                                  -------------           -------------

Cash provided by financing activities......................................                 160                      57
                                                                                  -------------           -------------
Cash and cash equivalents
Decrease during the period.................................................                (173)                   (330)
At beginning of the period.................................................                 549                     766
                                                                                  -------------           -------------
Cash and cash equivalents at end of the period.............................       $         376           $         436
                                                                                  =============           =============

PAGE 27
                         **Navistar International Corporation and Consolidated Subsidiaries

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

     Certain statements under this caption that are not purely historical constitute "forward-looking  statements"
under  the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties.  These
forward-looking statements are based on current management expectations as of the date made.  The company assumes
no obligation to update any forward-looking statements.  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 captions "Restructuring and Other
Non-recurring Charges" and "Business Environment."  Additional information regarding factors that could cause
actual results to differ materially from those in the forward-looking statements is contained from time to time
in the company's filings with the Securities and Exchange Commission.

Results of Operations

Second Quarter Ended April 30, 2003
-----------------------------------

     The company  reported a net loss of $14  million, or a $0.21 loss per diluted common share for the second
quarter ended April 30, 2003, primarily  due to lower  finance revenue, higher start-up costs, and higher
postretirement benefits expense.  For the comparable quarter last year, the net loss was $4 million, or a $0.07
loss per diluted common share.

     The truck segment's loss decreased $21 million and revenues increased $112 million for the second quarter of
2003 compared to the same period in 2002.  The truck segment's improvements are primarily the results of higher
shipments driven by increased industry demand.

     The engine segment's profit for the second quarter of 2003 was $47 million, a $14 million decrease compared
to the same period in 2002.  The decrease is primarily due to start-up  costs  associated  with the ramp up of the
new 6.0 liter (6.0L) V-8 engine.  The engine segment's revenues were $677 million in the second  quarter of 2003,
19% higher than the comparable quarter in 2002.  This increase is mainly driven by higher  shipments due to strong
demand for the new 6.0L V-8 engine as well as the fulfillment of first quarter shipment shortfalls.

     The financial services segment's profit decreased $10 million from the second quarter of 2002 to $13 million
primarily due to lower gains on sales of receivables.  Revenues for the financial  services segment decreased $19
million compared to the same period last year primarily due to changes in finance and insurance  revenue  discussed
below.

Sales and Revenues.  Sales and revenues for the second  quarter of 2003 totaled  $1,864  million, 11% higher than
the $1,672 million reported for the comparable quarter in 2002.

     United States (U.S.) and Canadian  industry  retail sales of Class 5 through 8 trucks totaled 70,700 units in
the second quarter of 2003, which is 5% higher than the 67,600 units sold during this period in 2002.  Class 8
heavy truck  sales of 33,900 units during the second  quarter of 2003 were 5% lower than the 2002 level of 35,600
units.  Industry sales of Class 5, 6 and 7 medium trucks,  including school buses, increased 15% compared to the
second quarter of 2002, to 36,700 units.  Industry  sales of school buses, which accounted for 22% of the medium
truck market, were 4% higher than the 2002 level of 7,700 units.

     The  company's market share in the combined U.S. and Canadian Class 5 through 8 truck market for the second
quarter of 2003  increased  to 28.5% from 27.4%  reported  in the same  period in 2002.  This improvement was the
result of focused sales and marketing efforts for the new High Performance Vehicles (HPV).

PAGE 28
                         **Navistar International Corporation and Consolidated Subsidiaries

Results of Operations (continued)**

     Total engine shipments for the quarter ended April 30, 2003, reached 111,900 units, which is 18% higher than
the 94,600 units shipped in the same quarter last year.  Shipments of mid-range  diesel engines by the company to
other original equipment  manufacturers  (OEMs) during the second  quarter of 2003 totaled  95,800  units,  a 22%
increase from the same period in 2002.

     Finance and  insurance  revenue of $53 million in the second  quarter of 2003 decreased  26% from 2002.  This
decrease was attributable to lower gains on the sales of receivables and losses incurred on forward  starting swap
contracts entered into in connection  with the  anticipated  sales of retail notes and finance leases during the
second quarter of 2003.

Costs and  expenses.  Manufacturing gross margin was 12.9% of sales for the second quarter of 2003 compared with
14.4% for the same period in 2002.  This decrease is primarily due to start-up costs associated with the new 6.0L
V-8 engine and ramp up costs associated with the planned move of premium conventional heavy truck production from
the company's Chatham, Ontario plant to its plant in Escobedo, Mexico.

     Postretirement benefits expense increased $13 million from the second quarter of 2002 to $71 million.  This
increase is the result of higher pension and health care obligations combined with lower returns on invested
assets.  In addition,  higher amortization expense due to significant losses in 2002 contributed to the increase.
These increases were partially offset by the effects of a required change in how certain unrecognized gains and
losses are amortized into income which is described in Note A to the Financial Statements.

     Engineering and research  expense in 2003 decreased $4 million from the second quarter of 2002 to $61 million
due to completion of new products and controlled spending.

     Selling, general and administrative expense decreased 5% to $122 million in the second quarter of 2003 from
$128 million for the comparable quarter in 2002.  This change is due to a decrease in the provision for losses on
receivables driven by a reduction in the repossession frequency.

     Interest expense  totaled $33 million  for the second quarter of 2003, compared to $38 million for the same
period last year.  This decrease is due to the company's lower weighted average interest rates on new debt.

Six Months Ended April 30, 2003
-------------------------------

     The company reported a net loss of $113 million, or a $1.68 loss per diluted  common share for the first six
months of 2003, primarily due to higher start-up costs and postretirement  benefits expense.  The net loss was $60
million, or a $1.00 loss per diluted common share, for the comparable period of 2002.

     The truck  segment's loss decreased $36 million and revenues increased $261 million for the first six months
of 2003 compared to the same period in 2002. The truck segment's improvements are primarily the result of higher
shipments driven by increased industry demand.

     The engine  segment's profit for the first half of 2003 was $12 million, a $91 million decrease compared to
the same period in 2002.  The decrease is primarily the result of start-up costs  associated  with the new 6.0L V-8
engine.  The engine segment's revenues were $1,177  million  in the first half of 2003, 6% higher than the
comparable period in 2002.  This increase was driven by higher shipments to Ford Motor Company (Ford) in the
second quarter.

PAGE 29
                         **Navistar International Corporation and Consolidated Subsidiaries

Results of Operations (continued)**

     The financial services segment's profit was $61 million for the first six months of 2003, a $7 million
increase over the comparable period in 2002.  The increase in earnings was primarily attributable to a greater
gain on the sale of retail receivables during the first quarter of 2003 partially offset by lower gains in the
second quarter and the loss incurred on the forward  starting swap  contracts  during the second  quarter that was
previously discussed.  Revenues for the financial services segment decreased $6 million primarily due to changes
in finance and insurance revenue discussed below.

Sales and Revenues.  Sales and revenues for the first six months of 2003 totaled  $3,442  million,  10% higher than
the $3,137 million reported for the comparable period in 2002.

     U.S. and Canadian industry  retail sales of Class 5 through 8 trucks totaled 134,900 units for the first six
months of 2003, which is 5% higher than the 128,400  units sold  during this period in 2002.  Class 8 heavy truck
sales of 70,000 units during the first half of 2003 were 2% higher than the 2002 level of 68,900 units.  Industry
sales of Class 5, 6 and 7 medium trucks,  including school buses, increased 9% to 64,900 units.  Industry sales of
school buses, which accounted for 22% of the medium truck market, increased 8% to 14,200 units.

     The company's market share in the combined  U.S. and Canadian Class 5 through 8 truck market for the first
six months of 2003 increased to 27.7% from 26.8% reported in the same period of 2002.  This improvement  was the
result of focused sales and marketing efforts.

     Total engine shipments for the six months ended April 30, 2003,  reached 189,500 units, which is 2% higher
than the 185,400 units shipped in the same  period  last year.  Shipments of mid-range diesel engines by the
company to other OEMs during the first half of 2003 totaled 159,100 units, slightly higher than the same period
of 2002.

     Finance and insurance revenue of $145 million for the first half of 2003 decreased 3% from 2002.  This
decrease is due to lower gains on sales of receivables.

Costs and expenses.  Manufacturing  gross margin was 9.5% of sales for the first half of 2003, compared to 12.7%
for the same period in 2002.  The  decrease is mainly  due to start-up  costs associated with the new 6.0L V-8
engine and costs associated with the planned move of premium conventional heavy truck production.

     Postretirement benefits expense increased $38 million from the first half of 2002 to $154 million.  This
increase is the result of higher pension and health care obligations combined with lower returns on invested
assets.  In addition, higher amortization expense due to significant losses in 2002 contributed to the increase.
These increases were partially offset by the effects of a required accounting change which is described
previously and in Note A to the Financial Statements.

     Engineering and research expense in the first half of 2003 decreased $11 million from the same period in
2002 to $118 million due to completion of new products and controlled spending.

     Selling, general and administrative expense decreased 6% from the first half of 2002.  This change is due to
a decrease in the provision for losses on receivables driven by a reduction in the repossession frequency.

     Interest expense for the first six months of 2003 decreased 8% from the first half of 2002 primarily due to
the company's lower weighted average interest rates on new debt.

PAGE 30
                         **Navistar International Corporation and Consolidated Subsidiaries

Restructuring and Other Non-recurring Charges**

2000 and 2002 Restructuring Charges
-----------------------------------

     In October 2000, the company incurred  charges for restructuring, asset  write-downs and other exit costs
eventually totaling $309  million, after $3 million in net adjustments in 2001 and 2002, as part of an overall
plan to restructure its manufacturing and corporate operations (2000 Plan of Restructuring).  The  major
restructuring, integration and cost reduction initiatives, which were substantially  complete as of November 30,
2001, included in the 2000 Plan of Restructuring are as follows:

o        Replacement of steel cab trucks  with a new line of HPV and a concurrent realignment of the
         company's truck manufacturing facilities
o        Closure of certain operations
o        Launch of the next generation technology diesel engines (NGD)
o        Consolidation of corporate operations
o        Realignment of the bus and truck dealership network and termination of various
         dealerships' contracts

     In October 2002, the company's board of directors approved a separate restructuring plan (2002 Plan of
Restructuring) and the company incurred charges for restructuring, asset and inventory write-downs and other exit
costs totaling $372 million.  In addition,  the company incurred  non-recurring  charges of $170 million related to
its V-6 diesel engine program and $60 million in losses (net of tax) from discontinued  operations  associated with
its exit of the Brazil domestic truck market (see Note I to the Financial Statements).

     The following are the major restructuring, integration and cost reduction  initiatives included in the 2002
Plan of Restructuring:

o        Closure of facilities and exit of certain activities  including the Chatham,  Ontario
         heavy truck assembly facility,  the Springfield, Ohio body plant and a manufacturing  production
         line within one of the company's plants
o        Offer of an early retirement program to certain union represented employees
o        Completion of the launch of the HPV and NGD product programs

       Of the 2002 pre-tax  restructuring, other non-recurring charges and adjustments of $544 million,  $157
million represented non-cash charges.

     Through April 30,  2003, approximately $596  million  in charges related  to the 2000 and 2002 Plans of
Restructuring and the 2002 non-recurring charges have been incurred.  Curtailment losses of $169 million related
to the company's postretirement benefit plans have been reclassified as a non-current postretirement benefits
liability.  The remaining restructuring and other  non-recurring charges liability of $255 million is expected to
be funded from existing cash balances and internally generated cash flows from operations.

PAGE 31
                         **Navistar International Corporation and Consolidated Subsidiaries

Restructuring and Other Non-recurring Charges (continued)**2000 and 2002 Restructuring Charges (continued)

     A description of the significant components of the 2000 and 2002 restructuring charges is as follows:

     The 2000 Plan of Restructuring included the reduction of approximately 1,900 employees from the workforce,
primarily in North America.  At October 31, 2002, the remaining $18 million balance of the total net charge of
$75  million was adjusted  as part of the $94  million charge for severance and benefits related to the 2002
restructuring charge.  Pursuant to the 2002 Plan of Restructuring, an additional 3,500 positions will be
eliminated throughout the company, primarily in North America.  During the six months ended April 30, 2003,
approximately  $24 million was paid for severance and other benefits to approximately 1,400 employees as a result
of the two Plans of Restructuring, of which $12 million was paid in the second  quarter.  The severance and other
benefits balance represents costs related to future payments due to the company's contractual severance
obligations.

     Lease termination costs related to the 2000 Plan of Restructuring  include future obligations under long-term
non-cancelable lease agreements at facilities being vacated following workforce reductions.   This charge
primarily consisted of the estimated lease costs, net of probable sublease income, associated with  the
cancellation  of the company's  corporate  office lease at NBC Tower in Chicago,  Illinois,  which expires in 2010.
As of April 30, 2003, $10 million of the total net charge of $38 million has been incurred for lease termination
costs, of which $1 million was incurred during the quarter.

     The 2000 Plan of Restructuring included the effect of the sale of Harco National Insurance Company (Harco).
On  November 30, 2001, Navistar Financial Corporation (NFC) completed the sale of Harco to IAT Reinsurance
Syndicate Ltd., a Bermuda reinsurance company.  During the six months ended April 30, 2003, $2 million of
payments related to exit costs were incurred.  All of these payments were made in the first quarter.

     Dealer termination costs related to the 2000 Plan of Restructuring include the termination of certain dealer
contracts in connection with the realignment of the company's bus distribution  network, and other litigation
costs to implement the 2000 restructuring initiatives.  Other exit costs principally include $25 million of
contractually obligated exit and closure costs incurred as a result of the planned closure of both the Chatham
Assembly Plant and the Springfield Body Plant.  As of April 30, 2003, $25 million of the total net charge of $68
million has been paid for dealer termination and other exit costs, of which $1 million was incurred during the
quarter.

Other Non-Recurring Charges

     In addition to the 2002 Plan of Restructuring  charges, the company recorded  non-recurring  charges of $170
million  primarily  related to the  discontinuance of the company's V-6 diesel engine program with Ford.  In October
2002, Ford advised the company that its current  business case for a V-6 diesel engine in the specified  vehicles
was not viable and discontinued its program for the use of these engines.  As a result, the company determined
that the timing of the  commencement of the V-6 diesel engine  program was neither reasonably predictable  nor
probable.  The non-recurring pre-tax charge of $167  million in  2002 included  the write-off of deferred
pre-production costs, the write-down to fair value of certain V-6 diesel engine-related fixed assets that were
abandoned, an accrual for future lease  obligations under non-cancelable operating leases for certain V-6 diesel
engine assembly assets  that will not be used by the company, an accrual for amounts contractually owed to
suppliers related to the V-6 diesel engine program and the write-down to fair value of certain other assets.

PAGE 32
                         **Navistar International Corporation and Consolidated Subsidiaries

Restructuring and Other Non-recurring Charges (continued)**Other Non-Recurring Charges (continued)

     The company worked with Ford to negotiate a reimbursement of its investment and development costs as well as
any amounts owed to the company's suppliers.  While the company  believed that it was legally entitled to such
reimbursement under the agreement, Ford did not agree to any such reimbursement of the company's investment and
development costs.  No anticipated recovery has been recorded as part of the $167 million  pre-tax charge.  As of
April 30, 2003, of the total net charge of $170 million, $76 million has been incurred  primarily  related to the
write-off or write-down to fair value of fixed assets and for the payment of lease obligations of which $2
million was incurred during the quarter.

     The actions to implement the 2002 restructuring initiatives are expected to generate at least $70 million in
annual savings for the company, due to the reduction  of manufacturing fixed costs.  The company realized
approximately $23 million of these benefits in the first six months of 2003, of which $13 million was realized in
the second quarter, and  expects to realize modestly  higher savings throughout the rest of the year.  Full
annualized savings will be realized in late 2003, once the restructuring initiatives are fully implemented.

     Components  of the  company's  restructuring  plans  and  other  non-recurring  charges,  including  the plans
initiated in both 2002 and 2000, are shown in the following table.

                                                        Balance October                   Balance April
                                                            31 2002          Amount         30 2003
        Millions of dollars                                                Incurred
        ----------------------------------------------- ----------------- -------------- ----------------
        Severance and other benefits.................     $  112             $ (24)          $ 88
        Lease terminations...........................         30                (2)            28
        Loss on sale of business.....................          4                (2)             2
        Dealer terminations and other exit costs.....         46                (3)            43
        Other non-recurring charges..................        104               (10)            94
                                                          ------            ------         ------
             Total...................................     $  296            $  (41)      $    255
                                                          ======            ======       ========

     In April 2003, the company reached a comprehensive agreement with Ford concerning termination of its V-6
diesel engine program.  The terms of the agreement include compensation to neutralize certain current and future
V-6 diesel engine program related costs not accrued for as part of the 2002 non-recurring charge, resolution of
ongoing pricing related to the company's V-8 diesel engine  program and a release by the parties of all of their
obligations under the V-6 diesel engine contract.  The company will continue as Ford's exclusive supplier of V-8
diesel engines through 2012 for use in its over 8,500 lb. gross vehicle weight pick-up trucks, vans and SUVs for
North America.  The agreement did not have a material net impact on the company's financial position or results
of operations for the three and six month periods ended April 30, 2003.

Liquidity and Capital Resources

     Cash flow is generated from the manufacture and sale of trucks and mid-range diesel engines and their
associated service parts as well as from product financing  provided to the company's dealers and retail customers
by the financial services segment.  The company's current debt ratings have made sales of finance receivables the
most economical source of funding for NFC.

PAGE 33
                         **Navistar International Corporation and Consolidated Subsidiaries

Liquidity and Capital Resources (continued)**

     The company had working capital of $182 million at April 30, 2003, compared to $209 million at October 31,
2002.  Cash used in operations during the first six months of 2003 totaled $162 million  primarily from a net loss
of $113 million and a net change in non-cash items of $55 million.

     The net source of cash resulting from the change in operating assets and liabilities included a $43 million
increase in other liabilities due to an increase in customer prepayments as well as a $23 million decrease in
inventories due to lower truck production.  This change was partially offset by a $56 million increase in prepaid
and other current assets primarily due to an increase in prepaid insurance and foreign income taxes.

     Cash provided by investment programs resulted from a net decrease in retail notes and lease receivables of
$328 million and a net decrease in property and equipment leased to others of $24 million.  These were partially
offset by a net increase  in  marketable securities of $209 million and $87 million of capital expenditures
primarily for the HPV and NGD programs.

     Cash used by financing  activities resulted from a net decrease of $196 million in notes and debt outstanding
under the bank revolving  redit facility and other commercial paper programs as well as net premiums paid on call
options on the company's stock of $25 million.  This was partially  offset by the sale of 7,755,030 shares of the
company's common stock for an aggregate purchase price of $175 million.

     NFC has traditionally obtained the funds to provide financing to the company'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 April 30, 2003,  NFC's funding  consisted of sold finance receivables of $2,730
million, bank and other borrowings of $911 million, convertible debt of $175 million, secured borrowings of $270
million and equity of $384 million.

     NFC securitizes and sells  receivables through Navistar Financial Retail Receivables Corporation (NFRRC),
Navistar Financial Securities Corporation (NFSC), Truck Retail Accounts Corporation (TRAC) and Truck Engine
Receivables Financing Corporation (TERFCO), all special purpose corporations and wholly owned subsidiaries of
NFC.  The sales of  finance  receivables in each securitization constitute sales under accounting principles
generally accepted in the United States of America, with the result that the sold receivables are removed from
NFC's balance sheet and the investor's interests in the related trust or conduit are not reflected as liabilities.

     Through the asset-backed  public market and private  placement  sales,  NFC has been able to fund fixed rate
retail notes and finance  leases at rates which are more economical than those  available to NFC in the unsecured
public bond market.  NFC sells  retail  notes and finance  leases through  NFRRC.  During the first six months of
2003 and 2002, NFC sold $850 million and $888 million, respectively, of retail  notes and finance leases to an
owner trust, which in turn,  issued  asset-backed  securities  that were sold to investors.  As of April 30, 2003,
the remaining shelf registration  available to NFRRC for the public issuance of asset-backed  securities was $1,650
million.

     TERFCO has in place a trust that provides for the funding of $100  million of unsecured trade receivables
generated by the sale of diesel engines  and  engine service  parts from International to Ford.  The  facility
matures in 2006.  As of April 30, 2003, NFC has utilized $100 million of this facility.

     TRAC has in place a revolving  retail account conduit that provides for the funding of $100  million of
eligible retail accounts.  As of April 30, 2003, NFC has utilized $33 million of this facility.  The facility
expires in August 2003 and is renewable upon mutual consent of the parties.

PAGE 34
                         **Navistar International Corporation and Consolidated Subsidiaries

Liquidity and Capital Resources (continued)**

     As of April 30, 2003, NFSC has in place a revolving  wholesale note trust that provides for the funding of
$1,012 million of eligible wholesale notes, of which $856 million has been utilized.

     As of April 30, 2003, cash available to fund retail notes, wholesale notes and leases under NFC's bank
revolving credit facilities, the revolving retail warehouse facility and the revolving  wholesale note trust was
$730 million.  When combined with unrestricted cash and cash  equivalents, $784 million was available to fund the
general business purposes of NFC.

     There have been no material changes in the company's hedging strategies or derivative positions since
October 31, 2002, except for the purchased and written call options associated with the issuance of the $190
million convertible  notes.  Further  disclosure  may be found in Note J to the Financial Statements and in the
company's 2002 Annual Report on Form 10-K.

     In November 2002, the company completed the sale of a total of 7,755,030 shares of its common stock held in
Treasury, par value $0.10 per share, at a price of $22.566 per share, for an aggregate purchase price of $175
million to the three employee benefit  plan trusts of  International.  The  securities  were  offered and sold in
reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933
and Rule 506 under  Regulation  D.  The  proceeds  from the sale of the  stock  will be used  primarily  to fund the
company's retirement plans in 2003.

     In December 2002, Fitch IBCA lowered the company's and NFC's senior unsecured debt ratings to BB from BB+.
They also lowered the company's and NFC's senior subordinated debt ratings to B+ from BB-.  Also in December
2002, Standard and Poor's lowered the company's and NFC's senior unsecured debt ratings to BB- from BB and the
company's senior subordinated debt rating to B from B+.  In December 2002, Moody's also lowered the company's
senior unsecured debt rating to Ba3 from Ba1 and the company's and NFC's senior subordinated debt ratings to B2
from Ba2.

     In December 2002, the company  completed the private placement of $190 million of senior convertible bonds
due 2007.  The bonds were priced to yield 2.5% with a conversion premium  of 30% on a closing  price of $26.70.
Simultaneous with the issuance of the convertible bonds, the company entered into two call option derivative
contracts, the consequences of which will allow the company to eliminate  share dilution upon conversion of the
convertible debt from the conversion  price of the bond up to a 100% premium over the share price at issuance.  In
February 2003, $100 million of the net proceeds  from the $190 million offering was used to repay the aggregate
principal amount of the 7% senior notes due February 2003.  The remaining  funds were used to repay other existing
debt, replenish  cash balances that were used to repay other debt that matured in fiscal 2002 and to pay fees and
expenses related to the offering.

     Cash flow from the company's manufacturing  operations, financial services operations and financing capacity
is currently sufficient to cover planned investment in the business.  The company had outstanding capital
commitments of $124 million at April 30, 2003, primarily for the HPV, NGD and other new engine programs.

     It is the opinion of management that, in the absence of significant unanticipated cash demands, current and
forecasted cash flow as well as anticipated financing actions will provide sufficient funds to meet operating
requirements and capital expenditures.  Currently, under limitations in various debt agreements, the company is
generally unable to incur material amounts of additional  debt.  The company is generally allowed under these
limitations to refinance debt as it matures.

     Management of the company's financial services operations 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 International's dealers and retail customers.

PAGE 35
                         **Navistar International Corporation and Consolidated Subsidiaries

Critical Accounting Policies**

     The company has identified critical accounting policies that, as a result of the judgments, uncertainties,
uniqueness and complexities of the underlying accounting standards and operations involved, could result in
material changes to its financial condition or results of operations under different conditions or using
different assumptions.  The company's most critical accounting policies are related to sales allowances, sales of
receivables, product warranty, product liability, pension and other postretirement benefits, allowance for losses
and  impairment of long-lived  assets.  Details regarding the company's use of these policies are described in the
2002 Annual Report on Form 10-K filed with the  Securities  and Exchange Commission.  There have been no material
changes to these policies since October 31, 2002, except as noted below.

     As a result of the 2002 Plan of Restructuring substantially  all of the participants of the company's pension
plans are inactive.  Accordingly, effective February 1, 2003, cumulative unrecognized gains and losses related to
pension benefits are amortized over the remaining life expectancy of the participants in the plans.  The company
previously recognized these costs over the average remaining service life of employees.  The change in
amortization period did not have a material impact on the results of operations for the three and six month
periods ended April 30, 2003.

Income Taxes

     The Statement of Financial Condition at April 30, 2003, includes a deferred tax asset of $1,612 million, net
of valuation  allowances of $110 million.  The company performs extensive analysis 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.  For more information, refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 3 in the company's 2002 Annual Report on Form 10-K.

New Accounting Pronouncements

     In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others." FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.  It also requires a guarantor to
recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing
the guarantee.  The initial recognition and measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002.  The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15, 2002.  The company has provided
disclosures about guarantees in Note K to the Financial Statements.

       In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (SFAS  148),
"Accounting for Stock-Based Compensation - Transition and Disclosure," which amends Statement of Financial
Accounting Standards No.123, "Accounting for Stock-Based Compensation."  SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation.  It also requires prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based  employee compensation and the effect of the method used on reported
results.  The provisions of SFAS 148 are effective for fiscal years ending after December 15, 2002, and the
interim disclosure  provisions are effective for interim  periods  beginning after December 15, 2002. The company
has provided the required interim disclosures in Note A to the Financial Statements.

PAGE 36
                         **Navistar International Corporation and Consolidated Subsidiaries

New Accounting Pronouncements (continued)**

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities."  This
interpretation  addresses consolidation requirements of variable interest entities.  Transferors to qualified
special purpose entities (QSPEs) subject to the reporting requirements of Statement of Financial Accounting
Standards  No. 140,  "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," are excluded from the scope of this interpretation.  The company currently sells receivables to
entities meeting the requirements of QSPEs.

     In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," which amends and clarifies accounting and reporting for
certain derivative instruments.  This statement is effective for contracts entered into or modified after June
30, 2003, and for hedging relationships designated after June 30, 2003, and is to be applied prospectively.  The
company is evaluating the impact of this standard on its financial condition, results of operations and cash
flows.

     In May 2003, the FASB issued Statement of Financial  ccounting Standards No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity," which establishes standards for how
an issuer classifies and measures certain financial instruments with characteristics of both liabilities and
equity.  This statement is effective for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim  period  beginning  after June 15, 2003.  The company
is evaluating the impact of this new standard on its financial condition, results of operations and cash flows.

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.  Truck sales in the first half of 2003 were hindered by a number
of factors including the overall state of the economy, rising insurance costs, tightened credit availability and
increased fuel prices.  The company's U.S. and Canadian  order backlog at April 30, 2003, is 17,900 units,
compared with 23,100 at April 30, 2002.  Historically, retail deliveries have been impacted by the rate at which
new truck orders  are received.  Therefore, in order to  manage through  the current downturn, the company
continually evaluates order receipts and backlog throughout the year by balancing production with demand as
appropriate.

     The company currently  projects 2003 U.S. and Canadian Class 8 heavy truck demand to be 156,000  units, down
4% from 2002.  Class 6 and 7 medium truck demand,  excluding school buses, is forecast at 77,300 units, 6% higher
than in 2002.  Demand for school buses is expected to be 27,500  units, consistent with 2002.  Mid-range  diesel
engine shipments by the company to OEMs in 2003 are expected to be 346,000 units, 10% higher than 2002.

       In May 2003, the company announced that as a result of discussions with the National  Automobile, Aerospace
and Agricultural Implement Workers of Canada, or CAW, it has reached a conditional understanding on a plan that
would keep the company's Chatham, Ontario plant open if certain conditions are met.  The plan is subject to
review and approval by company management and Navistar's board of directors.  Accordingly, no adjustments have
been made to the 2002 Plan of Restructuring  as of April 30, 2003, as a result of this  conditional  understanding.
The company has previously announced its intention to close the plant on July 18, 2003.

PAGE 37

                            **Navistar International Corporation and Consolidated Subsidiaries**

Item 3.       Quantitative and Qualitative Disclosures About Market Risk

              The company's primary market risks include fluctuations in interest rates and foreign currency exchange
              rates as further described in Item 7A of the 2002 Annual Report on Form 10-K.

              Interest rate risk is the risk that the company will incur economic losses due to adverse changes in
              interest  rates.  Assuming a hypothetical instantaneous 10% adverse change in interest rates as of April
              30, 2003, the net fair value of these instruments would decrease by approximately $20 million.

              Foreign currency risk is the risk that the company will incur economic losses due to adverse  changes in
              the  foreign  currency  exchange  rates.  There have been no  material changes in the company's foreign
              currency risk exposure since October 31, 2002, as reported in the 2002 Annual Report on Form 10-K.

Item 4.       Controls and Procedures

              Evaluation of disclosure controls and procedures

              The company's principal executive officer and principal financial officer evaluated the company's
              disclosure controls and procedures (as defined in rule  13a-14(c) and 15d-14(c) under the Securities
              Exchange Act of 1934, as amended (the Exchange Act)) as of a date within 90 days before the filing of
              this quarterly report (the Evaluation Date).  Based on that evaluation, the principal executive officer
              and principal financial officer of the company concluded that, as of the Evaluation Date, the disclosure
              controls and  procedures in place at the company were adequate to ensure that information required to be
              disclosed by the company, including its consolidated  subsidiaries, in reports that the company files or
              submits under the Exchange Act, is recorded, processed, summarized and reported on a timely basis in
              accordance with applicable rules and regulations.  Although the company's principal executive officer and
              principal financial officer believe the company's existing disclosure controls and procedures are
              adequate to enable the company to comply with its disclosure  obligations,  the company has  established a
              disclosure committee that is in the process of formalizing  and documenting the procedures already in
              place.

              Changes in internal controls

              The company has not made any significant changes to its internal controls subsequent to the Evaluation
              Date.  The company has not identified any significant deficiencies or material weaknesses or other
              factors that could significantly affect these controls, and therefore, no corrective action was taken.

PAGE 38
                            **Navistar International Corporation and Consolidated Subsidiaries**PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

              The company and its subsidiaries are subject to various claims arising in the ordinary course of
              business, and are parties to various legal proceedings that constitute ordinary routine litigation
              incidental to the business of the company and its subsidiaries.  In the opinion of the company's
              management, none of these  proceedings or claims are material to the business or the financial  condition
              of the company.

              Various claims and controversies have arisen between the company and its former fuel system supplier,
              Caterpillar Inc.  (Caterpillar), regarding the ownership and validity of certain  patents covering fuel
              system technology used in the company's new version of diesel engines that were introduced in February
              2002.  In June 1999, in Federal Court in Peoria, Illinois, Caterpillar sued Sturman Industries, Inc.
              (Sturman), the company's joint venture partner in developing fuel system technology, alleging that
              technology invented and patented by Sturman and licensed to the company, belongs to Caterpillar.  After a
              trial, on July 18, 2002, the jury returned a verdict in favor of Caterpillar finding that this technology
              belongs to Caterpillar under a prior contract between Caterpillar and Sturman.  Sturman will appeal this
              decision  and the  company  intends to  cooperate  in these  efforts.  In May 2003,  in  Federal  Court in
              Columbia, South Carolina, Caterpillar sued the company, its supplier of injectors and joint venture
              partner Siemens Diesel Systems Technology, LLC and Sturman for patent infringement, alleging that certain
              Caterpillar patents are infringed in the company's new engines.  In January 2002, Caterpillar sued the
              company in the Circuit Court in Peoria County, Illinois, and the company counter claimed against
              Caterpillar each alleging the other breached the purchase agreement pursuant to which Caterpillar
              supplied fuel systems for the company's prior version of diesel engines.  The alleged  breaches involve
              disputes over the price paid by the company to Caterpillar for fuel injectors delivered, Caterpillar's
              refusal to supply the new fuel system and the company's subsequent replacement of Caterpillar as the
              supplier of such systems for the company's new version of diesel  engines.  The company believes that it
              has meritorious defenses to the claims Caterpillar has asserted against the company and will defend
              vigorously any such actions.  Based upon the information developed to date, the company believes that the
              proceedings or claims will not have a material  adverse  impact on the business,  results of operations or
              financial condition of the company.

Item 2.       Changes in Securities and Use of Proceeds

              Directors of the company who are not employees receive an annual retainer and meeting fees payable at
              their election in shares of common stock of the company or in cash.  Currently  the board of directors
              mandates that at least one-fourth of the annual retainer be paid in the form of common stock of the
              company.  For the period covered by this report, receipt of approximately 2,071 shares were deferred as
              payment for the 2003 annual  retainer and meeting fees.  In each case, the shares were acquired at prices
              ranging from $22.325 to $28.115 per share, which represented the fair market value of such shares on the
              date of acquisition.  Exemption from  registration  of the shares is claimed by the company under Section
              4(2) of the Securities Act of 1933, as amended.

              Payments of cash dividends and the repurchase of common stock are currently limited due to restrictions
              contained in the company's $400 million Senior Notes, $250 million Senior Subordinated Notes and $19
              million Note Purchase Agreement.  The company has not paid  dividends on the common stock since 1980 and
              does not expect to pay cash dividends on the common stock in the foreseeable future.

PAGE 39
                            **Navistar International Corporation and Consolidated Subsidiaries**

                                        PART II - OTHER INFORMATION (continued)
                                        ---------------------------------------

Item 4.       Submission of Matters to a Vote of Security Holders
              At the company's Annual Meeting of Shareowners on February 18, 2003, the following nominees were elected
              to the board of directors to serve three-year terms  expiring at the 2006 Annual Meeting of Shareowners
              and until their successors are duly elected and qualified.  There were no broker non-votes or abstentions
              with respect to this matter.  The results of the voting for the election of directors were as follows:

              Nominee                                     Votes For                     Votes Withheld
              -------                                     ---------                     --------------
              Y. Marc Belton                             50,638,272                        2,991,578
              Abbie J. Griffin                           50,639,417                        2,990,433
              Robert C. Lannert                          52,944,835                         685,015

              Accordingly, the three  nominees  received a plurality  of the votes cast in the election of directors at
              the meeting and were elected.  The names of the remaining  directors who did not stand for election at the
              Annual Meeting and whose terms of office as directors continued after such meeting are Michael N. Hammes,
              John R. Horne,  James H. Keyes, Southwood J. Morcott, Eugenio  Clariond,  John D. Correnti, William F.
              Patient, Daniel C. Ustian and David McAllister.

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-6

                           99.1  CEO Certification pursuant to 18 U.S.C. Section
                                 1350, as adopted pursuant to Section 906 of the
                                 Sarbanes-Oxley Act of 2002                                               E-8

                           99.2  CFO Certification pursuant to 18 U.S.C. Section
                                 1350, as adopted pursuant to Section 906 of the
                                 Sarbanes-Oxley Act of 2002                                               E-9

                    (b)      Reports on Form 8-K:

                    The company filed a current report on Form 8-K with the Commission on February 14,
                    2003, in which the company released its first quarter 2003 earnings.

                    The company furnished a current report on Form 8-K with the Commission on March 4, 2003, in
                    which the company announced the presentation of an overview of the business at the
                    Salomon Smith Barney Sixteenth Annual Global Industrials Manufacturing Conference in
                    New York.

                    The company furnished a current report on Form 8-K with the Commission on March 26, 2003, in
                    which the company announced the presentation of an overview of the business at the
                    Deutsche Bank Basic Industries Conference in New York.

                    The company filed a current report on Form 8-K with the Commission on April 14, 2003, in
                    which the company announced that it reached a comprehensive agreement with Ford Motor
                    Company concerning the termination of the Ford V-6 diesel engine program.
PAGE 40

                                                     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)

June 13, 2003

PAGE 41

                                                   CERTIFICATION
                                                   -------------

I, Daniel C. Ustian, certify that:
1.  I have reviewed this quarterly report on Form 10-Q of Navistar International Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;
4. The  registrant's other certifying  officer and I are responsible for  establishing and maintaining  disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)       designed such disclosure controls and procedures to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this quarterly report is being prepared;
b)       evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within
         90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c)       presented in this quarterly report our conclusions  about the effectiveness  of the disclosure  controls
         and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our most recent  evaluation, to the
registrant's auditors and the audit committee of  registrant's board of directors (or persons  performing  the
equivalent functions):

a)       all significant  deficiencies  in the design or operation of internal controls which could adversely
         affect the registrant's ability to record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in internal controls; and
b)       any fraud, whether or not material, that involves management or other  employees who have a significant
         role in the registrant's internal controls; and

6. The registrant's other  certifying  officer and I have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date:  June 13, 2003

/s/  Daniel C. Ustian
     Daniel C. Ustian
     President and Chief Executive Officer
     (Principal Executive Officer)

PAGE 42

                                                   CERTIFICATION
                                                   -------------

I, Robert C. Lannert, certify that:
1.  I have reviewed this quarterly report on Form 10-Q of Navistar International Corporation;
2. Based on my knowledge,  this quarterly  report does not contain any untrue  statement of a material fact or omit
to state a material fact  necessary to make the  statements  made, in light of the  circumstances  under which such
statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge,  the financial  statements,  and other financial  information  included in this quarterly
report,  fairly present in all material respects the financial  condition,  results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;
4. The  registrant's  other certifying  officer and I are responsible for  establishing and maintaining  disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)       designed such  disclosure controls and  procedures to ensure that  material information relating to the
         registrant, including  its consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this quarterly report is being prepared;
b)       evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within
         90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c)       presented in this quarterly  report our conclusions  about the effectiveness of the disclosure controls
         and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our most recent  evaluation, to the
registrant's auditors  and the audit committee of registrant's board of directors (or persons  performing  the
equivalent functions):

         a)   all significant deficiencies  in the design or operation of internal controls which could adversely
              affect the registrant's ability to record, process, summarize and report financial data and have
              identified for the registrant's auditors any material weaknesses in internal controls; and
         b)   any  fraud, whether or not  material, that involves  management  or  other  employees  who have a
              significant role in the registrant's internal controls; and

6. The  registrant's other certifying officer and I have indicated in this quarterly report whether or not there
were significant  changes in internal controls or in other factors that could significantly  affect internal
controls subsequent to the date of our most recent evaluation, including any corrective  actions with regard to
significant deficiencies and material weaknesses.

Date:  June 13, 2003

/s/  Robert C. Lannert
     Robert C. Lannert
     Vice Chairman and Chief Financial Officer
     (Principal Financial Officer)
```