<PAGE>


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


                                    FORM 10-Q


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

For the quarterly period ended January 31, 1998

                                       OR

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

For the transition period from         to

Commission file number 1-9618


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


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

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


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


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


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


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


                      APPLICABLE ONLY TO CORPORATE ISSUERS:


     As of March 9, 1998, the number of shares  outstanding of the  registrant's
common stock was 49,113,774 and the Class B Common was 19,894,103.

                                      - 1 -

<PAGE>


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


                                      INDEX
                                      -----

                                                                      Page
                                                                    Reference
                                                                    ---------

Part I.  Financial Information:

     Item 1. Financial Statements:

     Statement of Income --
         Three Months Ended January 31, 1998 and 1997.............      3

     Statement of Financial Condition --
         January 31, 1998 October 31, 1997 and January 31, 1997...      4


     Statement of Cash Flow --
         Three Months Ended January 31, 1998 and 1997.............      5


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


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

Part II. Other Information:

     Item 1.    Legal Proceedings.................................     18

     Item 6.    Exhibits and Reports on Form 8-K..................     18

     Signature  ..................................................     19

                                      - 2 -

<PAGE>


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



ITEM 1.  Financial Statements

STATEMENT OF INCOME (Unaudited)
-------------------------------------------------------------------------------
Millions of dollars, except per share data
-------------------------------------------------------------------------------
                                                  Three Months Ended January 31
                                                  -----------------------------
                                                      Navistar International
                                                          Corporation and
                                                     Consolidated Subsidiaries
                                                     -------------------------
                                                       1998             1997
                                                      ------           ------
Sales and revenues
Sales of manufactured products ................       $1,672           $1,240
Finance and insurance revenue .................           45               45
Other income ..................................           10               11
                                                      ------           ------
  Total sales and revenues ....................        1,727            1,296
                                                      ------           ------

Costs and expenses
Cost of products and services sold ............        1,454            1,076
Postretirement benefits .......................           45               51
Engineering and research expense ..............           35               30
Marketing and administrative expense ..........           98               83
Interest expense ..............................           17               17
Financing charges on sold receivables .........            8                7
Insurance claims and underwriting expense .....            9                8
                                                      ------           ------
  Total costs and expenses ....................        1,666            1,272
                                                      ------           ------

    Income before income taxes ................           61               24
    Income tax expense ........................           23                9
                                                      ------           ------
Net income ....................................           38               15

Less dividends on Series G preferred stock ....            7                7
                                                      ------           ------
Net income applicable to common stock .........       $   31           $    8
                                                      ======           ======

Earnings per share
     Basic ....................................       $  .43           $  .10
     Diluted ..................................       $  .42           $  .10

Average shares outstanding (millions)
     Basic ....................................         71.6             73.6
     Diluted ..................................         72.5             73.7

See Notes to Financial Statements.

                                      - 3 -
<PAGE>


STATEMENT OF FINANCIAL CONDITION (Unaudited)
-------------------------------------------------------------------------------
Millions of dollars
-------------------------------------------------------------------------------
                                        Navistar International Corporation
                                           and Consolidated Subsidiaries
                                    -------------------------------------------
                                      January 31     October 31      January 31
                                         1998           1997            1997
                                    ------------     ----------      ----------
ASSETS
-----------------------------------
Cash and cash equivalents .........    $  188         $  609           $  197
Marketable securities .............       361            356              448
                                       ------         ------           ------
                                          549            965              645
Receivables, net ..................     1,543          1,755            1,311
Inventories .......................       506            483              452
Property, net of accumulated
  depreciation and amortization
  of $876, $847 and $864...........       896            835              773
Investments and other assets ......       312            332              238
Intangible pension assets .........       212            212              314
Deferred tax asset, net  ..........       911            934            1,024
                                       ------         ------           ------
Total assets ......................    $4,929         $5,516           $4,757
                                       ======         ======           ======
LIABILITIES AND SHAREOWNERS' EQUITY
-----------------------------------
Liabilities
Accounts payable, principally trade    $1,033         $1,100           $  714
Debt:
  Manufacturing operations ........       125             92              113
  Financial services operations ...     1,020          1,224              947
Postretirement benefits liability .       893          1,186            1,278
Other liabilities .................       885            894              783
                                       ------         ------           ------
    Total liabilities .............     3,956          4,496            3,835
                                       ------         ------           ------
Commitments and contingencies

Shareowners' equity
Series G convertible preferred
  stock (liquidation preference
  $240 million) ...................    $  240         $  240            $ 240
Series D convertible junior
  preference stock (liquidation
  preference $4 million) ..........         4              4                4
Common stock (55.4 and 51.0 million
  shares issued) ..................     1,748          1,659            1,642
Class B Common stock (19.9 and 24.3
   million shares issued) .........       388            471              491
Retained earnings (deficit) .......    (1,271)        (1,301)          (1,425)
Common stock held in treasury,
  at cost .........................      (136)           (53)             (30)
                                       ------         ------           ------
    Total shareowners' equity .....       973          1,020              922
                                       ------         ------           ------
Total liabilities                      $4,929         $5,516           $4,757
  and shareowners' equity .........    ======         ======           ======

See Notes to Financial Statements.

                                      - 4 -

<PAGE>


STATEMENT OF CASH FLOW (Unaudited)
-------------------------------------------------------------------------------
For the Three Months Ended January 31 (Millions of dollars)
-------------------------------------------------------------------------------
                                                       Navistar International
                                                          Corporation and
                                                     Consolidated Subsidiaries
                                                     -------------------------
                                                        1998            1997
                                                       ------          ------
Cash flow from operations
Net income .................................           $   38          $   15
Adjustments to reconcile net income
  to cash used in operations:
  Depreciation and amortization ............               39              33
  Deferred income taxes ....................               23               8
  Postretirement benefits funding in excess
    of expense .............................             (271)            (71)
  Other, net ...............................              (34)            (24)
Change in operating assets and liabilities:
  Receivables ..............................               (6)             37
  Inventories ..............................              (25)             11
  Prepaid and other current assets .........              (10)            (19)
  Accounts payable .........................              (61)           (106)
  Other liabilities ........................              (25)            (24)
                                                       ------          ------
Cash used in operations ....................             (332)           (140)
                                                       ------          ------
Cash flow from investment programs
Purchase of retail notes and lease
  receivables ..............................             (237)           (196)
Collections/sales of retail notes
   and lease receivables ...................              485             485
Purchase of marketable securities ..........             (129)           (165)
Sales or maturities of marketable
  securities ...............................              128             113
Capital expenditures .......................              (60)            (25)
Property and equipment leased to others ....              (41)            (16)
Other investment programs, net .............                7               4
                                                       ------          ------
Cash provided by investment programs .......              153             200
                                                       ------          ------

Cash flow from financing activities
Issuance of debt ...........................               48              79
Principal payments on debt .................              (24)            (13)
Net decrease in notes and debt outstanding
  under bank revolving credit facility
  and asset-backed and other commercial
  paper programs ...........................             (211)           (409)
Mexican credit facility ....................               35               -
Repurchase of common stock .................              (83)              -
Dividends paid .............................               (7)             (7)
                                                       ------          ------
Cash used in financing activities ..........             (242)           (350)
                                                       ------          ------
Cash and cash equivalents
  Decrease during the period ...............             (421)           (290)
  At beginning of the year .................              609             487
                                                       ------          ------
Cash and cash equivalents
  at end of the period .....................           $  188          $  197
                                                       ======          ======
See Notes to Financial Statements.

                                      - 5 -

<PAGE>


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

Note A.  Summary of Accounting Policies

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

     The  accompanying  unaudited  financial  statements  have been  prepared in
accordance with accounting  policies described in the 1997 Annual Report on Form
10-K and should be read in conjunction with the disclosures therein.

     In the opinion of management,  these interim financial  statements  reflect
all adjustments,  consisting of normal recurring accruals,  necessary to present
fairly  the  financial  position,  results of  operations  and cash flow for the
periods presented. Interim results are not necessarily indicative of results for
the full year.  Certain 1997 amounts have been  reclassified to conform with the
presentation used in the 1998 financial statements.

Note B.  Supplemental Cash Flow Information

     Consolidated  interest  payments  during the first three months of 1998 and
1997 were $25 million and $22 million, respectively.  There were no consolidated
tax payments made during the first three months of 1998 and 1997.

Note C.  Income Taxes

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

                                      - 6 -

<PAGE>


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


Note D.  Inventories

     Inventories are as follows:

                              January 31          October 31         January 31
Millions of dollars              1998                1997               1997
-------------------------------------------------------------------------------
Finished products..........    $    253            $    212           $    246
Work in process............         109                 106                 83
Raw materials and supplies.         144                 165                123
                               --------            --------           --------
Total inventories..........    $    506            $    483           $    452
                               ========            ========           ========

Note E.  Financial Instruments

     In November 1997, Navistar Financial Corporation (NFC) sold $500 million of
retail notes,  realizing proceeds of $477 million,  net of underwriting fees and
credit  enhancements,  which were used for general working capital  purposes.  A
gain of approximately $7 million was recognized on the sale.

     During the first  quarter of 1998,  NFC entered into a $50 million  forward
treasury  lock in  anticipation  of a May 1998 sale of retail  receivables.  NFC
intends to close this position on the pricing date of the sale. Any gain or loss
resulting from this  transaction will be included in the gain or loss recognized
on the sale of receivables in May 1998.

     In  anticipation  of the $250  million  10-year  Senior  Subordinated  Note
offering,  the company  entered  into four $50 million  forward  treasury  locks
during the first  quarter of 1998.  The company  closed  these  positions on the
pricing date of the debt resulting in a gain which was not material.

     As of January 31, 1998,  the company had open  positions on future sales of
$103   million  of  30-year   Treasury   bonds  and   future   purchases   of  a
duration-weighted  equivalent of 2-year  Treasury  bonds.  These  positions were
closed in February resulting in a gain which was not material.

     The company purchases  collateralized mortgage obligations (CMOs) that have
predetermined  fixed-principal  payment  patterns which are relatively  certain.
These  instruments  totaled $84 million at January 31, 1998.  At January 31, the
unrecognized gain on the CMO's was not material.

                                      - 7 -

<PAGE>


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

Note F.  Earnings  Per Share

     Effective for Navistar's  consolidated  financial  statements for the three
months  ended  January  31,  1998,   Navistar  adopted  Statement  of  Financial
Accounting   Standards  No.  128,  "Earnings  per  Share,"  which  replaces  the
presentation of primary  earnings per share and fully diluted earnings per share
with a presentation of basic earnings per share and diluted  earnings per share.
Basic  earnings per share excludes  dilution and is computed by dividing  income
available to common shareowners by the  weighted-average  number of basic common
shares  outstanding  for the  period.  Diluted  earnings  per share  assumes the
issuance  of common  stock  for other  potentially  dilutive  equivalent  shares
outstanding.  All  prior-period  earnings per share data has been restated.  The
adoption of this new accounting  standard did not have a material  effect on the
company's reported earnings per share amounts.

        Earnings per share was computed as follows:

                                                  For The Three Months Ended
                                                          January 31
                                                ------------------------------
Millions of dollars,
except share and per share data                   1998                  1997
-------------------------------                 --------              --------

Net income..............................        $     38              $     15
Less dividends
  on Series G Preferred stock...........               7                     7
                                                --------              --------

Net income applicable to
  common stock (Basic and Diluted)......        $     31              $      8
                                                ========              ========

Average shares outstanding (millions)
     Basic..............................           71.6                   73.6
        Dilutive effect
          of options outstanding........             .8                      -
        Conversion of
          Series D Preference Stock.....             .1                     .1
                                               --------               --------
     Diluted............................           72.5                   73.7
                                               ========               ========

Earnings per share
     Basic..............................            .43                    .10
     Diluted............................            .42                    .10

                                      - 8 -

<PAGE>


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

Note F.  Earnings  Per Share (continued)

     Unexercised  employee stock options to purchase 0.7 million and 2.7 million
shares of Navistar  common stock during the three months ended  January 31, 1998
and 1997,  respectively,  were not included in the computation of diluted shares
outstanding  because the options'  exercise prices were greater than the average
market  price  of  Navistar   common  stock  during  the   respective   periods.
Additionally,  the diluted calculation excludes the effects of the conversion of
the Series G preferred  stock as such  conversion  would  produce  anti-dilutive
results.  In January 1998,  the company  repurchased  approximately  3.2 million
shares of its Class B Common Stock from the Supplemental Trust.

Note G.  New Accounting Pronouncements

     In February 1998, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  132,  "Employers'  Disclosures  about
Pensions and Other  Postretirement  Benefits." This statement  revises standards
for  disclosures  about  pension and other  postretirement  benefit plans and is
effective  for fiscal years  beginning  after  December 15, 1997.  This standard
expands  or  modifies  disclosure  and,  accordingly  will have no impact on the
company's reported financial position, results of operations and cash flows.

Note H.  Subsequent Events

     On February 4, 1998 the company  completed  the private  placement  of $100
million 7% Senior Notes due 2003 and $250 million 8% Senior  Subordinated  Notes
due 2008 (the Senior Notes,  together with the Senior  Subordinated  Notes,  the
"Old Notes"). The proceeds of the Senior Notes were used to prepay an 8% Secured
Note due 2002 and will be used to repay the 9% Sinking Fund Debentures due 2004.
The proceeds of the Senior  Subordinated Notes were used to redeem the company's
$240 million,  $6.00 Series G Convertible  Cumulative Preferred Stock and to pay
accumulated and unpaid dividends thereon.  Excess proceeds from both debt issues
will be used for general working capital purposes. On March 5, 1998, the company
initiated  an offer to  exchange  the Old Notes  with new notes  (the  "Exchange
Notes") which have been registered under the Securities Act of 1933, as amended.
The  Exchange  Notes will  evidence  the same debt as the Old Notes  (which they
replace)  and will be  issued  under  and be  entitled  to the  benefits  of the
Indentures governing the Old Notes.

     On March 5,  1998  the  company  announced  that it has  been  selected  to
negotiate an extended term  agreement to supply  diesel  engines for select Ford
Motor Company under 8,500 lbs. GVW light duty trucks and sport utility vehicles.

                                      - 9 -

<PAGE>


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

Note I. Supplemental Financial Information


Navistar  International  Corporation (with financial  services  operations on an
equity basis) in millions of dollars:
                                                         Three Months Ended
                                                             January 31
                                                        ---------------------
Condensed Statement of Income                             1998          1997
--------------------------------------------            --------      -------
Sales of manufactured products..............            $  1,672     $  1,240
Other income................................                  10           10
                                                        --------     --------
Total sales and revenues....................               1,682        1,250
                                                        --------     --------

Cost of products sold.......................               1,448        1,071
Postretirement benefits.....................                  45           51
Engineering and research expense............                  35           30
Marketing and administrative expense........                  89           76
Other expenses..............................                  27           21
                                                        --------     --------
Total costs and expenses....................               1,644        1,249
                                                        --------     --------

Income before income taxes
  Manufacturing operations.................                   38             1
  Financial services operations............                   23            23
                                                        --------      --------
    Income before income taxes.............                   61            24
Income tax expense.........................                   23             9
                                                        --------      --------
Net income.................................             $     38      $     15
                                                        ========      ========



Condensed Statement                     January 31     October 31    January 31
of Financial Condition                     1998           1997          1997
-----------------------------------     ----------     ----------    ----------

Cash, cash equivalents
  and marketable securities........      $    387       $    802      $    476
Inventories........................           506            483           452
Property and equipment, net........           733            706           656
Equity in financial services
  subsidiaries.....................           329            322           319
Other assets.......................           876            864           689
Deferred tax asset, net............           911            934         1,024
                                         --------       --------      --------
     Total assets..................      $  3,742       $  4,111      $  3,616
                                         ========       ========      ========

Accounts payable,
  principally trade................      $    994       $  1,060      $    664
Postretirement benefits liabilities           885          1,178         1,270
Other liabilities..................           890            853           760
Shareowners' equity................           973          1,020           922
                                         --------       --------      --------
     Total liabilities
       and shareowners' equity....       $  3,742       $  4,111      $  3,616
                                         ========       ========      ========

                                     - 10 -

<PAGE>


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


Note I.  Supplemental Financial Information  (continued)

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

                                                          Three Months Ended
                                                              January 31
                                                       ----------------------
Condensed Statement of Cash Flow                         1998          1997
----------------------------------------------         --------      --------
Cash flow from operations
Net income....................................         $     38      $     15
Adjustments to reconcile net income to cash
   used in operations:
     Depreciation and amortization............               32            29
     Postretirement benefits funding
       in excess of expense...................             (271)          (71)
     Equity in earnings of nonconsolidated
       companies, net of dividends received...               (3)          (14)
     Deferred income taxes....................               23             8
     Other, net...............................               (3)           (7)
Change in operating assets and liabilities....             (124)          (87)
                                                       --------      --------
Cash used in operations.......................             (308)         (127)
                                                       --------      --------

Cash flow from investment programs
Purchase of marketable securities.............             (118)        (150)
Sales or maturities of marketable securities..              114           91
Capital expenditures..........................              (60)         (25)
Receivable from Navistar Financial Corporation                3          (74)
Other investment programs, net................                7            4
                                                       --------     --------
Cash used in investment programs..............              (54)        (154)
                                                       --------     --------

Cash flow from financing activities...........              (56)         (10)
                                                       --------     --------

Cash and cash equivalents
Decrease during the period....................             (418)        (291)
At beginning of the year......................              573          452
                                                       --------     --------
Cash and cash equivalents at end of the period         $    155     $    161
                                                       ========     ========

                                     - 11 -

<PAGE>


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

RESULTS OF OPERATIONS

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

     The company reported net income of $38 million, or $0.42 per diluted common
share,  for the first quarter ended January 31, 1998 reflecting  higher sales of
manufactured  product.  Net income was $15 million,  or $.10 per diluted  common
share, for the same period last year.

     The company's manufacturing  operations reported income before income taxes
of $38 million compared with pretax income of $1 million in the first quarter of
1997  reflecting  an  increase  in demand for  trucks.  The  financial  services
operations'  pretax  income for the first three  months of 1998 and 1997 was $23
million.

Sales and Revenues.  First quarter 1998 industry retail sales of Class 5 through
8 trucks totaled 87,200 units, an increase of 21% from 1997. Class 8 heavy truck
sales of 53,300 units during the first  quarter of 1998 were 26% higher than the
1997 level of 42,400 units.  Industry  sales of Class 5, 6 and 7 medium  trucks,
including school buses,  increased 14% to 33,900 units. Industry sales of school
buses, which accounted for 16% of the medium truck market, decreased 5%.

     Sales and revenues for the first  quarter of 1998 totaled  $1,727  million,
33% higher than the $1,296 million reported for the comparable  quarter in 1997.
Sales of  trucks,  mid-range  diesel  engines  and  service  parts for the first
quarter of 1998 totaled $1,672 million compared with $1,240 million reported for
the same period in 1997.

     The company  maintained its position as sales leader in the combined United
States and Canadian Class 5 through 8 truck market with a 28.6% market share for
the first quarter of 1998,  an increase from the 26.4% market share  reported in
1997. (Sources: American Automobile Manufacturers Association, the United States
Motor Vehicle Manufacturers Association and R.L. Polk & Company.)

     Shipments  of  mid-range  diesel  engines by the company to other  original
equipment manufacturers during the first quarter of 1998 totaled 42,600 units, a
4% increase from the same period of 1997. Service parts sales of $185 million in
the first quarter of 1998 were consistent with the prior year's level.

     Finance and insurance revenue was $45 million for both the first quarter of
1998 and 1997.

     Costs and expenses.  Manufacturing  gross margin was 13.4% of sales for the
first quarter of 1998 consistent with 13.6% for the same period in 1997.

                                     - 12 -

<PAGE>


     Marketing and administrative  expense increased to $98 million in 1998 from
$83  million  in  the  first  quarter  of  1997  reflecting  investment  in  the
implementation of the company's truck strategy to reduce costs and complexity in
its manufacturing processes.

     Postretirement  benefits expense  decreased to $45 million in 1998 from $51
million  in the first  quarter  of 1997  mainly  as a result of higher  expected
return on plan assets.

     Engineering  and research  expense  increased $5 million from first quarter
1997 to $35 million,  reflecting the company's investment in its next generation
vehicle program.

Liquidity and Capital Resources

     Cash flow is generated from the manufacture  and sale of trucks,  mid-range
diesel  engines and service  parts as well as product  financing  and  insurance
coverage provided to the company's dealers and retail customers by the financial
services operations.

     Historically,  funds to finance the company's  products are obtained from a
combination of commercial paper,  short- and long-term bank borrowings,  medium-
and long-term  debt issues,  sales of finance  receivables  and equity  capital.
NFC's  current  debt  ratings  have made sales of finance  receivables  the most
economical source of funding.
Insurance operations are funded through internal operations.

     Total cash,  cash  equivalents  and  marketable  securities  of the company
amounted to $549 million at January 31,  1998,  $965 million at October 31, 1997
and $645 million at January 31, 1997.

     Cash used in  operations  during  the first  quarter of 1998  totaled  $332
million,  primarily from excess postretirement  benefits funding of $271 million
and from a net change in  operating  assets  and  liabilities  of $127  million.
During the first quarter,  the company  contributed  $200 million to the Retiree
Health Care Base Plan Trust and $100 million to the hourly  pension plan,  which
net  of  expense,   resulted  in  funding  of  $193  million  and  $78  million,
respectively.  The net change in operating assets and liabilities includes a $61
million decrease in accounts payable resulting from lower production.

     Investment programs provided $153 million in cash reflecting a net decrease
in  retail  notes  and  lease  receivables  of $248  million.  Other  investment
activities used $41 million for property and equipment  leased to others and $60
million  to fund  capital  expenditures  for  construction  of a truck  assembly
facility in Mexico,  to increase  mid-range diesel engine capacity and for truck
product improvements.

     Financing activities used cash to pay $7 million in dividends on the Series
G  Preferred  shares  and to reduce  notes and debt  outstanding  under the bank
revolving credit facility and asset-backed and other commercial paper program by
$211  million  offset by a $24 million net  increase  in  long-term  debt at NFC
primarily  due  to  increased  capital  lease  funding  and by  $35  million  of
borrowings under the Mexican credit facility. In addition,  $83 million was used
to repurchase 3.2 million shares of Class B common stock during January 1998.

                                     - 13 -

<PAGE>


     Receivable  sales  were a  significant  source of funding in 1998 and 1997.
During the first  quarter of 1998 and of 1997,  NFC sold $500  million  and $486
million,  respectively,  of  retail  notes  through  Navistar  Financial  Retail
Receivables  Corporation (NFRRC).  NFRRC has filed registration  statements with
the Securities and Exchange  Commission  which provide for the issuance of up to
$5,000 million of  asset-backed  securities.  At January 31, 1998, the remaining
shelf registration available to NFRRC was $973 million.

     During the first  quarter of fiscal  1998,  NFC entered  into a $50 million
forward treasury lock in anticipation of a May 1998 sale of retail  receivables.
NFC intends to close this position on the pricing date of the sale.  Any gain or
loss  resulting  from  this  transaction  will be  included  in the gain or loss
recognized on the sale of receivables in May 1998.

     As of January 1998, Navistar Financial Securities  Corporation  ("NFSC"), a
wholly-owned  subsidiary of NFC had in place a $531 million revolving  wholesale
note trust that provides for the continuous sale of eligible  wholesale notes on
a daily  basis.  During the next few months $31 million  will  amortize  and the
commitment  will be $500  million.  At January 31,  1998,  the  remaining  shelf
registration  available  to NFSC for the issuance of investor  certificates  was
$200 million.

     At January 31, 1998,  available  funding  under NFC's  amended and restated
credit facility and the asset-backed commercial paper facility was $767 million,
of which $115 million was used to back  short-term debt at January 31, 1998. The
remaining  $652  million,   when  combined  with   unrestricted  cash  and  cash
equivalents made $658 million available to fund the general business purposes of
NFC at January 31, 1998.

     As of January 31, 1998,  the company had open  positions on future sales of
$103   million  of  30-year   Treasury   bonds  and   future   purchases   of  a
duration-weighted  equivalent of 2-year  Treasury  bonds.  These  positions were
closed in February resulting in a gain which was not material.

     The company purchases  collateralized mortgage obligations (CMOs) that have
predetermined  fixed-principal  payment  patterns which are relatively  certain.
These  instruments  totaled $84 million at January 31, 1998.  At January 31, the
unrecognized gain on the CMO's was not material.

     In November  1997,  the  company's  Mexican  subsidiary  established a $125
million  credit  facility to be used to fund the  development  of the  company's
Mexican operations.

     The company had outstanding  capital commitments of $107 million at January
31, 1998,  primarily for increased  manufacturing  capacity at the  Indianapolis
engine  plant,  improvements  to  existing  facilities  and  products,  and  for
construction of a truck assembly facility in Mexico.

                                     - 14 -

<PAGE>


     In January  1998,  Moody's,  Standard and Poors and Duff and Phelps  raised
Transportation's  senior debt  ratings from Ba2, BB, and BB to Ba1, BB+ and BB+,
respectively.  NFC's senior debt ratings  increased from Ba2, BB and BB+ to Ba1,
BB+ and BBB-. NFC's  subordinated  debt ratings were also raised from B1, B+ and
BB to Ba3, BB- and BB+, respectively.


     On February 4, 1998 the company  completed  the private  placement  of $100
million 7% Senior Notes due 2003 and $250 million 8% Senior  Subordinated  Notes
due 2008 (the Senior Notes,  together with the Senior  Subordinated  Notes,  the
"Old  Notes").  The  net  proceeds  from  the  sale  of the  Senior  Notes  were
approximately $98 million (after deducting  discounts to initial  purchasers and
expenses of the offering).  The company used  approximately $27 million to repay
the 8% Secured  Note due 2002  including  accrued  interest  and  expects to use
approximately  $47  million to repay the 9%  Sinking  Fund  Debentures  due 2004
including  accrued  interest.  The net  proceeds  from  the  sale of the  Senior
Subordinated  Notes (after  deducting  discounts to the initial  purchasers  and
expenses in connection  with the offering) were  approximately  $244 million and
were used to redeem the  company's  Series G  Convertible  Cumulative  Preferred
Stock  and to pay  accumulated  and  unpaid  dividends  thereon.  Any  remaining
proceeds will be used for general corporate purposes, including working capital.
Although the issuance of the new debt will result in higher interest costs,  the
redemption of the Series G Preferred  Stock  eliminates the payment of the $6.00
per share annual preferred dividend.  On March 5, 1998, the company initiated an
offer to exchange the Old Notes with new notes (the "Exchange Notes") which have
been registered under the Securities Act of 1933, as amended. The Exchange Notes
will  evidence the same debt as the Old Notes  (which they  replace) and will be
issued under and be entitled to the benefits of the Indentures governing the Old
Notes.

     In  anticipation  of the $250  million  10-year  Senior  Subordinated  Note
offering,  the company  entered  into four $50 million  forward  treasury  locks
during the first quarter of fiscal 1998. The company  closed these  positions on
the pricing date of the debt resulting in a gain which was not material.

     Management  continues  to evaluate  current and  forecasted  cash flow as a
basis for financing operating requirements and capital expenditures.  Management
believes that collections on the outstanding  receivables  portfolios as well as
funds available from various funding sources will permit the financial  services
operations  to meet the  financing  requirements  of the  company's  dealers and
customers.

Year 2000

     The company has identified all significant  applications  that will require
modification to ensure Year 2000 compliance. Internal and external resources are
being used to make the required modifications and test Year 2000 compliance. The
company  plans  to  complete  the  modifications  and  testing  process  of  all
significant  applications by July 1999, which is prior to any anticipated impact
on its operating  systems.  The total cost of the Year 2000 project has not been
and is not  anticipated  to be material to the company's  financial  position or
results of operations and will be funded through operating cash flows.

                                     - 15 -

<PAGE>


     The costs of the project and the date on which the company believes it will
complete the Year 2000  modifications  are based on management's best estimates,
which were derived utilizing  numerous  assumptions of future events,  including
the continued availability of certain resources,  third party modification plans
and other factors.  However, there can be no guarantee that these estimates will
be achieved and actual results could differ  materially from those  anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the  availability  and cost of personnel  trained in this area,  the
ability  to  locate  and  correct  all  relevant  computer  codes,  and  similar
uncertainties.

     In  addition,  the company has  communicated  with others with whom it does
significant  business to determine their Year 2000 compliance  readiness and the
extent to which the company is  vulnerable  to any third party Year 2000 issues.
However,  there can be no guarantee that the systems of other companies on which
the  company's  systems  rely will be  timely  converted,  or that a failure  to
convert  by another  company,  or a  conversion  that is  incompatible  with the
company's systems, would not have a material adverse affect on the company.

New Accounting Pronouncements

     In February 1998, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  132,  "Employers'  Disclosures  about
Pensions and Other  Postretirement  Benefits." This statement  revises standards
for  disclosures  about  pension and other  postretirement  benefit plans and is
effective  for fiscal years  beginning  after  December 15, 1997.  This standard
expands  or  modifies  disclosure  and,  accordingly  will have no impact on the
company's reported financial position, results of operations and cash flows.

                                     - 16 -

<PAGE>


Business Environment

     Sales of Class 5 through 8 trucks are  cyclical,  with  demand  affected by
such  economic  factors  as  industrial  production,  construction,  demand  for
consumer durable goods, interest rates and the earnings and cash flow of dealers
and customers.  Reflecting the stability of the general economy,  demand for new
trucks  remained  strong during the first quarter of 1998. An improvement in the
number of new truck orders has increased  the company's  order backlog to 60,600
units at  January  31,  1998 from  29,200  units at  January  31,  1997.  Retail
deliveries  in 1998  continue  to be highly  dependent  on the rate at which new
truck orders are received.  The company will evaluate order receipts and backlog
throughout the year and will balance production with demand as appropriate.

     A stronger  than  expected  economy  has led the  company to  increase  its
estimates  of demand.  The company  currently  projects  1998 United  States and
Canadian  Class 8 heavy truck demand to be 220,000  units,  a 12% increase  from
1997. Class 5, 6 and 7 medium truck demand,  excluding school buses, is forecast
at 123,000 units,  a 5% increase from 1997.  Demand for school buses is expected
to decline  slightly in 1998 to 33,000 units.  Mid-range diesel engine shipments
by the company to original  equipment  manufacturers  in 1998 are expected to be
215,300 units,  17% higher than in 1997.  The company's  service parts sales are
projected to grow 8% to $870 million.

     At the currently  forecasted 1998 demand of 376,000 units, the entire truck
industry is  operating at or near  capacity  while the  company's  manufacturing
facilities are near capacity. Additionally,  constraints have been placed on the
company's ability to meet certain  customers' demands because of component parts
availability.

     On March 5,  1998  the  company  announced  that it has  been  selected  to
negotiate an extended term  agreement to supply  diesel  engines for select Ford
Motor Company under 8,500 lbs. GVW light duty trucks and sport utility vehicles.

                                     - 17 -

<PAGE>


        Navistar International Corporation and Consolidated Subsidiaries


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


Item 1.       Legal Proceedings

              Incorporated herein by reference from Item 3 - "Legal Proceedings"
              in the  company's  definitive  Form 10-K dated  December 22, 1997,
              Commission File No. 1-9618.


Item 6.       Exhibits and Reports on Form 8-K

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

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

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

                     10.  Material Contracts                            E-3

                (b)  Reports on Form 8-K:

                     No  reports  on Form 8-K were
                     filed for the three months
                     ended January 31, 1998.

                                     - 18 -

<PAGE>


                                    SIGNATURE
                                    ---------

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



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






/s/  J. Steven Keate
----------------------------------
     J. Steven Keate
     Vice President and Controller
     (Principal Accounting Officer)


March 17, 1998

                                     - 19 -