<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 1-5236


                   NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                    Delaware                                 36-1264810
          ------------------------------                -------------------
         (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 1,000.


THE  REGISTRANT  IS  A  WHOLLY  OWNED   SUBSIDIARY  OF  NAVISTAR   INTERNATIONAL
CORPORATION AND MEETS THE CONDITIONS SET FORTH IN GENERAL  INSTRUCTIONS H(1) (a)
AND (b) OF THE FORM 10-Q AND IS  THEREFORE  FILING  THIS  FORM WITH THE  REDUCED
DISCLOSURE FORMAT.




                                      - 1 -

<PAGE>



                   NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                          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................       10

Part II. Other Information:

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

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

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

Exhibit 3.........................................................      E-1
Exhibit 4.........................................................      E-2
Exhibit 10........................................................      E-3




                                      - 2 -

<PAGE>



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

ITEM 1.  Financial Statements

STATEMENT OF INCOME (Unaudited)
-------------------------------------------------------------------------------
Millions of dollars
-------------------------------------------------------------------------------
                                                  Three Months Ended January 31
                                                  -----------------------------
                                                      Navistar International
                                                     Transportation Corp. and
                                                     Consolidated Subsidiaries
                                                     -------------------------
                                                       1998             1997
                                                      ------           ------
Sales and revenues
Sales of manufactured products ................       $1,652           $1,240
Finance and insurance revenue .................           45               45
Other income ..................................            6                4
                                                      ------           ------
  Total sales and revenues ....................        1,703            1,289
                                                      ------           ------

Costs and expenses
Cost of products and services sold ............        1,440            1,076
Postretirement benefits .......................           45               51
Engineering and research expense ..............           35               30
Marketing and administrative expense ..........           96               83
Interest expense ..............................           39               38
Financing charges on sold receivables .........            8                7
Insurance claims and underwriting expense .....            9                8
                                                      ------           ------
  Total costs and expenses ....................        1,672            1,293
                                                      ------           ------

    Income (loss) before income taxes .........           31               (4)
    Income tax expense ........................           (9)             (11)
                                                      ------           ------
Net income (loss) .............................       $   22           $  (15)
                                                      ======           ======

See Notes to Financial Statements.




                                      - 3 -

<PAGE>



STATEMENT OF FINANCIAL CONDITION (Unaudited)
-------------------------------------------------------------------------------
Millions of dollars
-------------------------------------------------------------------------------
                                    Navistar International Transportation Corp.
                                           and Consolidated Subsidiaries
                                    -------------------------------------------
                                     January 31      October 31      January 31
                                        1998            1997            1997
                                    ------------     ----------      ----------
ASSETS
-----------------------------------
Cash and cash equivalents .........    $   57         $  164           $   44
Marketable securities .............       125            127              133
                                       ------         ------           ------
                                          182            291              177
Receivables, net ..................     1,548          1,827            1,299
Inventories .......................       494            471              452
Property, net of accumulated
  depreciation and amortization
  of $874, $846, and $864..........       777            752              773
Investments and other assets ......       292            317              236
Intangible pension assets .........       212            212              314
                                       ------         ------           ------
Total assets ......................    $3,505         $3,870           $3,251
                                       ======         ======           ======
LIABILITIES AND SHAREOWNER'S EQUITY
-----------------------------------
Liabilities
Accounts payable, principally trade    $1,007         $1,082           $  714
Debt due Parent Company ...........     1,036            833              975
Debt:
  Manufacturing operations ........        90             92              113
  Financial services operations ...     1,020          1,224              947
Postretirement benefits liability .       893          1,186            1,278
Other liabilities .................       852            868              770
                                       ------         ------           ------
    Total liabilities .............     4,898          5,285            4,797
                                       ------         ------           ------

Commitments and contingencies

Shareowner's equity
Capital stock (1,000 shares issued)       786            786              786
Retained earnings (deficit) .......    (2,179)        (2,201)          (2,332)
                                       ------         ------           ------
    Total shareowner's equity .....    (1,393)        (1,415)          (1,546)
                                       ------         ------           ------
Total liabilities                      $3,505         $3,870           $3,251
  and shareowner's 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
                                                   Transportation Corp. and
                                                  Consolidated Subsidiaries
                                                  -------------------------
                                                     1998            1997
                                                    ------          ------
Cash flow from operations
Net income (loss)  .............................    $   22          $  (15)
Adjustments to reconcile net income (loss)
  to cash used in operations:
  Depreciation and amortization ................        37              33
  Postretirement benefits funding in excess
    of expense .................................      (271)            (71)
  Other, net ...................................       (39)            (22)
Change in operating assets and liabilities:
  Receivables ..................................        59              41
  Inventories ..................................       (25)             11
  Prepaid and other current assets .............       (10)            (19)
  Accounts payable .............................       (69)           (106)
  Other liabilities ............................       (30)            (25)
                                                    ------          ------
Cash used in operations ........................      (326)           (173)
                                                    ------          ------
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 ..............       (11)            (14)
Sales or maturities of marketable securities ...        13              27
Capital expenditures ...........................       (23)            (25)
Property and equipment leased to others ........       (41)            (16)
Other investment programs, net .................        16               4
                                                    ------          ------
Cash provided by investment programs ...........       202             265
                                                    ------          ------

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)
Net increase in loan from Navistar International
  Corporation ..................................       204              91
                                                    ------          ------
Cash provided by (used in) financing activities.        17            (252)
                                                    ------          ------
Cash and cash equivalents
  Decrease during the period ...................      (107)           (160)
  At beginning of the year .....................       164             204
                                                    ------          ------
Cash and cash equivalents at end of the period .    $   57          $   44
                                                    ======          ======
See Notes to Financial Statements.




                                      - 5 -

<PAGE>



    Navistar International Transportation Corp. and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)

Note A.    Summary of Accounting Policies

     Navistar International  Transportation Corp., hereafter referred to as "the
company"  and  "Transportation"  is the  wholly  owned  subsidiary  of  Navistar
International  Corporation,   hereafter  referred  to  as  "Parent  Company"  or
"Navistar."  The  consolidated  financial  statements  include  the  results  of
Transportation'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 $48 million and $43 million, respectively.

Note C.  Income Taxes

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

Note D.  Inventories

     Inventories are as follows:

                                   January 31      October 31      January 31
Millions of dollars                   1998            1997            1997
-----------------------------------------------------------------------------
Finished products................. $      252      $      209      $      246
Work in process...................        109             105              83
Raw materials and supplies........        133             157             123
                                   ----------      ----------      ----------
Total inventories................. $      494      $      471      $      452
                                   ==========      ==========      ==========




                                      - 6 -

<PAGE>



    Navistar International Transportation Corp. and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)


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.

       As of January 31, 1998, Transportation 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.

       Transportation  purchases collateralized mortgage obligations (CMOs) that
have  predetermined   fixed-principal  payment  patterns  which  are  relatively
certain.  These instruments  totaled $38 million at January 31, 1998. At January
31, the unrecognized gain on the CMO's was not material.

Note F.  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
Transportation's  reported  financial  position,  results of operations and cash
flows.

Note G.  Subsequent Events

     On February  4, 1998  Navistar  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
Transportation's   8%  Secured   Note  due  2002  and  will  be  used  to  repay
Transportation's  9% Sinking Fund  Debentures  due 2004.  The proceeds of Senior
Subordinated  Notes were used to redeem Navistar'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, Navistar 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.




                                      - 7 -

<PAGE>



    Navistar International Transportation Corp. and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)


Note G.  Subsequent Events (continued)

     On March 5, 1998  Transportation  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.


Note H.  Supplemental Financial Information


     Navistar  International   Transportation  Corp.  (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...........          $  1,652       $  1,240
Other income.............................                 5              2
                                                   --------       --------
Total sales and revenues.................             1,657          1,242
                                                   --------       --------

Cost of products sold....................             1,434          1,071
Postretirement benefits..................                45             51
Engineering and research expense.........                35             30
Marketing and administrative expense.....                87             75
Other expenses...........................                48             42
                                                   --------       --------
Total costs and expenses.................             1,649          1,269
                                                   --------       --------

Income (loss) before income taxes
  Manufacturing operations...............                 8            (27)
  Financial services operations..........                23             23
                                                   --------       --------
    Income (loss) before income taxes....                31             (4)
Income tax expense.......................                (9)           (11)
                                                   --------       --------
Net income (loss)........................          $     22       $    (15)
                                                   ========       ========


<TABLE>
<CAPTION>
                                                   January 31     October 31    January 31
Condensed Statement of Financial Condition            1998           1997          1997
-------------------------------------------------  ----------     ----------    ----------
<S>                                                 <C>            <C>           <C>
Cash, cash equivalents and marketable securities.   $     24       $    128      $      8
Inventories......................................        494            471           452
Property and equipment, net......................        614            623           656
Equity in nonconsolidated subsidiaries...........        325            322           319
Other assets.....................................        861            921           674
                                                    --------       --------      --------
     Total assets................................   $  2,318       $  2,465      $  2,109
                                                    ========       ========      ========

Accounts payable, principally trade..............   $    968       $  1,042      $    664
Postretirement benefits liabilities..............        885          1,178         1,270
Other liabilities................................      1,858          1,660         1,721
Shareowner's equity..............................     (1,393)        (1,415)       (1,546)
                                                    --------       --------      --------
     Total liabilities and shareowner's equity...   $  2,318       $  2,465      $  2,109
                                                    ========       ========      ========
</TABLE>




                                      - 8 -

<PAGE>



    Navistar International Transportation Corp. and Consolidated Subsidiaries
                    Notes to Financial Statements (Unaudited)

Note H. SUPPLEMENTAL FINANCIAL INFORMATION


     Navistar  International   Transportation  Corp.  (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 (loss)................................ $     22        $   (15)
Adjustments to reconcile net income (loss)
  to cash used in operations:
     Depreciation and amortization...............       30             29
     Postretirement benefits funding
       in excess of expense .....................      (271)          (71)
     Equity in earnings of nonconsolidated
       subsidiaries, net of dividends received...       (3)          (14)
     Other, net..................................       (8)           (4)
Change in operating assets and liabilities.......      (72)          (84)
                                                  --------       -------
Cash used in operations..........................     (302)         (159)
                                                  --------       -------

Cash flow from investment programs
Receivable from Navistar Financial Corporation...        3           (74)
Sales or maturities of marketable securities.....        -             5
Capital expenditures.............................      (22)          (25)
Other investment programs, net...................       15             4
                                                  --------       -------
Cash used in investment programs.................       (4)          (90)
                                                  --------       -------

Cash flow from financing activities..............      202            87
                                                  --------       -------

Cash and cash equivalents
Decrease during the period.......................     (104)          (162)
At beginning of the year.........................      128            170
                                                  --------       --------
Cash and cash equivalents at end of the period... $     24       $      8
                                                  ========       ========




                                      - 9 -

<PAGE>



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

RESULTS OF OPERATIONS

     Certain   statements   under  this  caption   constitute   "forward-looking
statements"  under the  Reform  Act,  which  involve  risks  and  uncertainties.
Navistar   International   Transportation  Corp.'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."

     Transportation  reported  net income of $22 million  for the first  quarter
ended January 31, 1998 reflecting higher sales of manufactured  product compared
to a net loss of $15 million for the comparable quarter last year.

     Transportation's  manufacturing  operations  reported  income before income
taxes of $8  million  compared  with a pretax  loss of $27  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  $1,703  million,
32% higher than the $1,289 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 $1,652 million compared with $1,240 million reported for
the same period in 1997.

     Transportation  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 13.2% of sales for the
first quarter of 1998 compared with 13.6% for the same period in 1997.




                                     - 10 -

<PAGE>



     Marketing and administrative  expense increased to $96 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 $182 million at January 31,  1998,  $291 million at October 31, 1997
and $177 million at January 31, 1997.

     Cash used in  operations  during  the first  quarter of 1998  totaled  $326
million,  primarily from excess postretirement  benefits funding of $271 million
and from a net change in operating assets and liabilities of $75 million. During
the first quarter, Transportation 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 $59 million decrease
in  receivables  offset by a $25 million  increase in  inventories  and by a $69
million decrease in accounts payable resulting from lower production.

     Investment programs provided $202 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 $23
million  to fund  capital  expenditures  to  increase  mid-range  diesel  engine
capacity and for truck product improvements.

     Financing  activities used cash 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 a $204 million
increase in loans from the Parent Company.




                                     - 11 -

<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, Transportation 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.

       Transportation  purchases collateralized mortgage obligations (CMOs) that
have  predetermined   fixed-principal  payment  patterns  which  are  relatively
certain.  These instruments  totaled $38 million at January 31, 1998. At January
31, the unrecognized gain on the CMO's was not material.

     Transportation  had  outstanding  capital  commitments  of $72  million  at
January  31,  1998,  primarily  for  increased  manufacturing  capacity  at  the
Indianapolis engine plant and improvements to existing facilities and products.

     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.




                                     - 12 -

<PAGE>



     On February 4, 1998 the Parent 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).  Approximately  $27  million  was  used  to  repay
Transportation's  8%  Secured  Note  due 2002  including  accrued  interest  and
approximately  $47 million is expected to be used to repay  Transportation's  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  Navistar'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.  On March 5, 1998,  the  Parent  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.

     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  Transportation's  dealers and
customers.

Year 2000

     Transportation  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.  Transportation  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  Transportation's
financial position or results of operations and will be funded through operating
cash flows.

     The costs of the project and the date on which  Transportation  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.




                                     - 13 -

<PAGE>



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

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
Transportation's  reported  financial  position,  results of operations and cash
flows.

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  Transportation'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  Transportation  to increase its
estimates of demand.  Transportation  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. Transportation'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  Transportation's  manufacturing
facilities  are near  capacity.  Additionally,  constraints  have been placed on
Transportation's ability to meet certain customers' demands because of component
parts availability.

     On March 5, 1998  Transportation  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.




                                     - 14 -

<PAGE>



    Navistar International Transportation Corp. and Consolidated Subsidiaries


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


Item 1.       Legal Proceedings

              Incorporated herein by reference from Item 3 - "Legal Proceedings"
              in Transportation's  definitive Form 10-K dated December 22, 1997,
              Commission File No. 1-5236.


Item 6.       Exhibits and Reports on Form 8-K


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

                      3.   Articles of Incorporation and By-Laws       E-1
                      4.   Instruments Defining Rights of
                             Security Holders,                         E-2
                             Including Indentures
                     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.




                                     - 15 -

<PAGE>



                                    SIGNATURE
                                    ---------

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



NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
-------------------------------------------
               (Registrant)






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


March 17, 1998




                                     - 16 -