WARRENVILLE, Ill -- Sustained strength in military and export shipments continue to drive the growth strategy of Navistar International Corporation (Other OTC: NAVZ) despite softness in traditional markets, the company reported today in its first quarter operational update.

The company expects “expansionary shipments” of 40,000 to 45,000 vehicles this year will account for a third of Navistar’s total worldwide vehicle shipments and help to mitigate the current weakness in its core markets, said Daniel C. Ustian, Navistar chairman, president and chief executive officer.

“The commercial truck market is beginning to improve slowly but clearly it is still tough going,” Ustian said. “To help offset cyclical downturns, our strategy has been to build successful and sustainable businesses in military and export markets. That strategy is paying off in the success of these expansionary businesses. And we are well positioned in our truck and engine businesses with strong products to respond to demand when the market does recover.”

Navistar’s defense business is expected to consistently generate $1.5 billion to $2.0 billion in annual revenue going forward, Ustian said. The latest order of 743 International® MaxxPro™ Mine Resistant Ambush Protected (MRAP) vehicles, announced yesterday, increases Navistar’s total Category I MRAP orders to 5,214 since Navistar’s first contract awarded in May 2007. These orders total more than $3 billion.

Navistar’s fiscal first quarter results reflect the soft market experienced through January. Worldwide shipments of school buses, Class 6-7 medium trucks and Class 8 heavy trucks and expansion market vehicles for the three months ending January 31 totaled 18,720 units, down 37 percent from 29,680 units shipped in the same period a year earlier when totals benefited from a historic pre-buy in advance of 2007 emissions standards.

“As the class 8 on-highway market begins to rebound, we are well poised to capture a solid portion of that segment with our fuel-efficiency leading International ProStarTM and the introduction of three new ProStar derivative models that are just now entering the market,” Ustian said.

Significant new products are on the horizon as well. “We’re continuing our product momentum to deliver profitable growth well into the future,” Ustian said. “Our customers and dealers are particularly excited about the upcoming International LoneStarTM that we introduced to the world last month at the Chicago Auto Show.”

The company plans to become current by mid-year in its financial filings with the Securities and Exchange Commission.

“As we continue to make progress toward becoming a current filer, we have maintained our focus on delivering on our commitments by aggressively implementing a plan based on three strategic pillars: great products, a competitive cost structure, and profitable growth,” Ustian said.

Manufacturing cash balances, together with other sources of liquidity leading into the expected 2009 pre-buy in advance of 2010 diesel emission requirements, are sufficient to support the operating and capital needs of the business, said Terry M. Endsley, senior vice president and treasurer. “The funding needs of the company and our financial services subsidiary, NFC, have been largely unaffected by the credit crunch and we are well positioned, with regard to liquidity and capital structure, to take full advantage of the 2008 and 2009 truck markets,” he said.