10-Q

                                   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, 2002

                                                          OR

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

     For the transition period from                       To

     Commission file number 1-9618

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

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

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

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

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

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

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

                                        APPLICABLE ONLY TO CORPORATE ISSUERS:

              As of February 28, 2002,  the number of shares  outstanding  of the  registrant's  common stock was
     60,095,384.






PAGE 2


                                         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, 2002 and 2001................................            3

           Statement of Financial Condition
              January 31, 2002, October 31, 2001 and January 31, 2001.....................            4

           Statement of Cash Flow
              Three Months Ended January 31, 2002 and 2001................................            5

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

     Additional Financial Information.....................................................            16

           Item 2.  Management's Discussion and Analysis of Results of
                       Operations and Financial Condition.................................            18

           Item 3.  Quantitative and Qualitative Disclosures
                       About Market Risk..................................................            23

     Part II.  Other Information:

           Item 1.  Legal Proceedings.....................................................            23

           Item 2.  Changes in Securities and Use of Proceeds.............................            23

           Item 6.  Exhibits and Reports on Form 8-K......................................            24

     Signature ...........................................................................            25







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

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

                                                                                     Navistar International Corporation
                                                                                       and Consolidated Subsidiaries
                                                                                  -----------------------------------------
                                                                                             Three Months Ended
                                                                                                 January 31
                                                                                  -----------------------------------------
                                                                                        2002                    2001
                                                                                  ------------------      -----------------
Sales and revenues
Sales of manufactured products...............................................     $         1,389         $         1,433
Finance and insurance revenue................................................                  77                      76
Other income.................................................................                   6                       7
                                                                                  ---------------         ---------------
        Total sales and revenues.............................................               1,472                   1,516
                                                                                  ---------------         ---------------

Costs and expenses
Cost of products and services sold...........................................               1,256                   1,285
Restructuring adjustment.....................................................                  (1)                      -
Postretirement benefits expense..............................................                  58                      46
Engineering and research expense.............................................                  64                      65
Sales, general and administrative expense....................................                 134                     121
Interest expense.............................................................                  40                      41
Other expense................................................................                  11                      14
                                                                                  ---------------         ---------------
        Total costs and expenses.............................................               1,562                   1,572
                                                                                  ---------------         ---------------

               Loss before income taxes......................................                 (90)                    (56)
               Income tax benefit............................................                 (34)                    (21)
                                                                                  ---------------         ---------------

Net loss.....................................................................     $           (56)        $           (35)
                                                                                  ===============         ===============

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

Earnings (loss) per share
        Basic................................................................     $        (0.93)         $        (0.58)
        Diluted..............................................................     $        (0.93)         $        (0.58)

Average shares outstanding (millions)
        Basic................................................................               59.8                    59.5
        Diluted..............................................................               59.8                    59.5

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

See Notes to Financial Statements.






PAGE 4

STATEMENT OF FINANCIAL CONDITION (Unaudited)
Millions of dollars
- ---------------------------------------------------------------------------------------------------------------------------
                                                                             Navistar International Corporation
                                                                                and Consolidated Subsidiaries
                                                                   -------------------------------------------------------
                                                                     January 31          October 31         January 31
                                                                        2002                2001               2001
                                                                   ----------------   -----------------   ----------------
ASSETS

Current assets
        Cash and cash equivalents...............................   $          432     $          822      $          431
        Marketable securities...................................               10                 41                   3
        Receivables, net........................................              704                917                 767
        Inventories.............................................              651                644                 705
        Deferred tax asset, net.................................              151                145                 209
        Other assets............................................              118                167                 170
                                                                   --------------     --------------      --------------

Total current assets............................................            2,066              2,736               2,285
                                                                   --------------     --------------      --------------

Marketable securities...........................................              465                222                 404
Finance and other receivables, net..............................            1,041              1,164                 957
Property and equipment, net.....................................            1,670              1,669               1,815
Investments and other assets....................................              191                169                 170
Prepaid and intangible pension assets...........................              273                272                 304
Deferred tax asset, net.........................................              866                835                 703
                                                                   --------------     --------------      --------------

Total assets....................................................   $        6,572     $        7,067      $        6,638
                                                                   ==============     ==============      ==============

LIABILITIES AND SHAREOWNERS' EQUITY

Liabilities
Current liabilities
        Notes payable and current maturities of long-term debt..   $          369     $          412      $          320
        Accounts payable, principally trade.....................              887              1,103                 968
        Other liabilities.......................................              752                758                 760
                                                                   --------------     --------------      --------------

Total current liabilities.......................................            2,008              2,273               2,048
                                                                   --------------     --------------      --------------

Debt:   Manufacturing operations................................              907                908                 582
        Financial services operations...........................            1,387              1,560               1,624
Postretirement benefits liability...............................              811                824                 667
Other liabilities...............................................              381                375                 437
                                                                   --------------     --------------      --------------

        Total liabilities.......................................            5,494              5,940               5,358
                                                                   --------------     --------------      --------------

Commitments and contingencies

Shareowners' equity
Series D convertible junior preference stock....................                4                  4                   4
Common stock (75.3 million shares issued).......................            2,139              2,139               2,139
Retained earnings (deficit).....................................             (232)              (170)               (174)
Accumulated other comprehensive loss............................             (339)              (339)               (180)
Common stock held in treasury, at cost
   (15.3 million, 15.9 million and 15.9 million shares held)....             (494)              (507)               (509)
                                                                   --------------     --------------      --------------

        Total shareowners' equity...............................            1,078              1,127               1,280
                                                                   --------------     --------------      --------------

Total liabilities and shareowners' equity.......................   $        6,572     $        7,067      $        6,638
                                                                   ==============     ==============      ==============

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

See Notes to Financial Statements.






PAGE 5

STATEMENT OF CASH FLOW (Unaudited)
Millions of dollars
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                        Navistar International Corporation
                                                                                           and Consolidated Subsidiaries
                                                                                     ------------------------------------------
                                                                                                Three Months Ended
                                                                                                    January 31
                                                                                     ------------------------------------------
                                                                                           2002                     2001
                                                                                     -----------------        -----------------
Cash flow from operations
Net loss..........................................................................   $           (56)         $           (35)
Adjustments to reconcile net loss
     to cash used in operations:
       Depreciation and amortization..............................................                55                       53
       Deferred income taxes......................................................               (31)                     (24)
          Postretirement benefits funding less than (in excess of) expense........                (8)                       8
       Other, net.................................................................               (40)                      (1)
    Change in operating assets and liabilities, net of effects of acquisition:
       Receivables................................................................               150                      161
       Inventories................................................................               (18)                     (55)
       Prepaid and other current assets...........................................               (20)                      (1)
       Accounts payable...........................................................              (221)                    (144)
       Other liabilities..........................................................                25                       (6)
                                                                                     ---------------          ---------------
    Cash used in operations.......................................................              (164)                     (44)
                                                                                     ---------------          ---------------

Cash flow from investment programs
Purchases of retail notes and lease receivables...................................              (187)                    (276)
Collections/sales of retail notes and lease receivables...........................               398                      924
Purchases of marketable securities................................................              (244)                    (313)
Sales or maturities of marketable securities......................................                32                       86
Proceeds from sale of business....................................................                62                        -
Capital expenditures..............................................................               (70)                     (64)
Payments for acquisition, net of cash acquired....................................                 -                      (60)
Proceeds from sale-leasebacks.....................................................                 -                       58
Property and equipment leased to others...........................................               (10)                     (37)
Investment in affiliates..........................................................                 1                        4
Capitalized interest and other....................................................               (10)                      (1)
                                                                                     ---------------          ---------------
    Cash provided by (used in) investment programs................................               (28)                     321
                                                                                     ---------------          ---------------

Cash flow from financing activities
Issuance of debt..................................................................                31                      118
Principal payments on debt........................................................               (51)                     (78)
Net decrease in notes and debt outstanding
    under bank revolving credit facility and commercial paper programs............              (190)                    (183)
Other financing activities........................................................                12                        -
                                                                                     ---------------          ---------------
    Cash used in financing activities.............................................              (198)                    (143)
                                                                                     ---------------          ---------------

Cash and cash equivalents
    Increase (decrease) during the period.........................................              (390)                     134
    At beginning of the period....................................................               822                      297
                                                                                     ---------------          ---------------

Cash and cash equivalents at end of the period....................................   $           432          $           431
                                                                                     ===============          ===============

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

See Notes to Financial Statements.






PAGE 6

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

Note A.  Summary of Accounting Policies

         Navistar  International  Corporation  (NIC) is a holding company whose principal  operating  subsidiary is
International Truck and Engine Corporation  (International).  As used hereafter,  "company" or "Navistar" refers to
Navistar  International  Corporation  and its  consolidated  subsidiaries.  Navistar  operates  in three  principal
industry segments:  truck, engine (collectively called  "manufacturing  operations"),  and financial services.  The
consolidated  financial  statements  include the results of the company's  manufacturing  operations and its wholly
owned  financial  services  subsidiaries.  The effects of  transactions  between the  manufacturing  and  financial
services operations have been eliminated to arrive at the consolidated totals.

         The  accompanying  unaudited  financial  statements  have been  prepared  in  accordance  with  accounting
policies  described in the 2001 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  2001  amounts  have  been  reclassified  to  conform  with the  presentation  used in the  2002  financial
statements.

Note B.  Supplemental Cash Flow Information

         Consolidated  interest  payments  during the first three  months of 2002 and 2001 were $41 million and $47
million,  respectively.  Consolidated  tax payments made during the first three months of 2002 were  immaterial and
were $3 million for the same period in 2001.

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 income and withholding  and federal  alternative  minimum taxes.  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
United States (U.S.) federal income taxes will be minimal.

Note D.  Inventories

     Inventories are as follows:
                                                                    January 31        October 31        January 31
Millions of dollars                                                    2002              2001              2001
- ---------------------------------------------------------------------------------------------------------------------
Finished products..............................................   $         418     $         405     $         449
Work in process................................................              34                33                60
Raw materials and supplies.....................................             199               206               196
                                                                  -------------     -------------     -------------
Total inventories..............................................   $         651     $         644     $         705
                                                                  =============     =============     =============






PAGE 7

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

Note E.  Financial Instruments

Accounting for Derivatives and Hedging Activities

         The  company  uses  derivative  financial  instruments  as part of its overall  interest  rate and foreign
currency risk management strategy as further described under Item 7A of the 2001 Annual Report on Form 10-K.

         The company is exposed to interest  rate risk  relating to changes in market  interest  rates.  As part of
its  overall  strategy  to manage the level of  exposure to the risk of  interest  rates  adversely  affecting  net
interest  income or expense,  the company uses  interest  rate swap  agreements,  interest  rate caps,  and forward
contracts.  The  company is also  occasionally  required by third  parties to use  derivative  instruments  to make
financing  possible under sold note  arrangements.  These  derivatives  are used in  asset-backed  transactions  in
order to absorb some portfolio-related risks.

         The company is exposed to foreign currency risk relating to changes in certain foreign  currency  exchange
rates.  As part of its overall  strategy to manage the level of exposure to exchange  rate risk,  the company  uses
forward contracts.  These derivatives are generally designated and qualify as cash flow hedges.

         On the date Navistar enters into a derivative contract,  management  designates the derivative as either a
hedging  or  non-hedging   instrument.   Additionally,   management   distinguishes   between  fair  value  hedging
instruments, cash flow hedging instruments, and other derivative instruments.

         The  company  documents  and  accounts  for  derivative  and hedging  activities  in  accordance  with the
provisions  of SFAS 133. In general,  SFAS 133  requires  that an entity  recognize  all  derivatives  as assets or
liabilities  in the  statement of financial  position  and measure  them at fair value.  When certain  criteria are
met, it also provides for matching the timing of gain or loss  recognition  on the  derivative  hedging  instrument
with the  recognition of (a) changes in the fair value or cash flows of the hedged asset or liability  attributable
to the hedged risk or (b) the earnings effect of the hedged  forecasted  transaction.  Changes in the fair value of
derivatives  which are not designated  as, or which do not qualify as, hedges for accounting  purposes are reported
in earnings in the period in which they occur.

         In  connection  with the $179  million  floating  rate  portion of the $500  million  sale of retail  note
receivables  that closed in November  2001,  Navistar  Financial  Corporation  (NFC) entered into two interest rate
swap  agreements.  The notional  amount of each swap was $179 million.  As of January 31, 2002,  the fair values of
the swaps were  offsetting  immaterial  amounts.  The  purpose  of these  swaps was to convert  the  floating  rate
interest  of the bonds into fixed rate  interest to match the  interest  basis of the  receivable  pool sold to the
owner trust, and thereby protecting NFC from interest rate volatility.  The net outcome,  after applying the effect
of these  swaps,  results in NFC paying a fixed  rate of  interest  on the  projected  balance of the pool.  To the
extent that actual pool balances  differ from the projected  balances,  NFC has retained  interest rate exposure on
this difference. These two derivatives are being accounted for as non-hedging derivative instruments.

         As of January 31, 2002, NFC has several  outstanding  derivative  instruments that were entered into prior
to the first  quarter of 2002.  One interest rate swap is  classified  as a cash flow hedge  derivative  instrument
and has a notional  amount of $34 million.  The fair value of this  derivative  instrument  as of January 31, 2002,
was zero and is  recorded  in other  liabilities  in the  Statement  of  Financial  Condition.  The impact on other
comprehensive  income for the quarter then ended was not material.  NFC has two interest rate swap  agreements with
notional  amounts  of $7  million  and $29  million.  The fair  values of these  swaps at January  31,  2002,  were
immaterial.  NFC has three  interest  rate caps that are  classified as  non-hedging  derivative  instruments  with
notional amounts of $48 million, $500 million and




PAGE 8

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

Note E.  Financial Instruments (continued)

$500  million.  The fair  values of these caps as of January  31,  2002,  are zero,  $6 million  and ($6)  million,
respectively.  The fair values of these  derivative  instruments  as of January  31,  2002,  are  recorded in other
liabilities  in the  Statement of Financial  Condition.  The changes in fair value for the quarter were recorded in
finance and insurance revenue and were not material.

         The company has other  derivatives  classified as non-hedging,  which are further  described in Note 12 of
the 2001 Annual Report on Form 10-K.

         As of January 31, 2002, the company held other derivative contracts with notional amounts of $86 million.


Note F.  Earnings Per Share

       Earnings (loss) per share was computed as follows:
                                                                                     For the Three Months Ended
                                                                                             January 31
                                                                                -------------------------------------
Millions of dollars, except share and per share data                                 2002                 2001
- ----------------------------------------------------------------------------    ----------------    -----------------

Net loss...................................................................     $           (56)    $            (35)
                                                                                ===============     ================

Average shares outstanding (millions)
        Basic..............................................................                 59.8                59.5
        Dilutive effect of options outstanding
               and other dilutive securities...............................                    -                   -
                                                                                ----------------    ----------------
        Diluted............................................................                 59.8                59.5
                                                                                ================    ================

Earnings (loss) per share
        Basic..............................................................     $        (0.93)     $        (0.58)
        Diluted............................................................     $        (0.93)     $        (0.58)

         The  computation  of diluted  shares  outstanding  for the three months  ended  January 31, 2002 and 2001,
excludes  incremental  shares of 1.0 million and 0.5 million,  respectively,  related to employee stock options and
other  dilutive  securities.  These  shares  are  excluded  due to their  anti-dilutive  effect  as a result of the
company's loss for the first quarter of 2002 and 2001.

Note G.  Comprehensive Income

         The components of comprehensive loss are as follows:
                                                                                     For the Three Months Ended
                                                                                             January 31
                                                                                -------------------------------------
Millions of dollars                                                                  2002                 2001
- ----------------------------------------------------------------                ----------------    -----------------

Net loss.......................................................                 $         (56)      $         (35)
Other comprehensive loss.......................................                             -                  (3)
                                                                                -------------       -------------
        Total comprehensive loss...............................                 $         (56)      $         (38)
                                                                                =============       =============

         Included in other  comprehensive  loss are charges  for  derivatives  that had been used as cash flow type
hedges in  accordance  with SFAS 133, as further  described in Note E. For the three months ended January 31, 2002,
this charge was immaterial, and was $2 million for the comparable period in 2001.





PAGE 9

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

Note H.  Segment Data

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

                                                                 For the quarter ended January 31, 2002
                                                  ----------------------------------------------------------------------
External revenues...............................     $     947        $     442          $      80        $  1,469
Intersegment revenues...........................             -               96                  9              105
                                                     ---------        ---------          ---------        ---------
     Total revenues.............................     $     947        $     538          $      89        $   1,574
                                                     =========        =========          =========        =========

Segment profit (loss)...........................     $    (113)       $      42          $      31        $     (40)


                                                                         As of January 31, 2002
                                                  ----------------------------------------------------------------------
Segment assets..................................     $   1,771        $   1,025          $   2,368        $   5,164


                                                                 For the quarter ended January 31, 2001
                                                  ----------------------------------------------------------------------
External revenues...............................     $   1,022        $     411           $     78         $  1,511
Intersegment revenues...........................             -              119                 17              136
                                                     ---------        ---------           --------         --------
     Total revenues.............................     $   1,022        $     530           $     95         $  1,647
                                                     =========        =========           ========         ========

Segment profit (loss)...........................     $     (91)       $      42           $     24         $    (25)


                                                                         As of January 31, 2001
                                                  ----------------------------------------------------------------------
Segment assets..................................     $   1,968        $   1,239           $  2,399         $  5,606


         Reconciliation  to the  consolidated  financial  statements as of and for the quarters ended January 31 is
as follows:

Millions of dollars                                                               2002                    2001
- ------------------------------------------------------------------------ ----------------------- -----------------------

Segment sales and revenues..........................................          $      1,574            $      1,647
Other income........................................................                     3                       5
Intercompany........................................................                  (105)                   (136)
                                                                              ------------            ------------
Consolidated sales and revenues.....................................          $      1,472            $      1,516
                                                                              ============            ============

Segment loss........................................................          $        (40)           $        (25)
Restructuring adjustment............................................                     1                       -
Corporate items.....................................................                   (38)                    (35)
Manufacturing net interest income (expense).........................                   (13)                      4
                                                                              ------------            ------------
Consolidated pretax loss............................................          $        (90)           $        (56)
                                                                              ============            ============

Segment assets......................................................          $      5,164            $      5,606
Cash and marketable securities......................................                   284                     236
Deferred taxes......................................................                 1,017                     912
Corporate intangible pension assets.................................                    72                      66
Other corporate and eliminations....................................                    35                    (182)
                                                                              ------------            ------------
Consolidated assets.................................................          $      6,572            $      6,638
                                                                              ============            ============





PAGE 10

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

Note I.  Restructuring Charge

         In October 2000, the company incurred charges for  restructuring,  asset  write-downs,  loss on anticipated
sale of  business  and other  exit  costs  totaling  $306  million as part of an  overall  plan to  restructure  its
manufacturing  and corporate  operations  ("Plan of  Restructuring").  The  following  are the major  restructuring,
integration and cost reduction initiatives included in the Plan of Restructuring:

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

         Of the total pretax  restructuring  charge of $306 million,  $150 million  represented  non-cash  charges.
Through  January  31,  2002,  approximately  $208  million  of the  charge has been  incurred,  and $12  million of
curtailment  loss  related  to  the  company's  postretirement  benefit  has  been  reclassified  as  a  noncurrent
postretirement  liability.  The  remaining  restructuring  liability  of $86  million is expected to be funded from
existing cash balances and internally generated cash flows from operations.

         The  specific  actions  included  in the Plan of  Restructuring  were  substantially  complete by November
2001.  Components of the remaining restructuring charge are as follows:

                                                    Balance                  Amount                  Balance
(Millions of dollars)                          October 31, 2001             Incurred            January 31, 2002
- -----------------------------------------    ----------------------      ---------------     -----------------------
Severance and other benefits                 $        32                 $       (3)         $          29
Lease terminations                                    35                          -                     35
Loss on sale of business                               2                          -                      2
Dealer termination and exit costs                     21                         (1)                    20
                                             ----------------------      ---------------     -----------------------
Total                                        $        90                 $       (4)         $          86
                                             ======================      ===============     =======================

         The Plan of  Restructuring  included the reduction of  approximately  2,100  employees from the workforce,
primarily  in North  America,  which was  revised to 1,900  employees  at October  31,  2001.  During the  quarter,
approximately  $3 million  was paid for  severance  and other  benefits,  and  employee  headcount  was  reduced by
approximately  400. As of January 31, 2002, of the total net charge of $75 million,  approximately  $34 million has
been paid for severance and other benefits for the reduction of approximately  1,900 employees,  and $12 million of
curtailment  loss has  been  reclassified  as a  noncurrent  postretirement  liability.  The  severance  and  other
benefits  balance  represents  costs related to future  payments  over the next two years for headcount  reductions
already incurred.

         Lease termination costs include the future  obligations  under long-term  non-cancelable  lease agreements
at  facilities  being vacated  following  workforce  reductions.  This charge  primarily  consists of the estimated
lease costs, net of probable  sublease income,  associated with the cancellation of the company's  corporate office
lease at NBC Tower in Chicago,  Illinois,  which  expires in 2010.  As of January 31, 2002, of the total net charge
of $38 million, $3 million has been incurred for lease termination costs.







PAGE 11

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

Note I.  Restructuring Charge (continued)

         The Plan of  Restructuring  included the effect of the sale of Harco National  Insurance  Company (Harco).
On November 30, 2001,  NFC completed the sale of Harco to IAT  Reinsurance  Syndicate  Ltd., a Bermuda  reinsurance
company.  The remaining  payments  related to exit costs of approximately $2 million are expected to be incurred in
fiscal year 2002.

         Dealer  termination and exit costs include the termination of certain dealer  contracts in connection with
the  realignment  of the  company's  bus  distribution  network,  and  other  litigation  costs  to  implement  the
restructuring  initiatives.  As of January 31,  2002,  of the total net charge of $38  million,  approximately  $18
million has been paid for dealer terminations and exit costs, of which $1 million was incurred during the quarter.

Note J.  Sale of Receivables

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

         NFC securitizes  and sells certain retail and wholesale  receivables  through  Navistar  Financial  Retail
Receivables  Corporation  (NFRRC),   Navistar  Financial  Securities  Corporation  (NFSC),  Truck  Retail  Accounts
Corporation (TRAC) and Truck Engine Receivables Financing  Corporation  (TERFCO),  all special purpose entities and
wholly-owned  subsidiaries of NFC. The sale of receivables in each of the  securitizations  constitute  sales under
generally  accepted  accounting  principles,  with the result  that the sold  receivables  are  removed  from NFC's
balance  sheet and the  investor's  interests in the related  trust or conduit are not  reflected  as  liabilities.
However,  the special purpose  entity's  residual  interest in the related trusts or assets held by the conduit are
reflected in the Statement of Financial  Condition as assets.  NFRRC,  NFSC, TRAC and TERFCO have limited  recourse
on the sold  receivables.  The terms of receivable  sales generally  require NFC to maintain cash reserves with the
trusts and conduits as credit  enhancement.  These cash reserves are restricted  under the terms of the securitized
sales  agreements.  The maximum  exposure  under all receivable  sale recourse  provisions at January 31, 2002, was
$408 million. Management believes the recorded reserves for losses are adequate.

         At January 31, 2002, NFC has a $500 million  revolving retail  warehouse  facility due in October 2005. In
October 2000, Truck Retail Instalment Paper  Corporation,  a special purpose entity and wholly-owned  subsidiary of
NFC,  issued $475 million of senior class AAA rated and $25 million of  subordinated  class A rated  floating  rate
asset-backed  notes.  The proceeds were used to purchase  eligible  receivables  from NFC and establish a revolving
retail warehouse facility for NFC's retail notes and retail leases, other than fair market value leases.

         NFC  continues  to service the  receivables,  for which a servicing  fee is received.  Servicing  fees are
earned on a level yield basis over the terms of the related sold  receivables.  Servicing  fees are  typically  set
at 1.0% of average  outstanding  net  receivable  balances,  representing  NFC's  estimated  costs to  service  the
receivables.

         Gains or losses on sales of  receivables  are estimated  based upon the present  value of future  expected
cash flows using  assumptions  for prepayment  speeds and current market  interest  rates.  These  assumptions  use
management's  best  estimates  commensurate  with the risks  involved.  An allowance  for credit losses is provided
prior to the receivable sale and is reclassified as part of retained interest upon sale.






PAGE 12

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

Note J.  Sale of Receivables (continued)

         Finance  receivable  balances do not include  receivables sold by NFC to public and private investors with
limited recourse provisions.  Outstanding sold receivable balances are as follows, in millions:

                                                           January 31            October 31           January 31
                                                              2002                  2001                 2001
                                                        -----------------       --------------      ----------------
         Retail notes..............................       $    2,042            $      1,863            $  2,401
         Wholesale notes...........................              713                     797                 792
         Retail accounts...........................              200                     191                 185
                                                             -------                 -------             -------
              Total................................       $    2,955            $      2,851            $  3,378
                                                             =======                 =======             =======

         Additional  financial data for gross serviced  finance  receivables as of January 31, 2002, is as follows,
in millions:
                                                     Retail                          Wholesale
                                                      Notes          Leases            Notes           Accounts
                                                   ------------    ------------    --------------    --------------
Gross serviced finance receivables..........        $   2,612       $     522       $     750         $     333
Gross serviced finance receivables with
     installments past due..................               37              12               7                17
Credit losses net of recoveries.............                4               -               -                 -

        During the three months  ended  January 31, 2002,  NFC sold $500 million of retail  notes,  net of unearned
finance income,  through NFRRC.  NFC sold the retail notes to an owner trust,  which, in turn,  issued $500 million
of  asset-backed  securities  that were sold to investors.  Aggregate gains of $17 million were recognized on these
sales.

         At January 31, 2002,  NFSC has in place a revolving  wholesale note trust that provides for the funding of
$837 million of eligible  wholesale  notes.  TERFCO has in place a revolving trust that provides for the funding of
$100 million of eligible Ford Motor  Company  accounts  receivable.  TRAC has in place a revolving  retail  account
conduit that provides for the funding of $100 million of eligible retail accounts.

         When  receivables  are  sold,  NFC  retains  interest  in  the  securitized  receivables  in the  form  of
interest-only strips,  servicing rights, cash reserve accounts and subordinated  certificates.  The carrying amount
of these  retained  interests  approximate  fair value and were $392  million,  $324  million  and $357  million at
January 31, 2002,  October 31, 2001 and January 31, 2001,  respectively.  These amounts are included in finance and
other receivables in the Statement of Financial Condition.

         Key economic  assumptions  used in measuring  the gains and the related  retained  interest at January 31,
2002,  were a prepayment  speed of 1.3 to 1.5, a weighted  average  remaining life of 22 months and a residual cash
flows discount rate of 6.86%.

         The following table summarizes certain cash flows received from (paid to)  securitization  trusts/conduits
during the three months ended January 31, 2002, in millions:

Proceeds from initial sales of retail receivables..................................................        $     500
Proceeds from subsequent sales of receivables into revolving facilities............................            1,129
Servicing fees received............................................................................                6
All other cash received from trusts................................................................               45
Purchase of delinquent or foreclosed receivables...................................................              (14)
Cash used for pool buybacks........................................................................                -





PAGE 13

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


Note K.  New Accounting Pronouncements

         In June 2001, the Financial  Accounting  Standards Board (FASB) issued  Statement of Financial  Accounting
Standards  No. 142 (SFAS 142),  "Goodwill  and Other  Intangible  Assets" and  Statement  of  Financial  Accounting
Standards  No.  143 (SFAS  143),  "Accounting  for  Asset  Retirement  Obligations."  SFAS 142 was  adopted  by the
company on November 1, 2001, and did not have a material  impact on the company's  financial  position,  results of
operations or cash flows.  SFAS 143 is effective for financial  statements  issued for fiscal years beginning after
June 15, 2002.  The company is evaluating the impact of SFAS 143 on its financial  position,  results of operations
and cash flows.

         In August 2001, the FASB issued Statement of Financial  Accounting  Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived  Assets,"  which is effective for fiscal years  beginning  after  December 15,
2001,  and interim  periods  within those  fiscal  years.  The company is  evaluating  the impact on the  company's
financial position, results of operations and cash flows.


Note L.  Condensed Consolidating Guarantor and Non-Guarantor Financial Information

         The  following  tables set forth the  condensed  consolidating  Statements  of  Financial  Condition as of
January 31, 2002 and 2001,  and the  Statements of Income and Cash Flow for the three months ended January 31, 2002
and 2001.  The following  information  is included as a result of the guarantee of the $400 million Senior Notes by
International,  exclusive  of  its  subsidiaries.  International  is  a  direct  wholly-owned  subsidiary  of  NIC.
International,  exclusive of its  subsidiaries,  also guarantees  NIC's  obligations  under its 7% senior notes due
2003 and 8% senior  subordinated  notes due 2008.  None of NIC's other  subsidiaries  guarantee any of these notes.
Each of the guarantees is full and unconditional.  Separate financial  statements and other disclosures  concerning
International  have not been  presented  because  management  believes  that such  information  is not  material to
investors.  NIC  includes  the  consolidated  financial  results  of  the  parent  company  only,  with  all of its
wholly-owned  subsidiaries  accounted for under the equity method.  International,  for purposes of this disclosure
only, includes the consolidated  financial results of its wholly-owned  subsidiaries accounted for under the equity
method.  "Non-Guarantor  Companies  and  Eliminations"  includes the  consolidated  financial  results of all other
non-guarantor  subsidiaries  including the elimination  entries for all intercompany  transactions.  All applicable
corporate expenses have been allocated appropriately among the guarantor and non-guarantor subsidiaries.

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





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

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

                                                                                                   Non-Guarantor
                                                                                                   Companies and
                                                                       NIC        International     Eliminations     Consolidated
                                                                  --------------  --------------  -----------------  --------------
  CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JANUARY 31, 2002

  Sales and revenues............................................  $          2    $      1,124    $        346       $      1,472
                                                                   -----------    ------------     -----------       ------------

  Cost of products and services sold............................             -           1,042             214              1,256
  Restructuring adjustment......................................             -               -              (1)                (1)
  All other operating expenses..................................            (6)            239              74                307
                                                                  ------------    ------------    ------------       ------------
      Total costs and expenses..................................            (6)          1,281             287              1,562
                                                                  ------------    ------------    ------------       ------------

  Equity in income (loss) of nonconsolidated subsidiaries.......           (98)             55              43                  -
                                                                  ------------    ------------    ------------       ------------

  Income (loss) before income taxes.............................           (90)           (102)            102                (90)
  Income tax expense (benefit)..................................           (34)              6              (6)               (34)
                                                                  ------------    ------------    ------------       ------------
  Net income (loss).............................................  $        (56)   $       (108)   $        108       $        (56)
                                                                  ============    ============    ============       ============

  CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL CONDITION AS OF JANUARY 31, 2002

  ASSETS
  Cash and marketable securities................................  $        263    $          8    $        636       $        907
  Receivables, net..............................................             6              63           1,676              1,745
  Inventories...................................................             -             344             307                651
  Property and equipment, net...................................             -             890             780              1,670
  Investment in affiliates......................................        (1,326)            931             395                  -
  Deferred tax asset and other assets...........................         1,012             267             320              1,599
                                                                  ------------    ------------    ------------       ------------
      Total assets..............................................  $        (45)   $      2,503    $      4,114       $      6,572
                                                                  ============    ============    ============       ============

  LIABILITIES AND SHAREOWNERS' EQUITY
  Debt .........................................................  $        821    $         21    $      1,821       $      2,663
  Postretirement benefits liability.............................             -             977              97              1,074
  Amounts due (from) to affiliates..............................        (2,024)          1,645             379                  -
  Other liabilities.............................................            80           1,245             432              1,757
                                                                  ------------    ------------    ------------       ------------
      Total liabilities.........................................        (1,123)          3,888           2,729              5,494
                                                                  ------------    ------------    ------------       ------------

  Shareowners' equity (deficit).................................         1,078          (1,385)          1,385              1,078
                                                                  ------------    ------------    ------------       ------------
  Total liabilities and shareowners' equity.....................  $        (45)   $      2,503    $      4,114       $      6,572
                                                                  ============    ============    ============       ============

  CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW FOR THE THREE MONTHS ENDED JANUARY 31, 2002

  Cash provided by (used in) operations.........................  $       (448)   $         72    $        212       $       (164)
                                                                  ------------    ------------    ------------       ------------

  Cash flow from investment programs
  Purchases, net of collections, of finance receivables.........             -               -             211                211
  Net (increase) decrease in marketable securities..............            30               -            (242)              (212)
  Capital expenditures..........................................             -             (62)             (8)               (70)
  Other investing activities....................................             1              (8)             50                 43
                                                                  ------------    ------------    ------------       ------------
  Cash provided by (used in) investment programs................            31             (70)             11                (28)
                                                                  ------------    ------------    ------------       ------------

  Cash flow from financing activities
  Net repayments of debt........................................             -               -            (210)              (210)
  Other financing activities....................................            12               -               -                 12
                                                                  ------------    ------------    ------------       ------------
  Cash provided by (used in) financing activities...............            12               -            (210)              (198)
                                                                  ------------    ------------    ------------       ------------
  Cash and cash equivalents
  Increase (decrease) during the period.........................          (405)              2              13               (390)
  At beginning of the period....................................           658               6             158                822
                                                                  ------------    ------------    ------------       ------------
  Cash and cash equivalents at end of the period................  $        253    $          8    $        171       $        432
                                                                  ============    ============    ============       ============






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

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

                                                                                                    Non-Guarantor
                                                                                                    Companies and
                                                                       NIC        International     Eliminations     Consolidated
                                                                  --------------  --------------- ------------------ --------------
    CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THREE MONTHS ENDED JANUARY 31, 2001

    Sales and revenues..........................................  $          3    $      1,225    $        288       $      1,516
                                                                   -----------    ------------     -----------       ------------

    Cost of products and services sold..........................             -           1,164             121              1,285
    All other operating expenses................................           (20)            241              66                287
                                                                  ------------    ------------    ------------       ------------
        Total costs and expenses................................           (20)          1,405             187              1,572
                                                                  ------------    ------------    ------------       ------------

    Equity in income (loss) of nonconsolidated subsidiaries.....           (79)             83              (4)                 -
                                                                  ------------    ------------    ------------       ------------

    Income (loss) before income taxes...........................           (56)            (97)             97                (56)
    Income tax expense (benefit)................................           (21)              5              (5)               (21)
                                                                  ------------    ------------    ------------       ------------
    Net income (loss)...........................................  $        (35)   $       (102)   $        102       $        (35)
                                                                  ============    ============    ============       ============

CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL CONDITION AS OF JANUARY 31, 2001

    ASSETS
    Cash and marketable securities..............................  $        232    $          5    $        601       $        838
    Receivables, net............................................             6             149           1,569              1,724
    Inventories.................................................             -             421             284                705
    Property and equipment, net.................................             -           1,043             772              1,815
    Investment in affiliates....................................          (831)            848             (17)                 -
    Deferred tax asset and other assets.........................           885             270             401              1,556
                                                                  ------------    ------------    ------------       ------------
        Total assets............................................  $        292    $      2,736    $      3,610       $      6,638
                                                                  ============    ============    ============       ============

    LIABILITIES AND SHAREOWNERS' EQUITY
    Debt........................................................  $        421    $          5    $      2,100       $      2,526
    Postretirement benefits liability...........................             -             826             (33)               793
    Amounts due (from) to affiliates............................        (1,503)          1,410              93                  -
    Other liabilities...........................................            94           1,340             605              2,039
                                                                  ------------    ------------    ------------       ------------
        Total liabilities.......................................          (988)          3,581           2,765              5,358
                                                                  ------------    ------------    ------------       ------------

    Shareowners' equity (deficit)...............................         1,280            (845)            845              1,280
                                                                  ------------    ------------    ------------       ------------
    Total liabilities and shareowners' equity...................  $        292    $      2,736    $      3,610       $      6,638
                                                                  ============    ============    ============       ============

    CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW FOR THE THREE MONTHS ENDED JANUARY 31, 2001

    Cash provided by (used in) operations.......................  $        118    $        (25)   $       (137)      $        (44)
                                                                  ------------    ------------    ------------       ------------

    Cash flow from investment programs
    Purchases, net of collections, of finance receivables.......             -               -             648                648
    Net (increase) decrease in marketable securities............            83               -            (310)              (227)
    Capital expenditures........................................             -             (50)            (14)               (64)
    Other investing activities..................................           (10)             57             (83)               (36)
                                                                  ------------    ------------    ------------       ------------
    Cash provided by investment programs........................            73               7             241                321
                                                                  ------------    ------------    ------------       ------------

    Cash flow from financing activities
    Net repayments of debt......................................           (23)              -            (120)              (143)
                                                                  ------------    ------------    ------------       ------------

    Cash and cash equivalents
    Increase (decrease) during the period.......................           168             (18)            (16)               134
    At beginning of the period..................................            64              23             210                297
                                                                  ------------    ------------    ------------       ------------
    Cash and cash equivalents at end of the period..............  $        232    $          5    $        194       $        431
                                                                  ============    ============    ============       ============






PAGE 16

                         Navistar International Corporation and Consolidated Subsidiaries

Additional Financial Information (Unaudited)

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

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

                                                                                             Three Months Ended
                                                                                                 January 31
                                                                                  -----------------------------------------
Condensed Statement of Income                                                          2002                     2001
- ----------------------------------------------------------------------------      ----------------        -----------------

Sales of manufactured products...............................................     $       1,389           $       1,433
Other income.................................................................                 3                       6
                                                                                  -------------           -------------
    Total sales and revenues.................................................             1,392                   1,439
                                                                                  -------------           -------------

Cost of products sold........................................................             1,241                   1,275
Postretirement benefits expense..............................................                57                      45
Engineering and research expense.............................................                64                      65
Sales, general and administrative expense....................................               117                     102
Other expenses...............................................................                35                      32
                                                                                  -------------           -------------
    Total costs and expenses.................................................             1,514                   1,519
                                                                                  -------------           -------------

Income (loss) before income taxes
    Manufacturing operations.................................................              (122)                    (80)
    Financial services operations............................................                32                      24
                                                                                  -------------           -------------
        Loss before income taxes.............................................               (90)                    (56)
        Income tax benefit...................................................               (34)                    (21)
                                                                                  -------------           -------------
Net loss  ...................................................................     $         (56)          $         (35)
                                                                                  =============           =============



                                                                     January 31          October 31         January 31
Condensed Statement of Financial Condition                              2002                2001               2001
- ----------------------------------------------------------------  ----------------   -----------------   ----------------

Cash, cash equivalents and marketable securities................   $         369      $         806       $         323
Inventories.....................................................             587                569                 662
Property and equipment, net.....................................           1,370              1,359               1,476
Equity in nonconsolidated subsidiaries..........................             425                398                 375
Other assets....................................................             954                895                 892
Deferred tax asset, net.........................................           1,013                979                 905
                                                                   -------------      -------------       -------------
        Total assets............................................   $       4,718      $       5,006       $       4,633
                                                                   =============      =============       =============

Accounts payable, principally trade.............................   $         836      $       1,051       $         946
Postretirement benefits liability...............................           1,062              1,069                 784
Debt............................................................             950                966                 645
Other liabilities...............................................             792                793                 978
Shareowners' equity.............................................           1,078              1,127               1,280
                                                                   -------------      -------------       -------------
        Total liabilities and shareowners' equity...............   $       4,718      $       5,006       $       4,633
                                                                   =============      =============       =============






PAGE 17

                         Navistar International Corporation and Consolidated Subsidiaries

Additional Financial Information (Unaudited)

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                                                       2002                     2001
- ---------------------------------------------------------------------------       ----------------        -----------------

Cash flow from operations
Net loss...................................................................       $         (56)          $         (35)
Adjustments to reconcile net loss
    to cash used in operations:
       Depreciation and amortization.......................................                  39                      36
       Deferred income taxes...............................................                 (30)                    (23)
       Postretirement benefits funding less than
          (in excess of) expense...........................................                  (8)                      8
       Equity in earnings of investees,
          net of dividends received........................................                 (27)                      2
       Other, net..........................................................                 (23)                      7
Change in operating assets and liabilities,
    net of effects of acquisition..........................................                (168)                   (204)
                                                                                  -------------           -------------
Cash used in operations....................................................                (273)                   (209)
                                                                                  -------------           -------------

Cash flow from investment programs
Sales or maturities of marketable securities...............................                  30                      83
Capital expenditures.......................................................                 (69)                    (64)
Payments for acquisition, net of cash acquired.............................                   -                     (60)
Proceeds from sale-leasebacks..............................................                   -                      58
Receivable from financial services operations..............................                 (83)                    272
Investment in affiliates...................................................                   1                       4
Capitalized interest and other.............................................                 (10)                     (1)
                                                                                  -------------           -------------
Cash provided by (used in) investment programs.............................                (131)                    292
                                                                                  -------------           -------------

Cash provided by (used in) financing activities............................                  (3)                     27
                                                                                  -------------           -------------

Cash and cash equivalents
Increase (decrease) during the period......................................                (407)                    110
At beginning of the period.................................................                 766                     213
                                                                                  -------------           -------------
Cash and cash equivalents at end of the period.............................       $         359           $         323
                                                                                  =============           =============






PAGE 18

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

RESULTS OF OPERATIONS

         Certain  statements  under  this  caption  that  are not  purely  historical  constitute  "forward-looking
statements"  under the  Private  Securities  Litigation  Reform Act of 1995 and  involve  risks and  uncertainties.
These  forward-looking  statements are based on current  management  expectations  as of the date made. The company
assumes no  obligation  to update any  forward-looking  statements.  Navistar  International  Corporation's  actual
results may differ  significantly  from the results  discussed  in such  forward-looking  statements.  Factors that
might cause such a  difference  include,  but are not  limited  to,  those  discussed  under the caption  "Business
Environment."

         The company  reported a net loss of $56  million,  or a $0.93 loss per diluted  common share for the first
quarter ended January 31, 2002,  primarily  due to continued  weak,  new and used truck pricing and lower new truck
shipments.  For the  comparable  quarter  last year,  the net loss was $35  million,  or a $0.58  loss per  diluted
common share.

         The truck  segment's  loss for the first quarter of 2002  increased by $22 million and revenues  decreased
$75  million  compared  to the same  period  last year.  The truck  segment's  profit  and  revenue  decreases  are
primarily the result of reduced industry wide shipments and lower market pricing.

         The engine  segment's  profit for the first three months of 2002 remained  consistent with the same period
in 2001 at $42 million, while revenues increased slightly.

         The  financial  services  segment's  profit for the first  quarter of 2002 was $31  million,  a $7 million
increase  over the  comparable  period in 2001.  The increase is primarily  the result of a higher gain on the sale
of retail note receivables offset, in part, by lower finance receivable balances.

         Sales and Revenues.  Sales and revenues for the first  quarter of 2002 totaled  $1,472  million,  3% lower
than the $1,516 million reported for the comparable quarter in 2001.

         United States (U.S.) and Canadian  industry  retail sales of Class 5 through 8 trucks totaled 61,100 units
in the first  quarter of 2002,  which is 23% lower than the 79,000  units sold during this period in 2001.  Class 8
heavy truck  sales of 33,500  units  during the first  quarter of 2002 were 22% lower than the 2001 level of 42,700
units.  Industry sales of Class 5, 6 and 7 medium trucks,  including  school buses,  decreased 24% to 27,700 units.
Industry sales of school buses, which accounted for 21% of the medium truck market, decreased 7% to 5,700 units.

         Market share for the first  quarter of 2002  increased to 26.3% from 25.1%  reported in the same period of
2001.  This improvement was driven by focused sales and marketing efforts.

         Shipments of mid-range  diesel engines by the company to other  original  equipment  manufacturers  during
the first quarter of 2002 totaled 78,000 units, a 6% increase from the same period of 2001.








PAGE 19

Costs  and  expenses.  Manufacturing  gross  margin  was 10.7% of sales for the  first  quarter  of 2002,  a slight
decrease from the 11.0% reported for the same period in 2001.

         Postretirement  benefits  expense  increased  $12 million  from the first  quarter of 2001 to $58 million.
This  increase  is  primarily  due to higher  interest  expense  resulting  from  higher  pension  and health  care
obligations, higher amortization, and lower returns on assets, all of which were driven by large losses in 2001.

         Sales,  general and  administrative  expense  increased  11% to $134 million in the first  quarter of 2002
from $121 million for the  comparable  quarter in 2001.  This  increase is due to an increase in the  provision for
losses on  receivables  driven by an  increase in  repossession  frequency  and pricing  pressure in the used truck
market.

         Other  expense  decreased to $11 million in the first  quarter of 2002 from $14 million in the same period
of 2001.   This decrease is primarily due to lower financing charges on sold receivables.

Restructuring Charge

         In October 2000, the company incurred charges for  restructuring,  asset  write-downs,  loss on anticipated
sale of  business  and other  exit  costs  totaling  $306  million as part of an  overall  plan to  restructure  its
manufacturing  and corporate  operations  ("Plan of  Restructuring").  The  following  are the major  restructuring,
integration and cost reduction initiatives included in the Plan of Restructuring:

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

         Of the total pretax  restructuring  charge of $306 million,  $150 million  represented  non-cash  charges.
Through  January  31,  2002,  approximately  $208  million  of the  charge has been  incurred,  and $12  million of
curtailment  loss  related  to  the  company's  postretirement  benefit  has  been  reclassified  as  a  noncurrent
postretirement  liability.  The  remaining  restructuring  liability  of $86  million is expected to be funded from
existing cash balances and internally generated cash flows from operations.

         The  specific  actions  included  in the Plan of  Restructuring  were  substantially  complete by November
2001.  Components of the remaining restructuring charge are as follows:

                                                     Balance                Amount                 Balance
(Millions of dollars)                            October 31, 2001          Incurred           January 31, 2002
- ------------------------------------------   -------------------------  ---------------   -------------------------
Severance and other benefits                 $        32                $       (3)       $          29
Lease terminations                                    35                         -                   35
Loss on sale of business                               2                         -                    2
Dealer termination and exit costs                     21                        (1)                  20
                                             -------------------------  ---------------   -------------------------
Total                                        $        90                $       (4)       $          86
                                             =========================  ===============   =========================








PAGE 20

         The Plan of  Restructuring  included the reduction of  approximately  2,100  employees from the workforce,
primarily  in North  America,  which was  revised to 1,900  employees  at October  31,  2001.  During the  quarter,
approximately  $3 million  was paid for  severance  and other  benefits,  and  employee  headcount  was  reduced by
approximately  400. As of January 31, 2002, of the total net charge of $75 million,  approximately  $34 million has
been paid for severance and other benefits for the reduction of approximately  1,900 employees,  and $12 million of
curtailment  loss has  been  reclassified  as a  noncurrent  postretirement  liability.  The  severance  and  other
benefits  balance  represents  costs related to future  payments  over the next two years for headcount  reductions
already incurred.

         Lease termination costs include the future  obligations  under long-term  non-cancelable  lease agreements
at  facilities  being vacated  following  workforce  reductions.  This charge  primarily  consists of the estimated
lease costs, net of probable  sublease income,  associated with the cancellation of the company's  corporate office
lease at NBC Tower in Chicago,  Illinois,  which  expires in 2010.  As of January 31, 2002, of the total net charge
of $38 million, $3 million has been incurred for lease termination costs.

         The Plan of  Restructuring  included the effect of the sale of Harco National  Insurance  Company (Harco).
On  November  30,  2001,  Navistar  Financial  Corporation  (NFC)  completed  the sale of Harco to IAT  Reinsurance
Syndicate Ltd., a Bermuda  reinsurance  company.  The remaining  payments related to exit costs of approximately $2
million are expected to be incurred in fiscal year 2002.

         Dealer  termination and exit costs include the termination of certain dealer  contracts in connection with
the  realignment  of the  company's  bus  distribution  network,  and  other  litigation  costs  to  implement  the
restructuring  initiatives.  As of January 31,  2002,  of the total net charge of $38  million,  approximately  $18
million has been paid for dealer terminations and exit costs, of which $1 million was incurred during the quarter.

Liquidity and Capital Resources

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

       The company had working  capital of $58  million at January 31,  2002,  compared to $463  million at October
31, 2001.  Cash used in  operations  during the first  quarter of 2002 totaled  $164 million  primarily  from a net
loss of $56 million and a net change in operating assets and liabilities of $84 million.

       The net use of cash resulting from the change in operating  assets and  liabilities  included a $221 million
decrease in accounts  payable  primarily due to cyclically  lower truck and engine  production  levels in the first
quarter as well as from the timing of  invoices  paid for  capital  equipment  purchased  in the fourth  quarter of
2001, and an $18 million increase in inventories  primarily  caused by the decrease in new truck  shipments.  These
were partially offset by a $150 million  decrease in receivables  primarily due to a net decrease in wholesale note
and account balances and lower volumes in truck production.

       Cash used in investment  programs resulted from a net increase in marketable  securities of $212 million and
$70 million of capital  expenditures  primarily for the NGV and Next Generation  Diesel (NGD) programs.  These were
partially  offset by a net decrease in retail notes and lease  receivables of $211 million and the sale of Harco on
November 30, 2001, that provided $62 million in cash proceeds.






PAGE 21

         Cash  used by  financing  activities  resulted  from a net  decrease  of $190  million  in notes  and debt
outstanding  under the bank revolving  credit  facility and other  commercial  paper programs and a net decrease in
long-term debt of $20 million.

         NFC has  traditionally  obtained  the funds to provide  financing  to  International's  dealers and retail
customers from sales of finance  receivables,  commercial  paper,  short and long-term bank borrowings,  medium and
long-term debt and equity  capital.  As of January 31, 2002,  NFC's funding  consisted of sold finance  receivables
of $2,955 million,  bank and other  borrowings of $999 million,  subordinated  debt of $100 million,  capital lease
obligations of $356 million and equity of $349 million.

         NFC securitizes and sells receivables through Navistar Financial Retail Receivables  Corporation  (NFRRC),
Navistar  Financial  Securities  Corporation  (NFSC),  Truck Retail  Accounts  Corporation  (TRAC) and Truck Engine
Receivables  Financing  Corporation  (TERFCO),  all special purpose entities and wholly-owned  subsidiaries of NFC.
The sale of  receivables  in each of the  securitizations  constitute  sales under  generally  accepted  accounting
principles,  with the result that the sold  receivables  are removed from NFC's  balance  sheet and the  investor's
interests  in the  related  trust or conduit  are not  reflected  as  liabilities.  However,  the  special  purpose
entity's  residual  interest in the related  trusts or assets held by the conduit are reflected on the Statement of
Financial Condition as assets.

         Through the asset-backed  public market and private  placement sales, NFC has been able to fund fixed rate
retail note  receivables  at rates offered to companies  with higher  investment  grade  ratings.  During the first
quarter of 2002, NFC sold $500 million of retail notes,  net of unearned  finance income,  through NFRRC.  NFC sold
the retail notes to an owner trust,  which in turn,  issued $500 million of asset-backed  securities that were sold
to investors.  Aggregate  gains of $17 million were  recognized on these sales.  Also, as of January 31, 2002, NFSC
has in place a revolving  wholesale note trust that provides for the funding of $837 million of eligible  wholesale
notes, of which $713 million has been utilized.

         At January 31, 2002,  available  funding under NFC's bank revolving credit facility,  the revolving retail
warehouse  facility,  the retail account facilities and the revolving  wholesale note trust was $959 million.  When
combined with  unrestricted  cash and cash  equivalents,  $1,004 million was available to fund the general business
purposes of NFC.

         In November 2000, NFC  established  TERFCO for the purpose of  securitizing  engine  accounts  receivable.
The  transaction  provides  for  funding of $100  million  and expires in 2006.  As of January  31,  2002,  NFC has
utilized $100 million of this facility.

         TRAC has in place an  arrangement  with a bank  conduit  that  provides for the funding of $100 million of
eligible  retail  accounts.  As of January 31, 2002, NFC has utilized $100 million of this  facility.  The facility
expires in August 2002 with an option for renewal.

         There have been no material  changes in the company's  hedging  strategies or derivative  positions  since
October 31, 2001.  Further  disclosure  may be found in Note E to the  financial  statements  and in the  company's
2001 Annual Report on Form 10-K.

         Cash flow from the  company's  manufacturing  operations,  financial  services  operations  and  financing
capacity is  currently  sufficient  to cover  planned  investment  in the  business.  The  company had  outstanding
capital commitments of $234 million at January 31, 2002, primarily for the NGV and NGD programs.

         It is the opinion of management that, in the absence of significant  unanticipated  cash demands,  current
and forecasted cash flow as well as anticipated  financing actions will provide  sufficient funds to meet operating
requirements  and capital  expenditures.  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 International's dealers and retail customers.





PAGE 22

New Accounting Pronouncements

         In June 2001, the Financial  Accounting  Standards Board (FASB) issued  Statement of Financial  Accounting
Standards  No. 142 (SFAS 142),  "Goodwill  and Other  Intangible  Assets" and  Statement  of  Financial  Accounting
Standards  No.  143 (SFAS  143),  "Accounting  for  Asset  Retirement  Obligations."  SFAS 142 was  adopted  by the
company on November 1, 2001, and did not have a material  impact on the company's  financial  position,  results of
operations or cash flows.  SFAS 143 is effective for financial  statements  issued for fiscal years beginning after
June 15, 2002.  The company is evaluating the impact of SFAS 143 on its financial  position,  results of operations
and cash flows.

         In August 2001, the FASB issued Statement of Financial  Accounting  Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived  Assets,"  which is effective for fiscal years  beginning  after  December 15,
2001,  and interim  periods  within those  fiscal  years.  The company is  evaluating  the impact on the  company's
financial position, results of operations and cash flows.

Business Environment

         Sales of Class 5 through 8 trucks  historically have been cyclical,  with demand affected by such economic
factors as  industrial  production,  construction,  demand  for  consumer  durable  goods,  interest  rates and the
earnings and cash flow of dealers and  customers.  Truck sales in the first  quarter  were  hindered by a number of
factors  including a significant  decline in the economy and associated  freight  tonnage,  rising insurance costs,
tightened  credit  availability,  and the used truck problems of high inventory and low prices.  The demand for new
trucks  reflected these adverse  conditions,  reducing the company's U.S. and Canadian order backlog at January 31,
2002, to 19,300 units, 14% lower than the 22,300 units at January 31, 2001.  Historically,  retail  deliveries have
been  impacted by the rate at which new truck orders are received.  Therefore,  the company  continually  evaluates
order  receipts  and  backlog  throughout  the year and will  balance  production  with demand as  appropriate.  To
control costs and align production  schedules with demand, the company reduced its production  schedules during the
quarter through shutdown weeks at its Springfield,  Escobedo,  Garland, Conway and Tulsa Assembly Plants as well as
at its Engine and Foundry Plants in Melrose Park and Waukesha.

         Reflecting  the  continued  industry-wide  decline in new truck orders,  the company  lowered its industry
projections  for 2002.  The company  currently  projects  2002 U.S. and  Canadian  Class 8 heavy truck demand to be
144,000  units,  down  from the  previous  forecast  of  154,000  units.  Class 5, 6,  and 7 medium  truck  demand,
excluding school buses,  remains unchanged at 112,500 units,  including 87,500 Class 6-7 trucks.  Demand for school
buses remains at 28,000 units.





PAGE 23

                          Navistar International Corporation and Consolidated Subsidiaries

Item 3.       Quantitative and Qualitative Disclosures About Market Risk

              There have been no material  changes in the company's  market risk exposure  since October 31, 2001, as
              reported in the 2001 Annual Report on Form 10-K.


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

Item 1.       Legal Proceedings

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

              Various claims and controversies  have arisen between the company and its current fuel system supplier,
              Caterpillar  Inc.,  regarding  the  ownership  and  validity of certain  patents  covering  fuel system
              technology to be used in the company's  next  generation  version of diesel  engines.  In June 1999, in
              Federal Court in Peoria, IL, Caterpillar sued Sturman Industries, Inc. (Sturman), the  company's  joint
              venture partner in developing fuel system technology, alleging that technology invented and patented by
              Sturman and licensed to the company,  belongs to  Caterpillar.  The company  believes  that Sturman has
              meritorious  defenses to such claims and intends to continue to  cooperate  with Sturman to defend this
              action  vigorously.  The  company  believes  that  Caterpillar  may assert  claims  against the company
              regarding other aspects of fuel system  technology to be used in the company's new engines.  In January
              2002,  Caterpillar  sued the company in the Circuit  Court in Peoria  County,  IL, and the company sued
              Caterpillar  in the Circuit  Court in Cook County,  IL, each  alleging the other  breached the purchase
              agreement  pursuant to which  Caterpillar  agreed to be the company's engine fuel system supplier.  The
              alleged breaches involve  Caterpillar's refusal to supply a new, improved fuel system and the company's
              subsequent  replacement  of  Caterpillar  as the  supplier  of  such  systems  for the  company's  next
              generation  version of diesel engines.  The company  believes that it has  meritorious  defenses to any
              such claims  Caterpillar has asserted or may assert against the company and will defend  vigorously any
              such actions.  Based upon the information  developed to date, the company believes that the proceedings
              or claims will not have a material  adverse impact on the business,  results of operations or financial
              condition of the company.

Item 2.       Changes in Securities and Use of Proceeds

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





PAGE 24


Item 6.       Exhibits and reports on Form 8-K
                                                                                                   10-Q Page
                                                                                                   ---------
                    (a)      Exhibits:

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

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

                           10.   Material Contracts                                                   E-6

                    (b)      Reports on Form 8-K:

                             None






PAGE 25


                                                     SIGNATURE
                                                 -----------------

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



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






/s/  Mark T. Schwetschenau
- ------------------------------------------
     Mark T. Schwetschenau
     Vice President and Controller
     (Principal Accounting Officer)


March 11, 2002

EX-3

                                                                                                           EXHIBIT 3


                                         NAVISTAR INTERNATIONAL CORPORATION
                                           AND CONSOLIDATED SUBSIDIARIES
                       ----------------------------------------------------------------------
                                       ARTICLES OF INCORPORATION AND BY-LAWS


       The following documents of Navistar International Corporation are incorporated herein by reference:


     3.1  Restated Certificate of Incorporation of Navistar International  Corporation effective July 1, 1993, filed
          as Exhibit 3.2 to Annual Report on Form 10-K dated October 31, 1993,  which was filed on January 27, 1994,
          Commission File No. 1-9618, and amended as of May 4, 1998.

     3.2  The  By-Laws of Navistar  International  Corporation  effective  April 14,  1995,  filed as Exhibit 3.2 on
          Annual  Report on Form 10-K dated  October 31, 1995,  which was filed on January 26, 1996,  on  Commission
          File No. 1-9618.






























                                                        E-1

EX-4

                                                                                                           EXHIBIT 4


                                         NAVISTAR INTERNATIONAL CORPORATION
                                           AND CONSOLIDATED SUBSIDIARIES
              ----------------------------------------------------------------------------------------
                                  INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS,
                                                INCLUDING INDENTURES

       The following instruments of Navistar  International  Corporation and its principal subsidiary  International
Truck and Engine Corporation,  and its principal  subsidiary Navistar Financial  Corporation  defining the rights of
security holders are incorporated herein by reference.


          4.1  Indenture,  dated as of May 30, 1997, by and between Navistar Financial Corporation and The Fuji Bank
               and Trust Company, as Trustee,  for 9% Senior Subordinated Notes due 2002 for $100,000,000.  Filed on
               Registration No. 333-30167.

          4.2  Indenture,  dated as of  February 4, 1998,  by and between  Navistar  International  Corporation  and
               Harris Trust and Savings Bank, as Trustee,  for 7% Senior Notes due 2003 for  $100,000,000.  Filed on
               Registration No. 333-47063.

          4.3  Indenture,  dated as of  February 4, 1998,  by and between  Navistar  International  Corporation  and
               Harris  Trust  and  Savings  Bank,  as  Trustee,  for 8%  Senior  Subordinated  Notes  due  2008  for
               $250,000,000.  Filed on Registration No. 333-47063.

          4.4  $200,000,000  Mexican  Peso  Revolving  Credit  Agreement  dated as of October 20, 1998 as amended by
               Amendment No. 4 dated  as of October 31, 2001,  and renewed on November 27, 2001,  among  Arrendadora
               Financiera Navistar S.A. de C.V., Servicios  Financieros Navistar S.A. de C.V. and Navistar Comercial
               S.A. de C.V. and Comerica Bank Mexico,  S.A. The Registrant  agrees to furnish to the Commission upon
               request a copy of such agreement  which it has elected not to file under the provisions of Regulation
               601(b)(4)(iii).

          4.5  $100,000,000 Revolving Credit Agreement dated as of July 9, 1999 as amended by Amendment No.  7 dated
               as of April 25, 2001,  among  Arrendadora  Financiera  Navistar S.A. de C.V.,  Servicios  Financieros
               Navistar  S.A. de C.V. and Navistar  Comercial  S.A. de C.V.  and Banco  Nacional de Mexico,  S.A. de
               C.V. The Registrant  agrees to furnish to the Commission  upon request a copy of such agreement which
               it has elected not to file under the provisions of Regulation 601(b)(4)(iii).

          4.6  $300,000,000  Mexican Peso  Revolving  Credit  Agreement  dated as of August 10, 1999, and renewed on
               November  21,  2001,  among  Servicios  Financieros  Navistar  S.A. de C.V.,  Arrendadora  Financiera
               Navistar S.A. de C.V.,  Navistar  Comercial S.A. de C.V. and Bancomer,  S.A. The Registrant agrees to
               furnish to the  Commission  upon  request a copy of such  agreement  which it has elected not to file
               under the provisions of Regulation 601(b)(4)(iii).

          4.7  $95,000,000  Forward  contract  dated as of April  20,  2000 by and  between  Navistar  International
               Corporation  and Royal Bank of Canada.  The  Registrant  agrees to  furnish  to the  Commission  upon
               request a copy of such agreement  which it has elected not to file under the provisions of Regulation
               601(b)(4)(iii).

                                                        E-2



                                                                                              EXHIBIT 4  (CONTINUED)


                                         NAVISTAR INTERNATIONAL CORPORATION
                                           AND CONSOLIDATED SUBSIDIARIES
              ----------------------------------------------------------------------------------------
                                  INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS,
                                                INCLUDING INDENTURES


          4.8  $50,000,000  Mexican Peso Credit  Agreement dated as of November 22, 2000, by and between  Servicios
               Financieros  Navistar,  S.A.  de C.V.,  Arrendadora  Financiera  Navistar,  S.A.  de C.V.,  Navistar
               Comercial,  S.A. de C.V. and Banco  Nacional de Obras y Servicios  Publicos,  S.N.C.  The Registrant
               agrees to furnish to the Commission  upon request a copy of such agreement  which it has elected not
               to file under the provisions of Regulation 601(b)(4)(iii).

          4.9  Credit  Agreement for  $820,000,000  Revolving  Credit and Competitive  Advance Facility dated as of
               December 8, 2000, between Navistar Financial Corporation,  Arrendadora Financiera Navistar,  S.A. de
               C.V.,  Servicios  Financieros  Navistar,  S.A. de C.V.  and  Navistar  Comercial,  S.A. de C.V.,  as
               borrowers,  lenders party hereto, The Chase Manhattan Bank as Administrative  Agent, Bank of America
               as  Syndication  Agent and Bank of Nova Scotia as  Documentation  Agent.  Filed as Exhibit  10.05 to
               Navistar Financial Corporation's Form 10-Q dated March 15, 2001.  Commission File No. 1-4146-1.

         4.10  Guarantee,  dated as of December 8, 2000, made by Navistar  International  Corporation,  in favor of
               The Chase Manhattan Bank, as Administrative  Agent, for the lenders parties to the Credit Agreement,
               dated as of December 8, 2000,  among  Navistar  Financial  Corporation  and  Arrendadora  Financiera
               Navistar,  S.A. de C.V., Servicios Financieros Navistar,  S.A. de C.V. and Navistar Comercial,  S.A.
               de C.V., the Lenders,  Bank of America,  N.A., as  syndication  agent,  The Bank of Nova Scotia,  as
               documentation  agent, and the  Administrative  Agent.  Filed as Exhibit 10.07 to Navistar  Financial
               Corporation's Form 10-Q dated March 15, 2001.  Commission File No. 1-4146-1.

         4.11  Indenture,   dated  as  of  May  31,  2001,  by  and  between  Navistar  International   Corporation,
               International  Truck and Engine  Corporation  and BNY Midwest Trust Company,  as Trustee,  for 9 3/8%
               Senior Notes due 2006 for $400,000,000.  Filed on Registration No. 333-64626.

         4.12  First  Supplement  to  Indenture,  dated as of May 31, 2001,  by and between  Navistar  International
               Corporation,  International  Truck and Engine Corporation and BNY Midwest Trust Company,  as Trustee,
               for 7% Senior Notes due 2003 for $100,000,000.  Filed on Registration No. 333-64626.

         4.13  First  Supplement  to  Indenture,  dated as of May 31, 2001,  by and between  Navistar  International
               Corporation,  International  Truck and Engine Corporation and BNY Midwest Trust Company,  as Trustee,
               for 8% Senior Subordinated Notes due 2008 for $250,000,000.  Filed on Registration No. 333-64626.

                                                        E-3



                                                                                              EXHIBIT 4  (CONTINUED)


                                         NAVISTAR INTERNATIONAL CORPORATION
                                           AND CONSOLIDATED SUBSIDIARIES
              ----------------------------------------------------------------------------------------
                                  INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS,
                                                INCLUDING INDENTURES



         4.14  Note Purchase  Agreement,  dated as of June 15, 2001, as amended by Amendment  dated August 16, 2001,
               between  International  Truck and Engine Corporation and the State of Wisconsin  Investment Board for
               9.95% Senior  Notes due 2011 for  $19,000,000.  The  Registrant  agrees to furnish to the  Commission
               upon  request a copy of such  agreement,  which it has  elected not to file under the  provisions  of
               Regulation 601(b)(4)(iii).

         4.15  $250,000,000  Mexican  Peso  Credit  Agreement  dated as of July 25,  2001 by and  between  Servicios
               Financieros  Navistar  S.A.  de  C.V.,  Arrendadora  Financiera  Navistar,  S.A.  de  C.V.,  Navistar
               Comercial,  S.A. de C.V. and Banco  Nacional de Obras y Servicios  Publicos,  S.N.C.  The  Registrant
               agrees to furnish to the Commission  upon request a copy of such  agreement  which it has elected not
               to file under the provisions of Regulation 601(b)(4)(iii).

         4.16  First Supplement to Indenture, dated as of August 22, 2001, by and between Navistar International
               Corporation, International Truck and Engine Corporation and BNY Midwest Trust Company, as Trustee,
               for 9 3/8% Senior Notes due 2006 for $400,000,000.   Filed as Exhibit 4.19 to Annual Report on Form
               10-K dated December 18, 2001.  Commission File No. 1-9618.

         4.17  Second Supplement to Indenture, dated as of August 22, 2001, by and between Navistar International
               Corporation, International Truck and Engine Corporation and BNY Midwest Trust Company, as Trustee,
               for 8% Senior Subordinated Notes due 2008 for $250,000,000.   Filed as Exhibit 4.20 to Annual Report
               on Form 10-K dated December 18, 2001.  Commission File No. 1-9618.

         4.18  $30,000,000 Revolving Credit Agreement dated as of October 25, 2001, among Arrendadora Financiera
               Navistar S.A de C.V., Servicios Financieros Navistar S.A. de C.V., Navistar Comercial S.A. de C.V.
               and Export Development Corporation.  The Registrant agrees to furnish to the Commission upon request
               a copy of such agreement which it has elected not to file under the provisions of Regulation
               601(b)(4)(iii).

         4.19  $500,000,000 Mexican Peso Medium Term Promissory Notes Program issued November 22, 2001, by
               Servicios Financieros Navistar S.A. de C.V. and placed in the market by the intermediate underwriter
               Casa de Bolsa Citibank, S.A. de C.V.  The Registrant agrees to furnish to the Commission upon
               request a copy of such agreement which it has elected not to file under the provisions of Regulation
               601(b)(4)(iii).
                                                        E-4



                                                                                              EXHIBIT 4  (CONTINUED)

                                         NAVISTAR INTERNATIONAL CORPORATION
                                           AND CONSOLIDATED SUBSIDIARIES
              ----------------------------------------------------------------------------------------
                                  INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS,
                                                INCLUDING INDENTURES



The following documents of Navistar International Corporation are filed herewith.

                                                                                                Form 10-Q Page
                                                                                                ---------------------


  4.20      Navistar International Corporation Restated Stock Certificate                              E-7




=====
     Instruments  defining  the  rights  of  holders  of  other  unregistered  long-term  debt of  Navistar  and its
subsidiaries  have been  omitted  from this  exhibit  index  because  the amount of debt  authorized  under any such
instrument  does not  exceed  10% of the total  assets of the  Registrant  and its  consolidated  subsidiaries.  The
Registrant agrees to furnish a copy of any such instrument to the Commission upon request.



                                                        E-5

EX-10

                                                                                                           EXHIBIT 10

                                         NAVISTAR INTERNATIONAL CORPORATION
                                            AND CONSOLIDATED SUBSIDIARIES
                                         ----------------------------------
                                                 MATERIAL CONTRACTS

The following documents of Navistar International Corporation are filed herewith.

                                                                                                 Form 10-Q Page
                                                                                                 --------------------

10.31*       Navistar 1994 Performance Incentive Plan, as amended                                        E-9

10.32*       Navistar  1998  Supplemental  Stock  Plan,  as  amended  and  supplemented  by the          E-18
             Restoration Stock Option Program

10.33*       Board of Directors resolution regarding director's annual retainer                          E-23

10.34*       Navistar Non-Employee Director's Deferred Fee Plan                                          E-24

10.35*       Executive  Severance  Agreement between J. R. Horne and the company dated June 16,          E-29
             1997

=================

*    Indicates a management  contract or compensatory plan or arrangement  required to be filed as an exhibit to this
report pursuant to Item 14(c).












                                                         E-6

EX-4.20

                                                                                            EXHIBIT 4.20

                                         NAVISTAR INTERNATIONAL CORPORATION
                                             RESTATED STOCK CERTIFICATE
              ----------------------------------------------------------------------------------------

                                                        E-7






                                                                                            EXHIBIT 4.20 (CONTINUED)

                                         NAVISTAR INTERNATIONAL CORPORATION
                                             RESTATED STOCK CERTIFICATE
              ----------------------------------------------------------------------------------------

                                                        E-8

EX-10.31 MATERIAL CO

                                                                                               EXHIBIT 10.31

                                  NAVISTAR 1994 PERFORMANCE INCENTIVE PLAN
                                     (Amended as of December 11, 2001)

                                                 SECTION I
                                         ESTABLISHMENT OF THE PLAN

      The Board of  Directors  of Navistar  International  Corporation  approved  the  establishment  of the
Navistar  1994  Performance  Incentive  Plan  ("Plan").  The Plan  replaces  the Navistar  1988  Performance
Incentive Plan,  which  consolidated  and modified the  Corporation's  Annual  Incentive Plan, the Long Term
Incentive Plan and the 1984 Stock Option Plan into one plan.

                                                 SECTION II
                                            PURPOSE OF THE PLAN

      The  purpose of the Plan is to enable  the  Corporation  and its  subsidiaries  to attract  and retain
highly  qualified  personnel,  to provide key  employees  who hold  positions  of major  responsibility  the
opportunity  to earn  incentive  awards  commensurate  with  the  quality  of  individual  performance,  the
achievement of performance goals and ultimately the increase in shareowner value.

                                                SECTION III
                                                DEFINITIONS

      For the purposes of the Plan, the following words and phrases shall have the meanings  described below
in this Section III unless a different meaning is plainly required by the context.

(1)      "Annual  Incentive  Award" means an award of cash approved by the  Committee  based on the level of
         achievement  attained against annual performance goals approved by the Committee on or prior to the
         commencement of the applicable Fiscal year.

(2)      "Award" means an award made under the Plan.

(3)      "Board of Directors" means the Board of Directors of Navistar International Corporation.

(4)      "Change in Control"  shall be deemed to have occurred if (A) any "Person" or "group" (as such terms
         are used in Section 13 (d) and 14 (d) of the  Securities  Exchange Act of 1934) other than employee
         or retiree  benefit  plans or trusts  sponsored  or  established  by the  Corporation  or  Navistar
         International  Transportation  Corp.  ("NITC") is or becomes the "beneficial  owner" (as defined in
         Rule 13d-3 under the Securities  Exchange Act of 1934),  directly or  indirectly,  of securities of
         the Corporation  representing  25% or more of the combined voting power of the  Corporation's  then
         outstanding  securities,  (B) as the result  of, or in  connection  with,  any cash  tender  offer,
         exchange  offer,  merger  or  other  business  combination,   sale  of  assets,  proxy  or  consent
         solicitation,  contested election or substantial stock accumulation (a "Control Transaction"),  the
         members  of the  Board of  Directors  of the  Corporation  immediately  prior to the  first  public
         announcement  relating to such Control  Transaction  shall  immediately  thereafter,  or within two
         years,  cease to  constitute  a majority of the Board of Directors  of the  Corporation  or (C) any
         dissolution or  liquidation of the  Corporation or NITC or an agreement for the sale or disposition
         of all or  substantially  all (more  than 50%) of the  assets of the  Corporation  or NITC  occurs.
         Notwithstanding  the  foregoing,  the sale or  disposition  of any or all of the assets or stock of
         Navistar Financial Corporation shall not be deemed a Change in Control.

                                                         E-9






                                                                                   EXHIBIT 10.31 (CONTINUED)

(5)      "Committee" means the Committee on Compensation and Governance of the Board of Directors.

(6)      "Common Stock" means the common stock of the Corporation.

(7)      "Corporation" means Navistar International Corporation.

(8)      "Employee"  means  a  person  regularly  employed  by  the  Corporation  or any  subsidiary  of the
         Corporation, including its officers.

(9)      "Fair Market  Value" means the average of the high and the low prices of a share of Common Stock on
         the effective  date of grant as set forth in the New York Stock  Exchange - Composite  Transactions
         listing  published  in the  Midwest  Edition of The Wall  Street  Journal or  equivalent  financial
         publication.

(10)     "Fiscal Year" means the fiscal year of the Corporation.

(11)     "Incentive  Stock Option" means a right,  as evidenced by an agreement  between the Participant and
         the Company in a form approved by the  Committee,  to purchase a certain number of shares of Common
         Stock at Fair Market Value for a period of ten (10) years from the date of grant which  options are
         designed to meet the requirements set out under Section 422 of the Internal Revenue Code.

(12)     "Long-term  Incentive Award" means an award of Restricted  Shares for a long-term cycle, the amount
         of the award and the length of the cycle will be determined by the Committee.

(13)     "Nonqualified  Stock Option" means a right,  as evidenced by an agreement  between the  Participant
         and the Company in a form  approved  by the  Committee,  to purchase a certain  number of shares of
         Common  Stock at Fair  Market  Value  for a period  of ten (10)  years and one day from the date of
         grant on which options are stated not to be qualified as incentive  stock options under Section 422
         of the U.S. Internal Revenue Code.

(14)     "Participant" means an Employee selected by the Corporation for participation in the Plan.

(15)     "Plan"  means the Navistar  1994  Performance  Incentive  Plan as set forth herein and as it may be
         amended hereafter from time to time.

(16)     "Qualified  Retirement"  means  a  retirement  from  employment  of the  Corporation  or any of its
         subsidiaries  at any time after the attainment of age fifty-five  (55) with at least ten (10) years
         of credited service as defined by the applicable retirement plan.

(17)     "Restricted  Share" means a share of Common Stock awarded to a Participant by the Committee without
         payment by the  Participant  which is  restricted  as to sale or transfer and subject to forfeiture
         pursuant to terms established by the Committee at the time of issuance.

(18)     "Stock Option" means either an Incentive Stock Option or a Nonqualified Stock Option.


                                                    E-10






                                                                                   EXHIBIT 10.31 (CONTINUED)



                                                     SECTION IV
                                                     ELIGIBILITY

         Management  will,  from time to time,  select and recommend to the  Committee  Employees who are to
         become  Participants  in the Plan.  Such  Employees will be selected from those who, in the opinion
         of  management,   have  substantial  responsibility  in  a  managerial  or  professional  capacity.
         Employees  selected for  participation  in the Plan may not  concurrently  participate in any other
         annual  performance,  long-term  performance,  sales  incentive  or  profit  sharing  plan  of  the
         Corporation or any of its subsidiaries except as specifically approved by the Committee.

                                                      SECTION V
                                               ANNUAL INCENTIVE AWARDS

(1)      On or before the  commencement  of each Fiscal Year, the Committee will approve  performance  goals
         for corporate  achievement for such Fiscal Year, and the amount of the Annual  Incentive Awards for
         such Fiscal Year will be based on the level of achievement  attained  against  previously  approved
         performance  goals.  The  Committee  also will approve an award  percentage  for each  organization
         level for each performance goal.

(2)      Performance  goals for Annual  Incentive  Awards will not be increased or decreased within a Fiscal
         Year except for extraordinary circumstances approved by the Committee.

(3)      An Annual Incentive Award  determination  will be made by the Committee when the financial  results
         and performance levels for a Fiscal Year are presented to the Committee by management.

(4)      Payment  of an  Annual  Incentive  Award  will  be  made  in  cash  to the  Participant  as soon as
         practicable  after an  Annual  Incentive  Award  determination  has been made by the  Committee.  A
         Participant  who is not an  Employee  at the end of a Fiscal Year will not be entitled to an Annual
         Incentive Award for that Fiscal Year unless the Committee determines otherwise.

                                                     SECTION VI
                                             LONG TERM INCENTIVE AWARDS

(1)      On or before the  commencement  of each Fiscal Year, the Committee will approve  performance  goals
         for corporate  achievement for a long-term cycle as determined by the Committee.  The amount of any
         Long Term  Incentive  Award earned shall be based on the cumulative  level of performance  attained
         against the approved performance goals.

(2)      Criteria for Long Term Incentive  Awards will not be increased or decreased for any long-term cycle
         that has begun except for extraordinary circumstances approved by the Committee.

(3)      Separate Long-term Incentive Award  determinations will be made by the Committee for each long-term
         cycle.





                                                    E-11






                                                                                   EXHIBIT 10.31 (CONTINUED)

(4)      Restricted  Shares will be awarded by the Committee to each  Participant  approved by the Committee
         at the  beginning of each cycle  unless to do so would  present a  substantial  risk of causing the
         Corporation to undergo an ownership  change, as such term is defined in Section 382 of the Internal
         Revenue Code,  in which event the  Committee  shall delay the award until there is no longer such a
         risk.  The amount to be awarded will be pursuant to a formula  approved by the Committee  that will
         be based on the ability of the  Participant to contribute to the efforts to achieve the performance
         goals approved by the Committee for the  applicable  cycle.  The Committee  shall  designate  which
         shares shall be subject to performance  goals.  The Committee will make the final  Long-Term  Award
         determination.  No fractional  shares will be issued.  A Participant who quits or is  involuntarily
         separated will forfeit any Restricted  Shares.  Any Restricted  Shares forfeited shall be forfeited
         (i) to the  Company or (ii) if the  forfeiture  to the  Company  creates a  substantial  risk of an
         ownership  change under Section 382 of the Internal  Revenue Code,  then to the salaried and hourly
         pension trusts of the Corporation's  principal  operating  subsidiary pro rata based on assets held
         in the  trusts  as of the  beginning  of the  prior  plan  year.  If a  Participant  dies,  becomes
         permanently and totally disabled, or retires pursuant to a Qualified Retirement,  Restricted Shares
         previously  awarded which are subject to performance  goals,  will be retained until the shares are
         earned or forfeited for failure to meet the performance goals.

(5)      A Participant  may elect,  subject to the provisions of Section VII (2), to pay any withholding tax
         due on Stock  Options or on  Restricted  Shares  awarded  pursuant  to the Plan  either (i) by cash
         including a personal  check made payable to the  Corporation  or (ii) by  delivering at Fair Market
         Value  unrestricted  Common Stock already owned by the  Participant or (iii) by any  combination of
         cash or  unrestricted  Common Stock.  If the  Participant is an officer of the  Corporation  who is
         subject to Section  16(b) of the  Securities  Exchange Act of 1934,  he or she may make an election
         pursuant  to (ii)  or  (iii)  above  only if it is made in  writing  (a) at  least  six (6)  months
         following  the date of grant of an option or an award and at least six (6) months prior to the date
         on which the  amount of the  minimum  required  withholding  tax  related to the option or award is
         determined  or (b) within a ten-day  period  following the release of the  Corporation's  annual or
         quarterly  financial  results.  Once an officer,  who is subject to Section 16(b) of the Securities
         Exchange Act of 1934, makes an election  pursuant to (ii) or (iii) above with respect to a specific
         option or award,  it shall be  irrevocable  unless the election is  disapproved by the Committee at
         its next meeting  following the election.  If the  redemption of shares by the  Corporation  to pay
         withholding  taxes would  present a substantial  risk of causing an ownership  change under Section
         382 of the Internal  Revenue Code, the  Corporation  may refuse the  redemption.  In such a case of
         refusal to redeem by the Corporation,  the Participant would be permitted to sell sufficient shares
         to pay any withholding taxes due.

                                                     SECTION VII
                                                    STOCK OPTIONS

(1)      The Committee may grant  Nonqualified  Stock Options or Incentive Stock Options or a combination of
         both to  Participants  in the amount and at the time that the  Committee  approves.  Option  grants
         shall be limited to a maximum of 50,000 shares per year for any  Participant.  The Board may in its
         discretion  grant  options in addition to the options  subject to the  limitation  contained in the
         proceeding  sentence,  provided that option grants shall be considered as made under the proceeding
         sentence  to the extent the  limitation  is not  exceeded,  and any option  grants in excess of the
         limitation  contained in the  proceeding  sentence shall be considered as made under this sentence,
         and any  option  grants  made  under  this  sentence  shall  not be  treated  as  performance-based
         compensation for tax purposes.

                                                    E-12






                                                                                   EXHIBIT 10.31 (CONTINUED)

(2)      Unless  otherwise  determined by the  Committee,  a Stock Option granted under the Plan will become
         exercisable in whole or in part after the  commencement of the second year of the term of the Stock
         Option to the extent of one third of the  shares,  to the  extent of one third of the shares  after
         commencement of the third year, and to the extent of one third of the shares after  commencement of
         the fourth year.  The  Committee  will be authorized to establish the manner of exercise of a Stock
         Option.  The effective  date of the grant of a Stock Option will,  unless the  Committee  expressly
         determines  otherwise,  be the business day on which the Committee approves the grant of such Stock
         Option,  provided  that such grant will expire if a written  option  agreement is not signed by the
         Participant  receiving a Stock Option and delivered to the  Corporation  within thirty (30) days of
         such approval by the  Committee.  The option can be exercised in whole or in part through  cashless
         exercises  or  other  arrangements  through  agents,  including  stockbrokers,  under  arrangements
         established  by the  Corporation  by paying the  amounts  required  by  instructions  issued by the
         Secretary of the  Corporation  for the  exercise of the  options.  If an exercise is not covered by
         instructions  issued by the Corporate  Secretary,  the purchase  price is to be paid in full to the
         Corporation  upon the exercise of a Stock Option either (i) by cash including a personal check made
         payable to the  Corporation;  (ii) by  delivering  at Fair Market Value  unrestricted  Common Stock
         already  owned by the  Participant,  for six months or more if acquired  from the  Corporation,  or
         (iii) by any combination of cash and  unrestricted  Common Stock, and in either case, by payment to
         the  Corporation  of any  withholding  tax. In no event may successive  simultaneous  pyramiding be
         used to exercise an Option.  If  permitting  the  exercise of a Stock  Option at the time notice of
         intent is given by the Participant to the Corporation  would present a substantial  risk of causing
         an ownership  change under Section 382 of the Internal  Revenue Code, the Corporation may refuse to
         permit the exercise in which event as soon as the Corporation  determines  that a substantial  risk
         of causing an  ownership  change no longer  exists,  it will issue  shares of Common Stock equal in
         value to the  difference  between the exercise price per share and the market price per share times
         the  number of shares  covered by the  exercise  plus  interest  on the total for the period of the
         delay  calculated  at the composite  prime rate of interest to corporate  borrowers as published in
         The Wall Street Journal.  The Committee  also will be authorized in its discretion to prescribe in
         the option  agreement  for the  exercise  of the Stock  Option in  specific  installments.  A Stock
         Option  granted  under  the Plan will be  exercisable  during  such  period  as the  Committee  may
         determine,  and will be  subject to  earlier  termination  as  hereinafter  provided.  In no event,
         however,  may a Stock Option  governed by the Plan be exercised  after the  expiration of its term.
         Except as provided herein,  no Stock Option may be exercised at any time unless the Participant who
         holds the Stock  Option is then an  Employee.  The  Participant  who holds a Stock Option will have
         none of the rights of a shareowner  with respect to the shares subject to a Stock Option until such
         shares are issued upon the exercise of a Stock Option.  Shares which  otherwise  would be delivered
         to the  holder  of a  Stock  Option  may  be  delivered,  at the  election  of the  holder,  to the
         Corporation in payment of Federal,  state and/or local  withholding taxes due in connection with an
         exercise.

(3)      Neither  the  Corporation  nor  any  subsidiary  may  directly  or  indirectly  lend  money  to any
         Participant  for the purpose of assisting the  individual to acquire  shares of Common Stock issued
         upon the exercise of Stock Options granted under the Plan.







                                                    E-13






                                                                                   EXHIBIT 10.31 (CONTINUED)

(4)      In the event of the termination of the employment of a Participant  who holds an outstanding  Stock
         Option,  other than by reason of death, total and permanent  disability or a Qualified  Retirement,
         the Participant may (unless the Stock Option shall have been  previously  terminated)  exercise the
         Stock  Option at any time  within  three  (3)  months  after  such  termination,  but not after the
         expiration of the term of the grant,  to the extent of the number of shares which were  exercisable
         at the date of the  termination  of  employment.  Stock  Options  governed  by the Plan will not be
         affected by any change of employment so long as the Participant continues to be an Employee.

(5)      Except as provided in the last two  sentences  of this  Section  VII(5),  in the event of Qualified
         Retirement a  Participant  who holds an  outstanding  Stock Option may exercise the Stock Option to
         the extent the option is exercisable  or becomes  exercisable  under its terms,  at any time during
         the term of the option grant, and in the event of a total and permanent  disability,  a Participant
         who holds an  outstanding  Stock Option may exercise the Stock Option,  to the extent the option is
         exercisable  or becomes  exercisable  under its terms,  at any time  within  three years after such
         termination  or, if later,  the date on which the option becomes  exercisable  with respect to such
         shares,  but not after the  expiration of the term of the option  grant.  In the event of the death
         of a Participant  who holds an  outstanding  Stock  Option,  the Stock Option may be exercised by a
         legatee,  or by the personal  representatives  or distributees,  at any time within a period of two
         (2) years after  death,  but not after the  expiration  of the term of the grant.  If death  occurs
         while employed by the  Corporation or a subsidiary,  or during the three-year  period  specified in
         the first  sentence of this  paragraph,  options may be  exercised  to the extent of the  remaining
         shares covered by Stock Options  whether or not such shares were  exercisable at the date of death.
         If death occurs  during the  three-month  period  specified in Section  VII(4) Stock Options may be
         exercised  to the  extent  of the  number of shares  that  were  exercisable  at the date of death.
         Notwithstanding  the other provisions of this Section VII(5), no option which is not exercisable at
         the time of a retirement  shall become  exercisable  after such  retirement if, without the written
         consent of the  Corporation,  a  Participant  engages  in a  business,  whether as owner,  partner,
         officer,  employee,  or  otherwise,  which is in  competition  with the  Corporation  or one of its
         affiliates,  and if the  Participant's  participation in such business is deemed by the Corporation
         to be detrimental to the best interests of the  Corporation.  The  determination as to whether such
         business  is in  competition  with the  Corporation  or any of its  affiliates,  and  whether  such
         participation  by such person is  detrimental to the best  interests of the  Corporation,  shall be
         made by the  Corporation  in its  absolute  discretion,  and the decision of the  Corporation  with
         respect  thereto,  including its  determination  as to when the  participation  in such competitive
         business commenced, shall be conclusive.

                                                    SECTION VIII
                                                  RESTRICTED SHARES

(1)      In addition to the Restricted  Shares which the Committee may award pursuant to Section VI(4),  the
         Committee  also may award  Restricted  Shares to  individuals  recommended by management for either
         retention or performance purposes or as part of an employment agreement.

(2)      The  Participant  will be entitled to all  dividends  paid with  respect to all  Restricted  Shares
         awarded  under the Plan  during the period of  restriction  and will not be  required to return any
         such dividends to the  Corporation in the event of the  forfeiture of the  Restricted  Shares.  The
         Participant also will be entitled to vote Restricted Shares during the period of restriction.

                                                    E-14






                                                                                   EXHIBIT 10.31 (CONTINUED)


(3)      All Restricted  Share  certificates  awarded under the Plan are to be delivered to the  Participant
         with an appropriate legend imprinted on the certificate.

                                                     SECTION IX
                                     ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

      Notwithstanding  any other provision of the Plan, the option agreements may contain such provisions as
the Committee determines to be appropriate for the adjustment of the number and class of shares,  subject to
each outstanding Stock Option,  the option prices in the event of changes in, or distributions  with respect
to, the outstanding Common Stock by reason of stock dividends,  recapitalizations,  mergers, consolidations,
split-ups,  combinations  or  exchanges  of shares,  spinoffs  and the like,  and,  in the event of any such
changes in, or distribution  with respect to, the outstanding  Common Stock,  the aggregate number and class
of shares available under the Plan shall be  appropriately  adjusted by the Committee,  whose  determination
shall be conclusive.

                                                      SECTION X
                                             ADMINISTRATION OF THE PLAN

      Full power and authority to construe,  interpret and  administer  the Plan is vested in the Committee.
Decisions  of the  Committee  will be  final,  conclusive  and  binding  upon  all  parties,  including  the
Corporation,  shareowners  and  employees.  The  foregoing  will  include,  but will not be limited  to, all
determinations  by the Committee as to (a) the approval of Employees for  participation in the Plan, (b) the
amount of the Awards,  (c) the  performance  levels at which  different  percentages  of the Awards would be
earned and all subsequent  adjustments to such levels and (d) the  determination  of all Awards.  Any person
who accepts any Award hereunder agrees to accept as final,  conclusive and binding all determinations of the
Committee.  The Committee  will have the right,  in the case of employees not employed in the United States,
to vary from the provision of the Plan to the extent the Committee  deems  appropriate  in order to preserve
the incentive features of the Plan.

                                                 SECTION XI
                                               NON-ASSIGNMENT

      Awards  under  the Plan may not be  assigned  or  alienated.  In case of a  Participant's  death,  the
amounts  distributable  to the deceased  Participant  under the Plan with respect to which a designation  of
beneficiary  has been  made (to the  extent it is valid  and  enforceable  under  applicable  law)  shall be
distributed  in  accordance  with  the Plan to the  designated  beneficiary  or  beneficiaries.  The  amount
distributable to a Participant upon death and not subject to such a designation  shall be distributed to the
Participant's  estate.  If  there  is any  question  as to  the  right  of  any  beneficiary  to  receive  a
distribution  under the Plan, the amount in question may be paid to the estate of the Participant,  in which
event the Corporation will have no further liability to anyone with respect to such amount.







                                                    E-15








                                                                                   EXHIBIT 10.31 (CONTINUED)

                                                SECTION XII
                                           RIGHTS OF PARTICIPANT

      To the extent that any  Participant,  beneficiary  or estate  acquires a right to receive  payments or
distributions  under the Plan, such right will be no greater than the right of a general unsecured  creditor
of the  Corporation.  All  payments and  distributions  to be made  hereunder  will be paid from the general
assets of the  Corporation.  Nothing  contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create any contracted  right or trust of any kind or fiduciary  relationship
between the Corporation and any Participant, beneficiary or estate.

                                                SECTION XIII
                                   MODIFICATION, AMENDMENT OR TERMINATION

      The Committee may modify without the consent of the  Participant  (i) the Plan,  (ii) the terms of any
option previously granted or (iii) the terms of Restricted Shares previously  awarded at any time,  provided
that, no such modification  will,  without the approval of the shareowners of the Corporation,  increase the
number of shares of Common Stock available hereunder.  The Committee may terminate the Plan at any time.

                                                SECTION XIV
                                           RESERVATION OF SHARES

      Each fiscal year,  there will be reserved for issue under the Plan one (1) percent of the  outstanding
shares of Common Stock  including  Class B Common Stock of the  Corporation  as  determined by the number of
shares  outstanding  as of the end of the  immediately  preceding  fiscal  year.  No more than Five  Hundred
Thousand  (500,000)  shares shall be granted as Incentive  Stock Options in any calendar  year.  Such shares
may be in whole or in part,  as the Board of Directors  shall from time to time  determine,  authorized  and
unissued  shares of Common Stock or issued  shares of Common Stock which shall have been  reacquired  by the
Corporation.  If less than one (1)  percent of the shares is  granted  or  awarded in any fiscal  year,  the
difference  will be available  for use in the  following  year only and if not used in the  following  year,
those shares will no longer be available.  Any shares  available from the prior year will be the last shares
to be granted or awarded.

                                                 SECTION XV
                                             AGREEMENT TO SERVE

      Each Participant  receiving a Nonqualified  Stock Option or an Incentive Stock Option shall, as one of
the terms of the  option  agreement,  agree to remain in the  service  of the  Corporation  or of one of its
subsidiaries  for a period of at least one (1) year from the date of granting the option.  Such service will
(subject  to the  provisions  of any  contract  between  the  Corporation  or any such  subsidiary  and such
Participant)  be at the pleasure of the  Corporation or of such  subsidiary and at such  compensation as the
Corporation  or such  subsidiary  shall  determine from time to time.  Any  termination  of a  Participant's
service for any reason other than death,  permanent and total disability or Qualified Retirement during such
period  shall be  deemed a  violation  of the  Agreement  contained  in this  Section.  In the event of such
violation,  any Nonqualified  Stock Option or Incentive Stock Option held by the Participant  under the Plan
will  immediately be canceled.  Nothing in the Plan will confer on any  Participant any right to continue in
the employ of the  Corporation or any of its  subsidiaries or interfere with or prevent in any way the right
of the Corporation or any of its  subsidiaries  to terminate a Participant's  employment at any time for any
reason.

                                                    E-16






                                                                                   EXHIBIT 10.31 (CONTINUED)
                                                SECTION XVI
                                             CHANGE IN CONTROL

      Notwithstanding any provision  contained herein to the contrary,  in the event of a Change in Control,
all awarded  Restricted  Shares will immediately be free of all  restrictions and performance  contingencies
and will be deemed fully earned and not subject to forfeiture and all  outstanding  options  governed by the
Plan will be immediately  exercisable  and shall continue to be exercisable  for a period of three (3) years
from the date of the Change in Control  regardless of the original term or  employment  status,  except that
the term of any Incentive Stock Option shall not be extended beyond ten (10) years from the date of grant.

                                                SECTION XVII
                                           LIMITATION OF ACTIONS

      Every right of action by or on behalf of the Corporation or any shareowner  against any past,  present
or future member of the Board of  Directors,  officer or Employee  arising out of or in connection  with the
Plan will,  irrespective of the place where action may be brought and irrespective of the place of residence
of any such  director,  officer  or  employee,  cease and be barred by the  expiration  of three  years from
whichever  is the later of (a) the date of the act or  omission  in  respect  of which  such right of action
arises or (b) the first date upon which there has been made  generally  available to  shareowners  an annual
report of the  Corporation  and a proxy  statement  for the annual  meeting  of  shareowners  following  the
issuance of such annual report,  which annual report and proxy  statement  alone or together set forth,  for
the related period,  the aggregate amount of Awards under the Plan during such period; and any and all right
of action by an Employee (past,  present or future) against the Corporation  arising out of or in connection
with the Plan  shall,  irrespective  of the place where  action may be  brought,  cease and be barred by the
expiration  of three (3) years from the date of the act or omission in respect of which such right of action
arises.

                                               SECTION XVIII
                                               GOVERNING LAW
      The Plan will be governed by and interpreted pursuant to the laws of the State of Delaware,  the place
of incorporation of the Corporation.

                                                SECTION XIX
                                            SUBSIDIARIES' PLANS

      To the extent  determined by the Committee,  any  subsidiary  may,  without regard to the  limitations
under the Plan, have a separate  incentive plan or program.  The Committee will have exclusive  jurisdiction
and sole  discretion  to approve or  disapprove  any such plan or program and,  from time to time, to amend,
modify,  or  suspend  any such plan or  program.  Individuals  eligible  for  Awards  under any such plan or
program will not be considered  Employees eligible for Awards under the Plan, unless otherwise determined by
the  Committee.  No provision of any such plan or program will be included in, or  considered a part of, the
Plan and any awards made under any such plan or program  will not be charged  against the  aggregate  amount
available under the Plan unless otherwise determined by the Committee.

                                                 SECTION XX
                                               EFFECTIVE DATE

      The effective date of the Plan shall be December 16, 1993, if approved by the  shareowners at the 1994
Annual Meeting, and the Plan shall continue in effect for ten (10) years from the effective date.
                                                    E-17

EX-10.32 MATERIAL CO

                                                                                                       EXHIBIT 10.32

                                       NAVISTAR 1998 SUPPLEMENTAL STOCK PLAN
              (As amended December 11, 2001, and supplemented by the Restoration Stock Option Program)

                                                     SECTION I
                                                PURPOSE OF THE PLAN

         The purpose of this Navistar  1998  Supplemental  Stock Plan ("Plan") is to provide an additional  plan for
the  issuance  of stock  options  and  restricted  stock for shares of the common  stock of  Navistar  International
Corporation to employees of Navistar International  Corporation and its subsidiaries  ("Corporation") to attract and
retain  highly  qualified  personnel,  to provide key  employees  who hold  positions  of major  responsibility  the
opportunity to earn incentive awards  commensurate  with the quality of individual  performance,  the achievement of
performance  goals and  ultimately  the increase in  shareowner  value.  This Plan is separate  from and intended to
supplement  the  Navistar  1994  Performance   Incentive  Plan  ("1994  Plan").   The  Plan  replaces  the  Navistar
International  Corporation  1998  Interim  Stock  Plan for  grants or awards of stock  made on and after the date of
adoption of this Plan.

                                                     SECTION II
                                                    DEFINITIONS

         The terms used in this Plan are defined as specified  in the 1994 Plan unless the context  indicates to the
contrary.

                                                    SECTION III
                                                    ELIGIBILITY

      Management  will, from time to time,  select and recommend to the Committee on Compensation  and Governance of
the Board of  Directors  of Navistar  International  Corporation  ("Committee")  (formerly  named the  Committee  on
Organization)  Employees who are to become  Participants in the Plan.  Employees will be selected from those who, in
the opinion of management,  have  substantial  responsibility  in a managerial or professional  capacity.  Employees
selected for  participation  in the Plan may also be participants in the 1994 Plan, and  participation  in this Plan
will not be considered participation in a plan that would affect their participation in the 1994 Plan.

                                                     SECTION IV
                                                   STOCK OPTIONS

      The Committee may grant  Nonqualified  Stock  Options to  Participants  in the amount and at the time that the
Committee  approves.  No Incentive  Stock Options  shall be granted under this Plan.  Options shall be granted under
the same terms and  conditions as options  granted under the 1994 Plan, as amended from time to time, but subject to
the  limitation on the number of shares  contained in this Plan,  and subject to the  limitation  that only treasury
shares, and not newly issued shares, may be used for any grant.

                                                     SECTION V
                                                 RESTRICTED SHARES

      The  Committee  may award  restricted  shares  for the  purposes  and under the same terms and  conditions  as
specified in Sections VI and VIII, and the other  provisions of the 1994 Plan, but subject to the limitations on the
number of shares  contained in this Plan, and subject to the  limitation  that only treasury  shares,  and not newly
issued shares, may be used for any award to an officer of the Corporation.

                                                        E-18






                                                                                           EXHIBIT 10.32 (CONTINUED)

                                                     SECTION VI
                                             ADMINISTRATION OF THE PLAN

      Full  power and  authority  to  construe,  interpret  and  administer  the Plan is  vested  in the  Committee.
Decisions of the  Committee  will be final,  conclusive  and binding upon all parties,  including  the  Corporation,
shareowners  and  employees.  The foregoing  will  include,  but will not be limited to, all  determinations  by the
Committee as to (i) the approval of Employees for  participation  in the Plan, (ii) the amount of the Awards,  (iii)
the performance levels at which different  percentages of the Awards would be earned and all subsequent  adjustments
to such levels and (iv) the  determination  of all Awards.  Any person who  accepts  any Award  hereunder  agrees to
accept as final,  conclusive and binding all determinations of the Committee.  The Committee will have the right, in
the case of employees  not employed in the United  States,  to vary from the provision of the Plan to the extent the
Committee deems appropriate in order to preserve the incentive features of the Plan.

                                                    SECTION VII
                                       MODIFICATION, AMENDMENT OR TERMINATION

      The Committee may modify  without the consent of the  Participant  (i) the Plan,  (ii) the terms of any option
previously  granted or (iii) the terms of Restricted Shares previously  awarded at any time,  provided that, no such
modification will, without the approval of the Board of Directors of the Corporation,  increase the number of shares
of Common Stock available hereunder.  The Committee may terminate the Plan at any time.

                                                    SECTION VIII
                                               RESERVATION OF SHARES

      The total number of shares of stock  reserved and  available  for delivery  pursuant to this Plan is 2 million
shares of common stock of Navistar International  Corporation.  The number of shares reserved and available shall be
increased  by shares of stock  subject to an option or award  under  this Plan or any other plan that is  cancelled,
expired,  forfeited,  settled in cash or otherwise terminated without a delivery of shares to the participant of the
plan,  including  shares used to pay the option exercised price of an option issued under the Plan or any other plan
or to pay taxes with respect to such an option.  Only treasury shares,  and not newly issued shares, may be reserved
and made available for delivery.

      Effective  December  11, 2001 the number of shares  remaining  to be issued under the plan is increased by 2.5
million shares.

                                                     SECTION IX
                                                  TERM OF THE PLAN

      The Plan shall be effective on the date of adoption by the Board of Directors  and continue  through  December
16, 2003.

                                                     SECTION X
                                                   GOVERNING LAW

      The Plan will be  governed by and  interpreted  pursuant  to the laws of the State of  Delaware,  the place of
incorporation of the Corporation.

                                                        E-19






                                                                                           EXHIBIT 10.32 (CONTINUED)

                                          RESTORATION STOCK OPTION PROGRAM

Restoration  options.  Restoration  stock options are additional  options  granted to an employee as a result of the
employee  exercising  another Navistar stock option if the form and manner of the exercise of the other stock option
qualify for the restoration option program.

Qualifying exercises.

o       The option being  exercised  (the  original  option) can be any employee  stock option  granted by Navistar,
        whether  granted before or after the  commencement or revision of the  restoration  option program.  Options
        that were granted as  restoration  options are not eligible for  restoration  option  grants if the original
        nonrestoration option was granted prior to June 21, 2000.  Incentive Stock Options (ISO) are not eligible.

o       No  restoration  option  exercise can be made during the  six-month  period  following  the revision of this
        program  unless  the  restoration  exercise  is made on a deferred  basis as  provided  for in this  program
        document.

o       The option price payable on exercise of the original  option must be paid by transferring to the Corporation
        Navistar  stock with a current  value equal to the option price.  The stock must be mature  stock,  i.e., if
        the stock was acquired from the Corporation, it must have been held at least six months.

o       The employee must either pay cash for the withholding tax,  transfer to the Corporation  Navistar stock with
        a current  value equal to the  withholding  tax, or request that the amount of stock  necessary to cover the
        withholding  tax be withheld  from the stock  otherwise  payable to the  employee.  The employee may request
        additional  withholding at a federal rate of up to 40%, if he presents to the Company mature shares equal in
        value to the additional  withholding.  The stock must be mature stock,  i.e., if the stock was acquired from
        the Corporation it must have been held at least six months.

o       The employee  must elect that the exercise be treated as a  restoration  exercise and sign an agreement  for
        the restoration option.

Terms of the restoration option grant.

o       The number of shares for which the  restoration  option is  granted is the number of shares  required  to be
        paid to the Corporation on exercise of the original  option,  i.e., the number of shares required to pay the
                                                                      ----
        option price; and the number of shares with value equal to the tax liability.

o       The option  price under the  restoration  option will be the market  price of Navistar  stock on the date of
        exercise of the original option (the date of grant of the restoration option).

o       The term of the restoration option shall be for the remaining term of the original option.

o       The  restoration  option  will  become  exercisable  six months  after the date of grant of the  restoration
        option, or, if sooner, one month before the end of the term of the original option.

                                                            E-20






                                                                                           EXHIBIT 10.32 (CONTINUED)

o       The usual terms of Navistar  stock  options as  specified in the plans and  Committee  and Board action will
        apply to the restoration options where specific provisions  reflecting the nature of the restoration options
        are not  applicable.  For  example,  the  options  will  continue  to become  exercisable  after a qualified
        retirement and will be  exercisable  for three years after  becoming  exercisable;  on change in control the
        options  will  become  exercisable  immediately  and be  extended  for  three  years;  options  that are not
        exercisable will lapse if an employee quits before retirement.

Restriction  on profit  shares.  The profit  shares  received  on  exercise  of the  original  option are subject to
restriction  on transfer.  The profit  shares are the shares that  represent  the  difference  in value  between the
option price and the value of the stock on the date of exercise of the original option,  less any shares withheld to
pay the withholding taxes required on the exercise of the original option.

o       The profit shares cannot be transferred for three years following the exercise of the original option.

o       The restriction period ends immediately if the holder dies,  terminates employment on account of disability,
        or terminates employment under a qualified retirement as defined in the stock option plan.

o       Profit shares can be used to pay the option price on exercise of another  Navistar  stock option even though
        the shares are  subject  to the  transfer  restrictions.  The holder is treated as  transferring  his profit
        shares to the  Corporation,  and getting from the  Corporation in the exchange the same shares back from the
        Corporation.  The transfer  restriction  continues to apply to the  exchanged  shares for the balance of the
        three-year  period that started on the date of exercise of the first original option.  The profit shares can
        only be used if the option being  exercised  permits  their use. For  example,  the options  prohibit use of
        shares that have not been held for longer than six months if the shares were acquired from the Corporation.

Deferral  of Profit  Shares.  Each  employee  who makes a  restoration  exercise  of an option may elect to have the
Company  defer  delivery of the profit  shares due on the original  option for a period of years or an event such as
death,  disability  or  retirement.  The profit  shares are that number of shares for which the option was exercised
less the number of shares used to pay the option price.  An election will be made under  procedures  established  by
the Company that will provide for the following:

o       The  election  must be made six months in advance of  exercise  of an option,  and no options  for which the
        employee has made an election can be exercised  under the restoration  program during the six-month  period.
        However,  the six-month  restriction  period will not apply if the employee makes a deferral election within
        30 days of the revision of this program and pursuant to the election  exercises an option within 6 months of
        the revision.  During the deferral  period,  the employee  will have no right to vote the stock,  to receive
        any dividend  declared on the stock, and no other right as a shareholder.  The employee will be paid in cash
        the  equivalent of any dividend  payments.  If the dividend is an  extraordinary  dividend,  the Company may
        give additional units for shares instead of making a cash payment.

o       The employee must select the number of years for the deferral  period (between 1 and 20) and can select that
        the deferral period ends on death,  disability,  and/or retirement,  or a specified time after retirement. A
        deferral period can be extended on six-months  notice by a current employee or an employee who terminated by
        retirement or disability.  (The terms retirement and disability are defined in the stock options and plan.)

                                                            E-21






                                                                                           EXHIBIT 10.32 (CONTINUED)

o       The deferral period will end on change in control of the Company.  In the event of a transaction  that would
        cause an adjustment under the anti-dilution  provisions of the stock option, such as a stock split,  merger,
        spin off, a similar adjustment will be made to the deferred shares to preserve the value of the deferral.

o       The Company can terminate the deferral within three months for any employee who terminates  employment for a
        reason  other than death,  disability  or  retirement.  The  Company  can  terminate  the  deferral  for all
        employees if it determines it is in the best interests of the Company to do so.

o       The employee will be granted  restoration  options on the exercise date to cover future FIT,  state,  local,
        FICA and Medicare tax liabilities for all restorations.

Effect on share  ownership  requirement.  The profit shares  delivered to the employee and units for deferred shares
can be counted as fulfilling an employee's stock ownership requirement under the Navistar Stock Ownership Program.

Termination  of the program.  The program has been  established by resolution of the Committee on  Compensation  and
Governance  and the Board that  authorized the granting of  restoration  stock options.  The Committee and Board can
terminate the program at any time by resolution terminating the prior authorization.





























                                                        E-22

EX-10.33 MATERIAL CO

                                                                                EXHIBIT 10.33



Board of Director's resolution regarding director's annual retainer:
- --------------------------------------------------------------------

         FURTHER  RESOLVED,  that the Board hereby increases the non-employee  director annual retainer to $50,000,
one-fourth of which will be paid annually in Restricted  Stock as the first quarterly  payment,  effective  January
1, 2002.






































                                                       E-23

EX-10.34 MATERIAL CO

                                                                                        EXHIBIT 10.34



                                                NAVISTAR NON-EMPLOYEE
                                                ---------------------
                                            DIRECTORS' DEFERRED FEE PLAN
                                            ----------------------------
                              (Adopted on August 14, 1995, amended as of June 16, 1997)



                                                      SECTION 1
                                                      ---------

                                                       PURPOSE
                                                       -------


         1.1         Navistar  Non-Employee  Directors'  Deferred Fee Plan (hereinafter  referred to as the "Plan")
has been established by Navistar  International  Corporation  (hereinafter referred to as the "Company") to attract
and retain as members of the Board of Directors  of the Company  (hereinafter  referred to as the "Board")  persons
who are not  full-time  employees of the Company or any of its  subsidiaries,  but whose  business  experience  and
judgment are a valuable asset to the Company and its subsidiaries.


                                                      SECTION 2
                                                      ---------

                                                  DIRECTORS COVERED
                                                  -----------------


         2.1         As used in the Plan,  the term  "Director"  means any person  who:  (A) is now a member of the
Board or is  hereafter  elected  to the Board and (B) is not a  full-time  employee  of the  Company  or any of its
subsidiaries.


                                                      SECTION 3
                                                      ---------

                                              DEFERRED DIRECTORS' FEES
                                              ------------------------


         3.1         Subject to obtaining the mutual consent of the Company and the Director at the
time a fee  deferral  election  is made,  the  Director  may elect to have  part or all of the cash fees  otherwise
payable  for  attendance  at  regular  or  special  meetings  (including  executive  sessions)  of the Board or its
committees  and/or the cash part of the annual  Director  retainer  fees,  including  retainer  fees for chairing a
Board  committee,  deferred in cash and paid as hereinafter  provided.  Any such election shall be made by filing a
form of election  with the  secretary  of the Company  not later than  December 31 of a calendar  year and shall be
effective with respect to any Directors' fees earned in all subsequent  calendar  years;  provided,  however,  that
such  election  may be changed from time to time by filing a new form of election  with the  secretary or on before
December 31 of the year prior to the year for which such change is to be effective.


                                                       E-24





                                                                                          EXHIBIT 10.34 (CONTINUED)


         3.2         All  deferred  Directors'  fees shall be  credited to a cash  account for the  Director at the
time such deferred  Directors'  fees would  otherwise have been payable to such  Director.  Such cash account shall
bear  interest,  compounded  quarterly  at the end of each  calendar  quarter,  from the date  amounts are credited
thereto to the date of payment at the rate  equivalent  to the rate of  interest as  published  on the first day of
such quarter by The Wall Street Journal as the "prime" rate or the equivalent thereof.


         3.3         A  Director  may elect to  deferred  all or any  portion of the fee that  would  otherwise  be
payable in common  stock of Navistar  International  Corporation  for service as a Director in any year after 1997.
Such deferral shall be subject to mutual agreement  between the Corporation and the Director,  and the making of an
election in the time and manner set forth in Section 3.1.


         3.4         For each year for which an election  under  Section 3.3 is in effect,  there shall be credited
to a deferred  stock account for the Director the number of shares of Navistar  common stock for which the election
is  effective.  Any  shares of  Navistar  common  stock for which the  election  is not  effective  (determined  by
rounding up to the nearest whole share) shall be  transferred  to the Director and subject to such  restriction  as
otherwise provided by the Restricted Shares Directors' Fees arrangement.

         Each  Directors'  deferred stock account shall be credited with an amount  equivalent to the dividend that
would have been paid on an equal number of  outstanding  shares,  which amount shall be credited in the  equivalent
number of shares  determined  based on the average of the high and low price of the shares on the date the dividend
would have been paid on  outstanding  stock.  The amount in the deferred  stock account shall be adjusted for stock
splits, stock dividends and similar transactions.  No interest shall be paid on the deferred stock account.

         The amount in each  year's  deferred  stock  account  shall be paid to the  Director  on the date or event
specified in the  agreement  and election  pursuant to Section 3.3, or paid to another  person as specified in such
agreement or election.  The amount  shall be paid in shares of common stock of Navistar  International  Corporation
to be  transferred  to the  Director.  The  Corporation  may pay amounts  less than 100 shares in cash.  Any shares
paid to a Director shall be subject to such restriction as otherwise  provided by the Restricted  Shares Directors'
Fees  arrangement.  Prior  to  the  shares  being  transferred  to  the  Director,  the  Director  shall  not  be a
shareholder,  and shall have no rights of a  shareholder,  with  respect to any amounts  credited  to the  deferred
stock account.  A Director's interest in a deferred stock account is not assignable.











                                                       E-25





                                                                                          EXHIBIT 10.34 (CONTINUED)

                                                      SECTION 4
                                                      ---------

                                         PAYMENT OF DEFERRED DIRECTORS' FEES
                                         -----------------------------------


         4.1         Subject to the provisions of Section 4.2,  Director's  deferred fee earned and credited to the
Director's  cash account,  including  accrued  interest,  shall be paid as follows:  prior to January 1 of any year
with  respect to which the Director  has elected to defer fees  pursuant to Section  3.1, the Director  shall elect
the time of payment of the fees so deferred,  which  election shall be  irrevocable,  and which shall be one of the
following:

                  (a) a lump sum  payment  at any time in any year  following  the year with  respect  to which the
                  fees are being deferred; or

                  (b)  annual  installments  beginning  on the  first  day of the month  following  the  Director's
                  retirement from the Board and continuing for a period not exceeding ten years.


         4.2         The Board may, in its sole  discretion,  begin the  payment of the  Director's  deferred  fees
prior to the  Director's  retirement  from the Board.  If the death of the  Director  occurs after  termination  of
service as a Director,  the Board may, in its sole  discretion,  accelerate  the time of payment of the  Director's
deferred fees.


         4.3         In the event of a "Change in  Control"  in the  Company as  defined  below,  any and all fees,
including  accrued  interest,  which have been deferred pursuant to Section 3 of this Agreement will be immediately
paid to the Director.


         4.4         For purposes of the Plan, a "Change in Control" shall be deemed to have  occurred,  if (A) any
"person"  or "group"  (as such terms are used in Section  13(d) and 14(d) of the  Securities  Exchange  Act of 1934
other than  employee  or retiree  benefit  plans or trusts  sponsored  or  established  by the  Company or Navistar
International  Transportation  Corp.  ("NITC") is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Securities  Exchange Act of 1934),  directly or indirectly,  of securities of the Company  representing  25% or
more of the  combined  voting  power of the  Company's  then  outstanding  securities,  (B) as the result of, or in
connection  with, any cash tender offer,  exchange  offer,  merger or other business  combination,  sale of assets,
proxy or consent  solicitation,  contested  election or substantial stock  accumulation (a "Control  Transaction"),
the members of the Board of Directors of the Company  immediately prior to the first public  announcement  relating
to such Control  Transaction shall immediately  thereafter,  or within two years, cease to constitute a majority of
the Board of Directors of the Company,  (C) any  dissolution  or liquidation of the Company or NITC or an agreement
for the sale or  disposition  of all or  substantially  all (more than 50%) of the assets of the Company or of NITC
occurs.  Notwithstanding  the  foregoing,  the sale or disposition of any or all of the assets or stock of Navistar
Financial Corporation shall not be deemed a Change in Control.



                                                       E-26






                                                                                          EXHIBIT 10.34 (CONTINUED)

                                                    MISCELLANEOUS
                                                    -------------


         5.1         The Plan does not give the Director any right to be nominated or re-elected to the Board.


         5.2         When a person  entitled  to a payment  under  the Plan is under  legal  disability  or, in the
Company's opinion,  is in any way incapacitated so as to be unable to manage such person's  financial affairs,  the
Company may direct that payment be made to such person's legal  representative,  or to a relative or friend of such
person  for such  person's  benefit.  Any  payment  made in  accordance  with the  preceding  sentence  shall be in
complete discharge of the Company's obligation to make such payment under the Plan.


         5.3         Any  action  required  or  permitted  to be taken by the  Company  under the terms of the Plan
shall be by affirmative vote of a majority of the members of the Board of Directors then in office.


         5.4         Any  controversy  or claim  arising out of or relating to the Plan or the breach  hereof shall
be settled by  arbitration  in the City of Chicago in  accordance  with the laws of the State of  Illinois by three
arbitrators,  of whom  one  shall be  appointed  by the  Company,  one by the  Director  and one by the  first  two
arbitrators.  If the first two arbitrators  cannot agree on the appointment of a third  arbitrator,  then the third
arbitrator  shall be  appointed by the Chief Judge of the United  States Court of Appeals for the Seventh  Circuit.
The arbitration  shall be conducted in accordance  with the rules of the American  Arbitration  Association  except
with respect to the  selection of  arbitrators  which shall be as provided in this  Section 5.4.  Judgment upon any
award  rendered  by the  arbitrators  may be entered in any court  having  jurisdiction  thereof  and will  include
interest  on any amounts due and payable to the  Director  from the date of the breach of the Plan  calculated  for
each month at the rate equal to the prime rate as  published  in The Wall  Street  Journal on the first date of its
publication  in the then current  year.  In the event that it shall be  necessary or desirable  for the Director to
retain legal counsel  and/or incur other costs and expenses in  connection  with the  enforcement  of any or all of
the  Director's  rights under the Plan,  the Company  shall pay (or the Director  shall be entitled to recover from
the  Company,  as the case may be)  reasonable  attorney's  fees and  costs and  expenses  in  connection  with the
enforcement of said rights  (including the  enforcement of any arbitration  award in court),  unless they determine
that the Director's request to arbitrate was frivolous.


         5.5         Any  notices,  requests,  demands or other  communications  provided  for by the Plan shall be
sufficient if in writing and if sent by registered or certified  mail,  return receipt  requested,  to the Director
at the last  address  filed in writing  with the  Company  or, in the case of the  Company,  to the  Company at its
principal executive offices, attention Chairman.


         5.6         The  provisions  of the Plan shall be  construed  in  accordance  with the internal law of the
State of Illinois.


                                                       E-27





                                                                                          EXHIBIT 10.34 (CONTINUED)

         5.7         The Plan may be amended or canceled  by mutual  agreement  of the  parties in writing  without
the consent of any other  person,  and, no person,  other than the parties  hereto,  shall have any rights under or
interest in the Plan or the subject matter hereof.


         5.8         All  provisions  of the Plan shall inure to the benefit of and be binding upon the  successors
and assigns of the Company  (including  any  successor to, or assignee of, the assets or business of the Company or
any  subsidiary  pursuant to a  transaction  constituting  a change in control (as defined  herein)),  and the term
"Company" as used herein shall include Navistar International Corporation and all such successors and assigns.




































                                                       E-28

EX-10.35 MATERIAL CO

                                                                                       EXHIBIT 10.35


                                            EXECUTIVE SEVERANCE AGREEMENT
                                            -----------------------------


         THIS AGREEMENT between Navistar International Corporation, a Delaware corporation (the "Company"), its
principal operating subsidiary, Navistar International Transportation Corp., a Delaware corporation ("NITC"), and J.
R. Horne (the "Executive"), dated this 16th day of June 1997.

                                                      WITNESSETH
                                                      ----------

         WHEREAS, the Company wishes to assure itself of stability and continuity of senior management and
recognizes that organizational changes, including a change in control of the Company or NITC, may occur, and that
the possibility of such changes negatively affects or may negatively affect the retention of senior management
personnel of the Company and NITC and the decision-making and performance of such personnel with respect to such
organizational changes, and the effectiveness of retention and incentivizing features of other elements of the
Company's executive compensation program; and

         WHEREAS, the Executive desires to achieve a degree of certainty as to rights to compensation upon certain
terminations of employment during the Agreement Period as defined in paragraph 2 below.

         NOW, THEREFORE, this Agreement is made to assure the fulfillment of the Company's and NITC's objectives in
a manner which serves the best interests of the Company and NITC and their stockholders by providing the Executive
and certain severance benefits in the event of a Termination as defined in paragraph 4 below during the Agreement
Period.  Accordingly, the Company, NITC and the Executive agree as follows:

         1.       Implementation of Agreement.
                  ----------------------------

         (a)      This Agreement shall become effective on the date first set forth above.

         (b)      This Agreement shall be sole and exclusive agreement between the parties hereto with regard to
severance payments and severance benefits provided by the Company or NITC to the Executive.  Specifically, the
Executive Severance Agreement between the Company and NITC and the Executive, dated 02/14/95, is hereby terminated
by mutual agreement of the parties.  All stock options and restricted stock of the Company granted or awarded to the
Executive shall be governed by the respective plans and agreements pursuant to which they were granted or awarded.
Except as provided in paragraph 5, any pension or other retirement benefits due to the Executive upon termination or
retirement of the Executive from the Company or NITC shall be governed by the appropriate pension or benefit plan.

         (c)      This Agreement is not an employment contract nor does it alter the Executive's status as an at will
employee of the Company or NITC.  The Executive may terminate his or her employment with the Company or NITC at any
time, and the Company and NITC retain the right to terminate the Executive's employment without notice, at any time,
for any reason.  This Agreement only provides the Executive with the severance payments and benefits as defined in
paragraph 5 below in the event of a Termination as defined in paragraphs 4(a) or 4(b) below.

                                                         E-29




                                                                                    EXHIBIT 10.35 (CONTINUED)

         2.       Agreement Period.
                  -----------------

         For purposes of this Agreement, "Agreement Period" means the period beginning on the date first set forth
above and ending on the earlier of (i) June 30, 2000, or (ii) the date on which the Executive dies or becomes
totally and permanently disabled or on which the Executive voluntarily elects to take retirement in accordance with
the Company's or NITC's retirement policy, provided that such election takes place prior to a Change in Control (as
defined in paragraph 3 hereof).  The Agreement Period automatically shall be extended annually for successive one
year periods ending on each subsequent June 30, without any further action on the part of any party hereto, unless
the Company or NITC has, at least one hundred eighty (180) days prior to the effective date of such extension,
notified the Executive that the Agreement shall not be so extended.  If a Change in Control occurs during the
Agreement Period, notwithstanding any other provision of this Section 2, the Agreement Period shall not expire
earlier than three years after such Change in Control.

         3.       Change in Control
                  -----------------

         For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if (i) any "person"
or "group" (as such terms are used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934), other than
employee or retiree benefit plans or trusts sponsored or established by the Company or NITC, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding
securities, (ii) the following individuals cease for any reason to constitute more than three-fourths of the number
of directors then serving on the Board of Directors of the Company: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent solicitation, relating to the election
of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's
stockholders was approved by the vote of at least two-thirds (2/3) of the directors then still in office or whose
appointment, election or nomination was previously so approved or recommended; (iii) any dissolution or liquidation
of the Company or NITC or sale or disposition of all or substantially all (more than 50%) of the assets of the
Company or of NITC occurs: or (iv) as the result of, or in connection with, any cash tender offer, exchange offer,
merger or other business combination, sale of assets, proxy or consent solicitation, contested election or
substantial stock accumulation (a "Control Transaction"), the members of the Board of Directors of the Company
immediately prior to the first public announcement relating to such Control Transaction shall immediately
thereafter, or within two years, cease to constitute a majority of the Board of Directors of the Company.
Notwithstanding the foregoing, the sale or disposition of any or all of the assets or stock of Navistar Financial
Corporation shall not be deemed a Change in Control.

         4.       Termination.
                  ------------

         (a)      For purposes of this Agreement, a Termination under this paragraph 4(a) shall have occurred if,
during the Agreement Period and either prior to a Change in Control or more than 36 months after the then-most
recent Change in Control, (i) the Executive's employment is terminated by the Company or by NITC for any reason
other than for Cause (as defined below, or (ii) an event occurs which constitutes Good Reason (as defined below),
and the Executive voluntarily terminates his or her


                                                         E-30





                                                                                    EXHIBIT 10.35 (CONTINUED)

employment with the Company or NITC within ten (10) days after being notified of such an event.  For purposes of
this Agreement, "Good Reason" means the occurrence, during the Agreement Period and either prior to a Change in
Control or more than 36 months after the then-most recent Change in Control, of either of the following events,
unless the Executive has given his or her written consent that such event shall not be deemed Good Reason
hereunder:  the Company or subsidiary (A) reduces the Executive's base salary by 10% or more in one reduction or a
series of reductions over a period of time and such reduction is not part of a general reduction for his or her
peers as a group and is not a deferral, or (B) takes action which makes the Executive ineligible to participate on
the same basis in incentive plans or bonuses in which his or her peers as a group participate.  In the event of
Termination under this paragraph 4(a), the Executive shall be paid the termination payments and benefits set forth
in paragraph 5(a) below.  For purposes of this Agreement, the term "Cause" means that the reason for the Executive's
termination was for (i) willful misconduct involving an offense of a serious nature, (ii) conviction of a felony as
defined by the United States of America or by the state in which the Executive resides, or (iii) continued
intentional failure to substantially perform required duties with the Company or its subsidiaries (other than a
failure due to physical or mental illness) or, prior to a Change in Control, to substantially comply with
requirements as to the ownership of Common Stock of the Company under the Company's Stock Ownership Program as in
effect on June 16, 1997, in each case continuing for 15 days after the Executive is given written notice of such
failure.  If the Executive's termination is for Cause, no termination payments or benefits shall be due or owing by
the Company or NITC under paragraph 5(a) below.

         (b)      For purposes of this Agreement, a Termination under this paragraph 4(b) shall have occurred if,
during the Agreement Period and during the 36 months after a Change in Control, (i) the Executive's employment is
terminated by the Company or by NITC, or (ii) an event occurs which constitutes a Constructive Termination (as
defined below), and the Executive voluntarily terminates his or her employment with the Company or NITC within ten
(10) days of being notified of such an event.  For purposes of this Agreement, "Constructive Termination" means the
occurrence, during  the period of 36 months after a Change in Control, of any of the following events, unless the
Executive has given his or her written consent that such event shall not be deemed a Constructive Termination
hereunder:  (i) a material change, adverse to the Executive, in the Executive's positions, titles, offices, status,
nature of responsibilities, organizational level or authority within the Company in effect prior to a Change in
Control, except in connection with the termination of the Executive's employment for Cause, disability, or
retirement, or as a result of the Executive's death; (ii) the Company or subsidiary reduces the Executive's annual
base salary or annual total compensation opportunities (including threshold, target, and maximum levels in the case
of performance-based compensation) as compared to the highest rates in effect for the Executive in the six months
prior to the Change in Control; (iii) the Executive becomes ineligible to participate on  substantially the same
basis in incentive plans, bonuses, benefit plans or fringe benefits in which the Executive participated immediately
prior to the Change in Control or in which his or her peers as a group then participate; (iv) the Company and NITC
fail to obtain agreements from any successor to assume and agree to perform this agreement as contemplated in
paragraph 14 below; or (v) the Company or a subsidiary requires the  Executive to be based anywhere more than 45
miles from the location of the Executive's office or the location of the Company's executive offices immediately
prior to the Change in Control, except that the Company may require the Executive to be based more than 45 miles
from such location if the relocation is to a principal executive office of the Company or principal office of a
major division or subsidiary of the Company, provided that the Executive is fully reimbursed, on an after-tax basis,
for all reasonable expenses incurred and losses experienced in respect of such relocation in accordance with the
relocation policy of the Company or its

                                                         E-31





                                                                                    EXHIBIT 10.35 (CONTINUED)


subsidiaries in effect immediately prior to the date of the Change in Control, and except for required travel on the
Company's business to an extent substantially consistent with the business travel obligations which the Executive
undertook on behalf of the Company prior to the Change in Control.  In the event of a Termination under this
paragraph 4(b), the Executive shall be paid the termination payments and benefits set forth in paragraph 5(b) below.

         (c)      For purposes of this Agreement, a termination of employment shall be deemed to have occurred only
if the Executive is not, after such event, employed by the Company, NITC, or any subsidiary of the Company and/or
NITC.  A termination of employment by any subsidiary of the Company or NITC shall be deemed to be a termination by
the Company and NITC for purposes of this Agreement, if the condition of the first sentence of this paragraph 4(c)
is met.

         (d)      For purposes of this Agreement, a Termination shall have occurred if the Executive voluntarily
terminates his employment with the Company and NITC and does not engage in a business, whether as owner, partner,
officer, employee or otherwise, which is in competition with the Company, NITC or one of its affiliates for five
years following the voluntary termination of employment.  In the event of a Termination under this paragraph 4c, the
Executive shall be paid the termination payments and benefits set forth in paragraph 5d below.

         5.       Termination Payments.
                  ---------------------

         (a)      In the event of a Termination as defined in paragraph 4(a) above, the Executive will be entitled to
the following payments and benefits:

                  (i)      The Company and NITC shall be jointly obligated to pay to the Executive, within ten (10)
business days of the Executive's termination of employment, a lump sum amount in cash equal to (A) a Pro Rata (as
defined below) portion of  the Executive's Target Annual Incentive (as defined below) plus (B) 200% of the sum of
the Executive's annual base salary in effect at the time of Termination and Target Annual Incentive.  For purposes
of this Agreement, "Target Annual Incentive" means the annual incentive amount that would have been payable to the
Executive for the fiscal year of Termination under such plan(s), program(s), or policy(ies) which result or would
result in the earning of compensation reportable as "Bonus" in the Company's Summary Compensation Table under Item
402(b)(2) of Regulation S-K or any successor thereto for that year assuming the "targeted" level of performance
required for payment of such annual incentive was achieved for the fiscal year of Termination and assuming
Executive's employment had not terminated.  For purposes of this Agreement, "Pro Rata" means a portion of a specified
amount determined by multiplying such amount by a fraction the numerator of which is the number of days from the
beginning of the fiscal year of Termination through the date of Termination and the denominator of which is the
total number of days in the fiscal year of Termination.

                  (ii)     In addition, the Company and NITC shall be jointly obligated to provide the following
benefits to the Executive: (A) health insurance and life insurance for a period of 12 months immediately following
the date of Termination, with the same coverage, in the same amounts and at the same costs to the Executive as in
effect immediately prior to the date of the Termination; (B) Company or NITC paid outplacement services normally
provided to his or her peers; (C) Company or NITC paid



                                                         E-32




                                                                                    EXHIBIT 10.35 (CONTINUED)

tax counseling and tax forms preparation normally provided to his or her peers for all years up to and including the
year of Termination; (D) payment for any unused vacation; and (E) such pension and post-retirement health and life
insurance benefits (including grow-in) as are provided for the Executive at his or her level, age and years of
service under Company or NITC sponsored retirement plans on the date of the Termination.

         (b)      In the event of a Termination as defined in paragraph 4(b) above, the Executive will be entitled to
the following payments and benefits:

                  (i)      The Company and NITC shall be jointly obligated to pay to the Executive, within (10)
business days after said Termination, a lump sum amount in cash equal to the sum of the amounts specified in (A) and
(B) as follows:

                              (A)   A Pro Rata portion of the Executive's Target Annual Incentive: and

                              (B)   300% of the sum of the Executive's annual base salary in effect at the time of
                                    Termination and Target Annual Incentive.

                  (ii)     The Company and NITC shall be jointly obligated to pay to the Executive the amounts, if
any, specified in paragraph 6, at the times specified and otherwise in accordance with paragraph 6.

                  (iii)    In addition, the Company and NITC shall be jointly obligated to provide the following
benefits to the Executive: (A) health insurance and life insurance for a period of  36 months immediately following
the date of termination, with the same coverage, in the same amounts and at the same costs to the Executive as in
effect immediately prior to the date of the Change in Control; (B) Company or NITC paid outplacement services
normally provided to his or her peers at the time of the Change in Control: (C) Company or NITC paid tax counseling
and tax forms preparation normally provided to his or her peers at the time of the Change in Control for all years
up to and including the year of Termination; (D) payment for any unused vacation; and (E) such post-retirement
health and life insurance benefits (including grow-in) as were provided for the Executive at his or her level, age
and years of service under Company or NITC sponsored retirement plans at the time of the Change in Control.

                  (iv)     In addition, the Company and NITC shall be jointly obligated to pay the Executive, within
30 days after Termination, a lump sum amount in cash equal to the present value of the Participant's accrued
benefits under the Company's Managerial Retirement Objective Plan, the Supplemental Executive Retirement Plan, or
successor plans thereto or any other supplemental, non-qualified pension plan including grow-in (together, the
"Supplemental Plans") in which the Executive was participating at the time of the Change in Control, determined after
giving the Executive three additional years of age and pension service credit thereunder.  Such present value shall
be determined using actuarial assumptions and discount rates consistent with the Company's practices in effect
immediately prior to the Change in Control.

                  (v)      The Company and NITC shall be jointly obligated to pay to the Executive, within ten (10)
business days after said Termination, a lump sum amount in cash equal to the excess (if any) of the amount specified
below in (A) over the amount specified below in (B):


                                                         E-33




                                                                                    EXHIBIT 10.35 (CONTINUED)

                             (A)       295% of the Executive's average annual compensation from the Company and/or
                                       NITC during the five years ended December 31, 1996 as set forth in the
                                       Executive's W-2 statements issued by the Company or NITC.  If the Executive
                                       has not been employed for five years by the Company and/or NITC, his or her
                                       average annual compensation will be calculated based on the average of the
                                       Executive's annual compensation from the Company or   NITC as set forth in
                                       the Executive's W-2 statements for the previously ended calendar years
                                       during which the Executive was employed by the Company or NITC.  If any  of
                                       the W-2 statements to be used in the calculation is for employment with the
                                       Company or NITC for part of a year, the amount shall be annualized for the
                                       purpose of the  foregoing calculation.

                             (B)       The amount paid or payable under paragraph 5(b)(i).

         (c)      Except as set forth in paragraph 5(d) hereof, no portion of any payment made under this paragraph 5
shall be included in any calculation for any pension due the Executive from the Company or NITC.

         (d)      In the event of a Termination as defined in paragraph 4d above, the Company or NITC shall provide
the Executive 52 weeks of base salary either in a lump sum amount or monthly as selected by the Executive and
retirement grow-in benefits as set forth in  J. V. Thompson's letter of August 25, 1986, addressed to: Managerial
Employees in Marketing or Administrative Classifications Who Are Under Age 55 With 10 or More Years of Credited
Pension Service on October 31, 1986, and Whose Age Plus Continuous Company Service Equals 55 or More and in Linda J.
Beezhold's letter to the Executive dated September 5, 1986.

         6.       Tax Gross-Up Payment
                  --------------------

         In the event that there shall occur a Change in Control of the Company, if the Executive becomes entitled
to one or more payments (with a "payment" including, without limitation, the vesting of an option or other non-cash
benefit or property), whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement
with the Company or any affiliated company (the "Total Payments"), which are or become subject to the tax imposed by
Section 4999 of the Internal Revenue Code (the "Code") (or any similar tax that may hereafter be imposed) (the
"Excise Tax"), an additional amount shall be payable to the Executive at the time specified below pursuant to Section
5(b)(ii) about the (the Gross-up Payment") (which shall include, without limitation, reimbursement for any penalties
and interest that may accrue in respect of such Excise Tax) such that the net amount retained by the Executive,
after reduction for any Excise Tax (including any penalties or interest thereon) on the Total Payments and any
federal, state and local income or employment tax and Excise Tax on the Gross-up Payment provided for by this
paragraph 6, but before reduction for any federal, state, or local income or employment tax on the Total Payments,
shall be equal to the sum of (A) the Total Payments, and (B) an amount equal to the product of any deductions
disallowed for federal, state, or local income tax purposes because of the inclusion of the Gross-up Payment in the
Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state, or local
income taxation, respectively, for the calendar year in which the Gross-up Payment is to be made.

                                                         E-34




                                                                                    EXHIBIT 10.35 (CONTINUED)

         For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the
amount of such Excise Tax:

            (A)    The Total Payments shall be treated as "parachute payments" within the meaning of Section
                   280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section
                   280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless and except to the
                   extent that, in the written opinion of independent compensation consultants or auditors of
                   nationally recognized standing ("Independent Advisors") selected by the Company and reasonably
                   acceptable to the Executive, the Total Payments (in whole or in part) do not constitute
                   parachute payments, or such excess parachute payments (in whole or in part) represent reasonable
                   compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code
                   in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are
                   otherwise not subject to the Excise Tax

            (B)    The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be
                   equal to the lesser of (A) the total amount of the Total Payments or (B) the total amount of
                   excess parachute payments within the meaning of section 280G(b)(1) of the Code (after applying
                   clause (A) above); and

            (C)    The value of any non-cash benefits or any deferred payment or benefit shall be determined by the
                   Independent Advisors in accordance with the principles of Section 280G(d)(3) and (4) of the Code.

         For the purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed (A) to
pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate
of taxation for the calendar year in which the Gross-up payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year
(determined without regard to limitations on deductions based upon the amount of the Executive's adjusted gross
income); and (C) to have otherwise allowable deductions for federal, state, and local income tax purposes at least
equal to those disallowed because of the inclusion of the Gross-up Payment in the Executive's adjusted gross
income.  In the event that the Excise Tax is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, the Executive shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not
prior to the time the amount of such reduction is refunded to the Executive or otherwise realized as a benefit by
the Executive) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied
in initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code.  In the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional
Gross-up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at
the time that the amount of such excess is finally determined.

                                                         E-35





                                                                                    EXHIBIT 10.35 (CONTINUED)

         The Gross-up Payment provided for above shall be paid on the 30th day (or such earlier date at the Excise
Tax becomes due and payable to the taxing authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or
portion thereof cannot be finally determined on or before such day, the Company shall pay to the Executive on such
day an estimate, as determined by the Independent Advisors, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code), as
soon as the amount thereof can be determined.

         In the event that the amount of the estimated payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth day after demand
by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).  If more than one
Gross-up Payment is made, the amount of each Gross-up Payment shall be computed so as not to duplicate any prior
Gross-up Payment.  The Company shall have the right to control all proceedings with the Internal Revenue Service
that may arise in connection with the determination and assessment of any Excise Tax and, at its sole option, the
Company may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with any
taxing authority in respect of such Excise Tax (including any interest or penalties thereon); providing, however,
that the Company's control over any such proceedings shall be limited to issues with respect to which a
Gross-up-Payment would be payable hereunder, and the Executive shall be entitled to settle or contest any other
issue raised by the Internal Revenue Service or any other taxing authority.  The Executive shall cooperate with the
Company in any proceedings relating to the determination and assessment of any Excise Tax and shall not take any
position or action that would materially increase the amount of any Gross-up Payment.

         7.       Confidentiality.
                  ----------------

         The Executive agrees that at all times during and after the Agreement Period as defined in paragraph 2
above, he or she will not divulge or appropriate for personal use or the use of others any secret or confidential
proprietary information pertaining to the business of the Company or NITC obtained during the Executive's employment
by the Company or NITC.

         8.       Offsetting Payments.
                  --------------------

         In the event of a Termination as defined in paragraph 4 above for which termination payments have been
paid, the Company or NITC shall not be entitled to recover or offset any termination payment paid or owed other than
for a breach of the obligations set forth in paragraph 7 above.

         9.       Arbitration of All Disputes.
                  ----------------------------

         Any controversy or claim arising out of or relating to this Agreement or the breach hereof shall be settled
by arbitration in the City of Chicago in accordance with the laws of the State of Illinois by three arbitrators, of
whom one shall be appointed by the Company and NITC, one by the Executive and one by the first two arbitrators.  If
the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be
appointed by the Chief Judge of the United States Court of Appeals for the Seventh Circuit.  The arbitration shall
be conducted in Chicago in accordance with the rules of the American Arbitration Association, except with respect to
the place of arbitration and to the

                                                         E-36





                                                                                    EXHIBIT 10.35 (CONTINUED)

selection of arbitrators which shall be as provided in this paragraph 9.  Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.  Any award will include interest on any amounts
due and payable to the Executive from the date due to the date of payment calculated at the greater of twelve
percent (12%) simple interest per annum or one hundred and ten percent (110%) of the prime rate in effect at the
Continental Illinois National Bank and Trust Company of Chicago on the first of each month.  In the event that it
shall be necessary or desirable for the Executive to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of any or all of the Executive's rights under this Agreement, the Company and NITC
shall pay, when submitted by the Executive, the Executive's reasonable attorney's fees and costs and expenses,
including expenses of any expert witnesses, in connection with the enforcement of said rights (including the
enforcement of any arbitration award in court) unless the arbitrators specifically find that the Executive's request
to arbitrate was frivolous.

         10.      Notices
                  -------

         Any notices, requests, demands or other communications provided for by this Agreement shall be sufficient
if in writing and if sent by registered or certified mail, return receipt requested, to the Executive at the last
address filed in writing with the Company or, in the case of the Company or NITC, to the Company or NITC at its
principal executive offices, attention General Counsel.

         11.      Non-Alienation.
                  --------------

         The Executive shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon
any termination payments or other benefits provided under this Agreement; and no termination payments or other
benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts,
or by operation of law.  This provision does not affect beneficiary designations or testamentary dispositions to the
extent applicable.

         12.      Governing Law.
                  --------------

         The provisions of this Agreement shall be construed in accordance with the internal law of the State of
Illinois.

         13.      Amendment.
                  ----------

         This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent
of any other person and, so long as the Executive lives, no person, other than the parities hereto, shall have any
rights under or interest in this Agreement or the subject matter hereof










                                                         E-37




                                                                                    EXHIBIT 10.35 (CONTINUED)

14.      Successors; Binding Agreement.
         ------------------------------

         All provisions of this Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company and NITC.  The Company and NITC will require its respective successor or assign to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the Company and NITC would
be required to perform it if no such succession or assignment had taken place.

         IN WITNESS WHEREOF, the Executive has hereunto set his or her hand and, pursuant to the authorization from
its Board of Directors, the Company and NITC have each caused these presents to be executed in its name on its
behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year
first above written.

                                    NAVISTAR INTERNATIONAL CORPORATION

                                    By:                  /s/ Robert A. Boardman
                                            ---------------------------------------------
                                                        Senior Vice President and
                                                             General Counsel


ATTEST:

/s/ Steve K. Covey
- --------------------------------
Secretary


(SEAL)

                                   NAVISTAR INTERNATIONAL TRANSPORTATION CORP.

                                    By:                     /s/ Robert A. Boardman
                                            ----------------------------------------------
                                                        Senior Vice President and
                                                             General Counsel


ATTEST:

/s/ Gregory Lennes
- --------------------------------
Secretary


(SEAL)

                                                             /s/ J.R. Horne
                                              --------------------------------------------
                                                                Executive



                                                         E-38