<PAGE 1>
EXHIBIT 13

NAVISTAR INTERNATIONAL CORPORATION

AND SUBSIDIARIES

FORM 10-K

ANNUAL REPORT

FOR THE YEAR ENDED OCTOBER 31, 1995

FILED PURSUANT TO SECTION 13 OR 15 (D)

OF THE

SECURITIES EXCHANGE ACT OF 1934

FINANCIAL SUMMARY
Millions of dollars, except per share data 1995 1994
- ----------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31

Sales and revenues ............................ $ 6,342 $ 5,337

Income before income taxes .................... $ 262 $ 158
Net income .................................... $ 164 $ 82

Net income per common share ................... $ 1.83 $ .72

Manufacturing gross margin .................... 13.8% 12.8%

Return on equity (a) .......................... 18.9% 12.5%

Cash and marketable securities ................ $ 1,040 $ 861

(a) Calculated using income of continuing operations.

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

FINANCIAL INFORMATION

Financial Summary ................................................... 2

Management's Discussion and Analysis of Results
of Operations and Financial Condition ............................. 4

Statement of Financial Reporting Responsibility ..................... 11

Independent Auditors' Report ........................................ 12

Financial Statements

Statement of Income ............................................... 13
Statement of Financial Condition .................................. 15
Statement of Cash Flow ............................................ 17
Statement of Non-Redeemable Preferred, Preference and
Common Shareowners' Equity ...................................... 19

Notes to Financial Statements

1 Summary of accounting policies ................................. 20
2 Supplemental cash flow information ............................ 22
3 Postretirement benefits ........................................ 23
4 Income taxes ................................................... 26
5 Discontinued operations ........................................ 30
6 Marketable securities .......................................... 30
7 Receivables .................................................... 32
8 Property ....................................................... 34
9 Inventories .................................................... 34
10 Leases ........................................................ 35
11 Accounts payable .............................................. 36
12 Other liabilities ............................................. 36
13 Debt .......................................................... 37
14 Financial instruments ......................................... 40
15 Commitments, contingent liabilities and restrictions on assets. 42
16 Legal proceedings ............................................. 42
17 Environmental matters ......................................... 43
18 Preferred and preference stocks ............................... 44
19 Common stock .................................................. 45
20 Stock compensation plans ...................................... 46
21 Selected quarterly financial data (unaudited) ................. 47

Ten-Year Summary of Selected Financial and Statistical Data ......... 48

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Navistar International Corporation is a holding company and its
principal operating subsidiary is Navistar International Transportation
Corp. (Transportation). In this discussion and analysis, "Company" refers
to Navistar International Corporation and its consolidated subsidiaries.
The Company manufactures and markets Class 5 through 8 trucks, including
school buses, mid-range diesel engines and service parts in the United
States and Canada. These products are also sold to distributors in selected
export markets. The financial services subsidiaries of the Company provide
wholesale, retail and lease financing and commercial physical damage and
liability insurance coverage to the Company's dealers and retail customers
and to the general public through an independent insurance agency system.

The discussion and analysis reviews separately the operating and
financial results and liquidity and capital resources of "Manufacturing" and
"Financial Services." Manufacturing includes the consolidated financial
results of the Company's manufacturing operations with its wholly-owned
financial services subsidiaries included on a one-line basis under the
equity method of accounting. Financial Services includes Navistar Financial
Corporation (Navistar Financial) and its domestic insurance subsidiary as
well as foreign finance and insurance companies. See Note 1 to the
Financial Statements.

Management's discussion and analysis of results of operations should be
read in conjunction with the Financial Statements and the Notes to the
Financial Statements.

RESULTS OF OPERATIONS

Consolidated

The Company reported net income of $164 million for 1995, or $1.83 per
common share, on increased sales and revenues. This was a substantial
improvement over the $82 million, or $.72 per common share, reported in 1994
which included a $20 million charge to discontinued operations, net of $13
million of income taxes, related to environmental liabilities. See Notes 5
and 17 to the Financial Statements. The net loss of $501 million for 1993
included a one-time charge of $513 million ($318 million after taxes) for
common stock contributed to an independent retiree Trust and a $228 million
charge for the cumulative effect of accounting changes.

As a result of the strong demand for trucks and diesel engines, sales
and revenues of $6,342 million in 1995 were 19% higher than the $5,337
million reported in 1994 and 34% above the $4,721 million reported in 1993.

Manufacturing

Manufacturing, excluding Financial Services, reported income before
income taxes of $200 million in 1995, double the $98 million reported in
1994. The 1995 operating results reflect a second consecutive record year
of Class 8 heavy truck, mid-range diesel engine and truck service parts
sales. Sales of Class 5, 6 and 7 medium trucks also increased. The 1995
operating results reflect the effects of improved pricing and various cost
improvement initiatives. Pretax income of $98 million in 1994 was $91
million higher than the $7 million reported in 1993 before the one-time $509
million contribution to an independent retiree Trust. The improvement of
1994 over 1993 reflects higher sales of trucks, diesel engines and service
parts as well as a $33 million reduction in postretirement benefits expense.

Sales and Revenues. As a result of continued favorable economic conditions
in both the United States and Canada, 1995 industry retail sales of Class 5
through 8 trucks totalled 380,600 units, a 12% improvement over 1994 and 32%
greater than the 288,900 units sold in 1993. Class 8 heavy truck sales
increased 11% from the 1994 level to 228,800 units as a result of demand
from large fleet customers. Industry sales of Class 5, 6 and 7 medium
trucks, including school buses, were up 13% to 151,800 units in 1995
reflecting demand across a wide variety of vocations including maintenance
leasing, local governments, and wholesale, retail and service related
businesses. Industry sales of school buses, which accounted for 20% of the
medium truck market, increased slightly over 1994 to 30,400 units.

Manufacturing's sales of trucks, diesel engines and service parts for
1995 totalled $6,125 million, 19% over the $5,153 million reported for 1994
and 36% higher than the $4,510 million recorded in 1993. Truck shipments
totalled 110,200 units in 1995, increases of 16% and 26% from 1994 and 1993,
respectively. The Company maintained its position as sales leader in the
combined United States and Canadian Class 5 through 8 truck market in 1995
with a 26.7% market share, a slight decline from the 27.0% share in 1994.
This change reflects a decrease in the Company's Class 8 heavy truck market
share as the Company was unable to produce sufficient quantities of those
models most in demand by its customers as a result of capacity limitations
at its assembly facilities.

Shipments of mid-range diesel engines by the Company to original
equipment manufacturers during 1995 were a record 156,100 units, a 20%
increase from 1994 and a 32% improvement over 1993. Higher shipments to a
domestic automotive manufacturer to meet consumer demand for the light
trucks and vans which use this engine were the primary reason for the
increase.

Service parts sales of $730 million in 1995 were slightly higher than
the $714 million in 1994 and 16% higher than the $632 million reported in
1993 as a result of dealer and national account volume growth.

Other income increased to $43 million in 1995 from $25 million in 1994
and $16 million in 1993 as a result of increased income on higher cash, cash
equivalents and marketable securities balances.

Operating Costs and Expenses. Manufacturing gross margin was 13.8% of sales
in 1995 compared with 12.8% in 1994 and 13.1% in 1993. The increase in
gross margin is primarily the result of higher sales volumes, improved
pricing and an increase in operating efficiency. These improvements were
partially offset by higher material costs, overtime costs to meet demand for
the Company's products and a $62 million provision for payment to employees
as required by the Company's profit sharing agreements, an increase of $38
million. Factors which contributed to the change in gross margin between
1994 and 1993 included higher sales volumes offset by an increase in the
provision for profit sharing, additional costs to meet customer delivery
commitments and additional costs incurred with the introduction of new truck
and engine products.

Engineering and research expense increased to $113 million in 1995 from
$97 million in 1994 and $94 million in 1993 reflecting investment in the
next generation of trucks and diesel engines as well as improvements to
existing products.

Marketing and administrative expense of $277 million was 4% of sales
in 1995, down from 5% in 1994 and 1993. This expense was $238 million and
$230 million, respectively, in those years. The $39 million increase in the
expense between 1994 and 1995 reflects higher sales and distribution
expense, an increase in the provision for payment to employees as provided
by the Company's performance based incentive programs and an investment in
the development of systems and processes which support the Company's
business strategy.

Finance service charges on sold receivables increased to $84 million, a
27% increase over 1994 and 50% higher than 1993, as a result of higher truck
sales and increased interest rates.

Financial Services

Financial Services, which consists of Navistar Financial, its domestic
insurance subsidiary and the Company's foreign finance and insurance
subsidiaries, had income before income taxes of $62 million, $60 million and
$61 million in 1995, 1994 and 1993, respectively.

Navistar Financial's pretax income in 1995 was $59 million, a 6%
increase from $55 million in 1994. The change is a result of higher income
from an increased volume of wholesale financing to support the demand for
trucks, and improvement in Navistar Financial's interest cost over market
interest rates. The increase was offset by a reduction in margins on retail
financing as a result of increased competition in the commercial financing
markets and rising interest costs which could not be fully offset by
increased retail note pricing.

Navistar Financial's pretax income increased $6 million in 1994 from
the $49 million reported in 1993. The improvement reflects higher income
from Navistar Financial's insurance subsidiary and an increased volume of
wholesale financing partially offset by lower margins on retail financing.
In addition, 1993 pretax income included a one-time $4 million charge for
the contribution to an independent retiree Trust.

Earnings from the foreign finance and insurance subsidiaries were $3
million and $5 million in 1995 and 1994, respectively. Earnings in 1993 of
$12 million included a one-time benefit of $6 million resulting from lower
loss reserve requirements.

Navistar Financial's revenue for 1995 was $228 million, 8% higher than
the $211 million reported in 1994. The change reflects an increased volume
of wholesale and retail financing to support the demand for trucks, and
higher average yields on wholesale notes and accounts as a result of a
higher prime interest rate. The increase was partially offset by lower
revenues from Navistar Financial's insurance subsidiary reflecting a
reduction in written premiums of truck liability lines as a result of
adverse loss experience in those lines. Navistar Financial's revenues
declined 9% between 1993 and 1994 following a decline in retail note and
lease revenue.

Interest expense for Navistar Financial increased to $84 million in
1995 from $70 million in 1994 and $79 million in 1993. The change between
1995 and 1994 was the result of higher debt balances required to finance the
increased wholesale note and account balances and higher market interest
rates. The decrease between 1994 and 1993 was the result of reduced debt
required to finance the lower level of owned retail receivables, offset in
part by higher interest rates.

LIQUIDITY AND CAPITAL RESOURCES

Consolidated

Consolidated cash flow is generated from the manufacture, sale and
financing of trucks, diesel engines and service parts. Total cash, cash
equivalents and marketable securities of the Company amounted to $1,040
million at October 31, 1995 and $861 million at October 31, 1994. At
October 31, 1995 and 1994, approximately $140 million and $138 million in
marketable securities, respectively, were held by the Company's insurance
subsidiaries and not available for general corporate purposes.

Manufacturing

Manufacturing's cash, cash equivalents and marketable securities
amounted to $876 million at October 31, 1995 and $665 million at October 31,
1994. This included cash and cash equivalents of $461 million at October
31, 1995 and $499 million at October 31, 1994.

Cash generated by operations during 1995 totalled $400 million
primarily from net income of $164 million, a net change in operating assets
and liabilities of $166 million as well as $89 million of non-cash deferred
income taxes and $53 million of other non-cash items, principally
depreciation. These amounts were partially offset by a $72 million pension
contribution in excess of normal funding. Consolidated income tax expense
for 1995 was $98 million, of which $9 million was cash payments to federal,
and certain state and local governments while the remaining $89 million of
federal and other taxes reduced the deferred tax asset.

The net change in operating assets and liabilities of $166 million
includes a $72 million increase in accounts payable as a result of higher
production schedules at the Company's assembly facilities, the $137 million
increase in other liabilities attributed principally to the provision for
payment to employees as required by the Company's profit sharing and
performance incentive programs and to the timing of such payments. These
changes were partially offset by an $88 million increase in outstanding
receivables primarily reflecting the timing of payments from Navistar
Financial.

The cash generated by operations was used to fund Manufacturing's
investment and financing activities. Investment programs used $139 million
in cash to fund capital expenditures for truck product improvements, to
increase diesel engine production capacity and for programs to improve cost
performance. In addition, purchases of marketable securities exceeded
proceeds from sales by $247 million. Financing programs used cash of $29
million for dividends on the Series G Preferred shares, $21 million for
principal payments on debt and $10 million to repurchase Class B Common
shares.

Financial Services

The Financial Services subsidiaries provide product financing and
insurance coverage to Transportation's dealers and retail customers. During
1995 and 1994, Navistar Financial supplied 93% of the wholesale financing of
new trucks to Transportation's dealers, up from 90% in 1993. Navistar
Financial's share of the retail financing of new trucks sold in the United
States was 14% in 1995 compared with 15% in 1994 and 1993. The reduced
share of retail financing is a result of competition and high levels of
liquidity in the commercial financing markets.

Historically, funds to finance Transportation's products come from a
combination of commercial paper, short and long-term bank borrowings, medium
and long-term debt issues, sales of finance receivables and equity capital.
Navistar Financial's current debt ratings have made bank borrowings and
sales of finance receivables the most economic sources of cash. Insurance
operations are funded from premiums and income from investments.

Operations provided $115 million in cash in 1995 primarily from net
income of $40 million and an increase in accounts payable of $68 million
reflecting the timing of payments to Manufacturing. Investment programs
used $349 million during this period principally as a result of a net
increase of $335 million in retail and wholesale finance receivables.
Financing activities provided $200 million reflecting a net increase in debt
of $212 million and the payment of $12 million in dividends to
Transportation.

Receivable sales were a significant source of funding in 1995 and 1994.
During 1995, Navistar Financial sold $740 million of retail notes, net of
unearned finance income, through Navistar Financial Retail Receivables
Corporation (NFRRC), a wholly-owned subsidiary, to two owner trusts which,
in turn, sold $714 million of notes and $26 million of certificates to
investors. The net proceeds from these sales were $693 million. During
1994, Navistar Financial sold $1,033 million of retail notes receivable.
Net proceeds from these sales were $952 million. In both years, the net
proceeds were used for general working capital purposes. At October 31,
1995, the remaining shelf registration available to NFRRC for issuance of
asset-backed securities was $1,430 million. On November 14, 1995, NFRRC
filed an additional registration statement with the Securities and Exchange
Commission providing for the issuance from time to time of an additional
$2,000 million of asset-backed securities. See also Note 13 to the
Financial Statements.

Navistar Financial utilizes a revolving wholesale note sales trust
which provides for the continuous sale of eligible wholesale notes on a
daily basis. In June 1995, the Navistar Financial Dealer Note Master Trust
issued an additional $200 million of certificates increasing the revolving
wholesale note sales trusts from $300 million to $500 million. These sales
trusts are comprised of three $100 million pools of notes maturing serially
from 1997 to 1999 and the $200 million pool maturing in 2004.

Management's discussion of the future liquidity of Manufacturing and
Financial Services operations is included in Business Environment of
Management's Discussion and Analysis.

Environmental Matters

As disclosed in Notes 5 and 17 to the Financial Statements,
Transportation recorded a $20 million charge, net of $13 million of income
taxes, in the fourth quarter of 1994 as a loss of discontinued operations
for environmental liabilities at production facilities of two formerly owned
businesses: Wisconsin Steel located in Chicago, Illinois and Solar Turbine,
Inc. located in San Diego, California. The $33 million pretax charge
consisted of an $11 million payment to be made to the Economic Development
Administration and a $22 million charge for potential cleanup costs for the
Wisconsin Steel and Solar sites.

In addition, the Company has been named a potentially responsible party
(PRP), in conjunction with other parties, in a number of cases arising under
an environmental protection law commonly known as the Superfund law. These
cases involve sites which allegedly have received wastes from current or
former Company locations.

Based on information available to the Company, a reasonable estimate is
calculated of the Company's share, if any, of the costs for the
investigation and cleanup of these sites and is provided for in the
Financial Statements. The Company believes that, based on these
calculations, its share of the potential additional costs for each site,
other than the Wisconsin Steel and Solar sites, is not material. The
anticipated cleanup costs of current PRP actions at October 31, 1995,
including the environmental cleanup costs of the Wisconsin Steel and Solar
sites, are reflected in the Company's $25 million environmental liability.
The Company reviews its environmental liability on a regular basis.

Derivative Financial Instruments

As disclosed in Notes 1 and 14 to the Financial Statements, the Company
uses derivative financial instruments to transfer or reduce the risks of
foreign exchange and interest rate volatility, and potentially increase the
return on invested funds. Company policy does not allow the use of
derivatives for speculative purposes.

Manufacturing, as conditions warrant, has hedged its foreign exchange
exposure on the purchase of parts and materials from foreign countries and
its exposure from sales of manufactured products in other countries.
Contracted purchases of commodities for manufacturing may be hedged up to
one year. During 1995, Manufacturing entered into forward contracts to
hedge its forward exchange exposure to the Canadian dollar on firm
commitments. These foreign currency contracts generally mature within three
months of origination.

Navistar Financial uses interest rate caps, interest rate swaps and
forward interest rate contracts when needed to convert floating rate funds
to fixed and vice versa to match its asset portfolio. Navistar Financial
also uses forward interest rate contracts to manage its exposure to
fluctuations in funding costs from the anticipated securitization and sale
of retail notes.

Both Manufacturing and Navistar Financial purchase collateralized
mortgage obligations that have relatively stable cash flow patterns in
relation to interest rate changes.

Income Taxes

The Statement of Financial Condition at October 31, 1995 and 1994
includes a deferred tax asset of $1,087 million and $1,134 million,
respectively, net of a valuation allowance of $307 million and $297 million,
respectively, related to future tax benefits. The deferred tax assets are
net of valuation allowances since it is more likely than not that some
portion of the deferred tax asset may not be realized in the future.

The deferred tax asset includes the tax benefits associated with
cumulative tax losses of $2,020 million and temporary differences, which
represent the cumulative expense of $1,620 million recorded in the Statement
of Income that has not been deducted on the Company's tax returns. The
valuation allowances assume that it is more likely than not that
approximately $810 million of cumulative tax losses will not be realized
before their expiration date. Realization of the net deferred tax asset is
dependent on the generation of approximately $2,900 million of future
taxable income, of which an average of approximately $90 million would need
to be generated annually for the 14-year period 1996 through 2009. The
remaining taxable income, which represents the realization of tax benefits
associated with temporary differences, does not need to be generated until
subsequent to 2009. See Note 4 to the Financial Statements.

Extensive analysis is performed to determine the amount of the deferred
tax asset. Such analysis is based on the premise that the Company is and
will continue to be a going concern and that it is more likely than not that
deferred tax benefits will be realized through the generation of future
taxable income. Management reviews all available evidence, both positive
and negative, to assess the long-term earnings potential of the Company
using a number of alternatives to evaluate financial results in economic
cycles at various industry volume conditions. Other factors considered are
the Company's 15 consecutive year leadership in the combined market share of
Class 5 through 8 trucks, recognition as a worldwide leading producer of
mid-range diesel engines and projected revenue enhancements and operating
cost reductions from manufacturing and product quality improvements as well
as design and material cost reduction programs. The projected availability
of taxable income to realize the tax benefit from net operating loss
carryforwards and the reversal of temporary differences before expiration of
these benefits is also considered. Management believes that with the
combination of available tax planning strategies, the Company's plan to
reduce its cost structure and the maintenance of significant market share,
earnings are achievable in order to realize the net deferred tax asset of
$1,087 million.

Reconciliation of the Company's United States income before income
taxes for financial statement purposes to taxable income for the years ended
October 31 is as follows:

Millions of dollars 1995 1994
- ----------------------------------------------------------------------------
Income of continuing operations
before income taxes ........................ $ 262 $ 158
Exclusion of income of foreign subsidiaries .. (11)
(13)
Loss of discontinued operations
before income tax benefits ................. -
(33)
State income taxes ........................... (2)
(2)
Temporary differences ........................ 67 24
Other ........................................ 1 2
-------- --------
Taxable income ............................... $ 317 $ 136
======== ========

The Company undertook significant restructuring actions in 1993. Since
these actions resulted in a substantial loss, management believes that the
information which would be presented in the above table for that year is not
meaningful.

Business Environment

Sales of Class 5 through 8 trucks are cyclical, with demand affected by
such economic factors as industrial production, construction, demand for
consumer durable goods, interest rates and the earnings and cash flow of
dealers and customers. As a result of a general slowdown in economic
activity in the United States, the Class 5 through 8 truck market has
experienced a significant decline in the rate of new truck orders. During
the latter half of 1995, this slowdown has also been responsible for an
increase in the cancellation of some existing orders which were originally
placed during 1994 and early 1995 in anticipation of continued growth in the
economy. The decline in the number of new orders, in combination with high
retail delivery rates throughout 1995, has reduced the Company's backlog of
unfilled truck orders by 27% to 47,100 units at October 31, 1995 from 64,800
units at October 31, 1994. Accordingly, retail deliveries in 1996 will be
highly dependent on the rate at which new truck orders are received. The
Company will evaluate order receipts and backlog throughout the year and
will balance production with demand as appropriate.

The Company currently projects 1996 United States and Canadian Class 8
heavy truck demand to be 175,000 units, a 24% decrease from 1995. Class 5,
6 and 7 medium truck demand is forecast at 115,000 units, a decline from
1995. Demand for school buses is expected to increase 7% in 1996 to 32,500
units. These demand levels, while consistent with other industry forecasts,
will require a significant increase in new order receipts over the levels
experienced during the second half of 1995 in order to be achieved. Diesel
engine shipments by the Company to original equipment manufacturers in 1996
are expected to be approximately 156,000 units, unchanged from 1995. The
Company's service parts sales are projected to grow 3% to $755 million.

It is the opinion of management that current cash, cash equivalents and
marketable securities and forecasted cash flow will provide a basis for
financing operating requirements, capital expenditures and anticipated
payments of preferred dividends. In addition, management believes that
collections on the outstanding receivables portfolios as well as funds
available from various funding sources will permit the Financial Services
subsidiaries to meet the financing requirements of the Company's dealers and
customers.

STATEMENT OF FINANCIAL REPORTING RESPONSIBILITY

Management of Navistar International Corporation and its subsidiaries
is responsible for the preparation and for the integrity and objectivity of
the accompanying financial statements and other financial information in
this report. The financial statements have been prepared in accordance with
generally accepted accounting principles and include amounts that are based
on management's estimates and judgments.

The accompanying financial statements have been audited by Deloitte &
Touche LLP, independent auditors, whose appointment is ratified by
shareowner vote at the Annual Meeting. Management has made available to
Deloitte & Touche LLP all the Company's financial records and related data,
as well as the minutes of the Board of Directors' meetings. Management
believes that all representations made to Deloitte & Touch LLP during its
audit were valid and appropriate.

Management is responsible for establishing and maintaining a system of
internal controls throughout its operations that provides reasonable
assurance as to the integrity and reliability of the financial statements,
the protection of assets from unauthorized use and the execution and
recording of transactions in accordance with management's authorization.
The system of internal controls which provides for appropriate division of
responsibility is supported by written policies and procedures that are
updated by management, as necessary. The system is tested and evaluated
regularly by the Company's internal auditors as well as by the independent
auditors in connection with their annual audit of the financial statements.
The independent auditors conduct their audit in accordance with generally
accepted auditing standards and perform such tests of transactions and
balances as they deem necessary. Management considers the recommendations
of its internal auditors and independent auditors concerning the Company's
system of internal controls and takes the necessary actions that are cost-
effective in the circumstances to respond appropriately to the
recommendations presented. Management believes that the Company's system of
internal controls accomplishes the objectives set forth in the first
sentence of this paragraph.

The Audit Committee of the Board of Directors, composed of six non-
employee Directors, meets periodically with the independent auditors,
management, general counsel and internal auditors to satisfy itself that
such persons are properly discharging their responsibilities regarding
financial reporting and auditing. In carrying out these responsibilities,
the Committee has full access to the independent auditors, internal
auditors, general counsel and financial management in scheduled joint
sessions or private meetings as in the Committee's judgment seem
appropriate. Similarly, the Company's independent auditors, internal
auditors, general counsel and financial management have full access to the
Committee and to the Board of Directors and each is responsible for bringing
before the Committee or its Chair, in a timely manner, any matter deemed
appropriate to the discharge of the Committee's responsibility.

John R. Horne
President and
Chief Executive Officer

Robert C. Lannert
Executive Vice President and
Chief Financial Officer

INDEPENDENT AUDITORS' REPORT

Navistar International Corporation,
Its Directors and Shareowners:

We have audited the Statement of Financial Condition of Navistar
International Corporation and Consolidated Subsidiaries as of October 31,
1995 and 1994, and the related Statement of Income, of Cash Flow, and of
Non-Redeemable Preferred, Preference and Common Shareowners' Equity for each
of the three years in the period ended October 31, 1995. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying consolidated financial statements
present fairly, in all material respects, the financial position of Navistar
International Corporation and Consolidated Subsidiaries at October 31, 1995
and 1994, and the results of their operations and their cash flow for each
of the three years in the period ended October 31, 1995, in conformity with
generally accepted accounting principles.

As discussed in Notes 3 and 4 to the Financial Statements, effective
November 1, 1992, the Company changed its methods of accounting for
postretirement benefits other than pensions and for income taxes.

Deloitte & Touche LLP
December 18, 1995
Chicago, Illinois

STATEMENT OF INCOME

Navistar International Corporation
and Consolidated Subsidiaries
----------------------------------
For the Years Ended October 31
(Millions of dollars, except per share data) 1995 1994 1993
- ------------------------------------------------------------------------------------

Sales and revenues
Sales of manufactured products ............... $ 6,125 $ 5,153 $ 4,510
Finance and insurance revenue ................ 167 152 181
Other income ................................. 50 32 30
-------- -------- --------
Total sales and revenues ................... 6,342 5,337 4,721
-------- -------- --------
Costs and expenses
Cost of products and services sold ........... 5,288 4,496 3,925
Postretirement benefits ...................... 206 176 209
Supplemental Trust contribution .............. - - 513
Engineering and research expense ............. 113 97 94
Marketing and administrative expense ......... 307 265 257
Interest expense ............................. 87 75 91
Financing charges on sold receivables ........ 29 16 14
Insurance claims and underwriting expense .... 50 54 59
-------- -------- --------
Total costs and expenses ................... 6,080 5,179 5,162
-------- -------- --------
Income (loss) before income taxes
Manufacturing .............................. - - -
Financial Services ......................... - - -
-------- -------- --------
Income (loss) before income taxes ........ 262 158 (441)

Income tax benefit (expense) ............. (98) (56) 168
-------- -------- --------

Income (loss) of continuing operations ....... 164 102 (273)
Loss of discontinued operations .............. - (20) -
-------- -------- --------
Income (loss) before cumulative effect
of changes in accounting policy ............. 164 82 (273)
Cumulative effect of changes
in accounting policy ....................... - - (228)
-------- -------- --------

Net income (loss) ............................ 164 82 (501)

Less dividends on Series G preferred stock ... 29 29 29

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

Net income (loss) applicable to common stock . $ 135 $ 53 $ (530)
======== ======== ========
- ------------------------------------------------------------------------------------
Income (loss) per common share:
Continuing operations ...................... $ 1.83 $ .99 $ (8.63)
Discontinued operations .................... - (.27) -
Cumulative effect of changes
in accounting policy ..................... - - (6.56)
-------- -------- --------

Net income (loss) per common share ........... $ 1.83 $ .72 $ (15.19)
======== ======== ========

Average number of common and dilutive common
equivalent shares outstanding (millions) ... 74.3 74.6 34.9

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

<FN>
See Notes to Financial Statements.

Manufacturing* Financial Services*
---------------------------------- ----------------------------------

1995 1994 1993 1995 1994 1993
----------------------------------------------------------------------------

$ 6,125 $ 5,153 $ 4,510 $ - $ - $ -
- - - 222 202 223
43 25 16 13 12 14
-------- -------- -------- -------- -------- --------
6,168 5,178 4,526 235 214 237
-------- -------- -------- -------- -------- --------

5,280 4,494 3,919 8 2 6
205 175 208 1 1 1
- - 509 - - 4
113 97 94 - - -
277 238 230 30 27 27
9 10 12 84 70 79
84 66 56 - - -
- - - 50 54 59
-------- -------- -------- -------- -------- --------
5,968 5,080 5,028 173 154 176
-------- -------- -------- -------- -------- --------

200 98 (502) - - -
62 60 61 - - -
-------- -------- -------- -------- -------- --------
262 158 (441) 62 60 61

(98) (56) 168 (22) (22) (22)
-------- -------- -------- -------- -------- --------

164 102 (273) 40 38 39
- (20) - - - -
-------- -------- -------- -------- -------- --------

164 82 (273) 40 38 39

- - (228) - - (9)
-------- -------- -------- -------- -------- --------

$ 164 $ 82 $ (501) $ 40 $ 38 $ 30
======== ======== ======== ======== ======== ========

----------------------------------------------------------------------------
<FN>
* "Manufacturing" includes the consolidated financial results of the
Company's manufacturing operations with its wholly-owned financial
services subsidiaries included under the equity method of accounting.
"Financial Services" includes the Company's wholly-owned subsidiary,
Navistar Financial Corporation, and other wholly-owned finance and
insurance subsidiaries. Transactions between Manufacturing and Financial
Services have been eliminated from the "Navistar International
Corporation and Consolidated Subsidiaries" columns on the preceding page.
The basis of consolidation is described in Note 1.

<CAPTI0N>
STATEMENT OF FINANCIAL CONDITION
Navistar International Corporation
and Consolidated Subsidiaries
----------------------------------

As of October 31 (Millions of dollars) 1995 1994
- -----------------------------------------------------------------------------------

ASSETS

Cash and cash equivalents .......................... $ 485 $ 557
Marketable securities .............................. 555 304
-------- -------
1,040 861
Receivables, net ................................... 1,854 1,508
Inventories ........................................ 416 429
Property and equipment, net ........................ 683 578
Equity in Financial Services subsidiaries .......... - -
Investments and other assets ....................... 166 165
Prepaid and intangible pension assets .............. 320 372
Deferred tax asset ................................. 1,087 1,134
-------- --------
Total assets ....................................... $ 5,566 $ 5,047
======== ========

LIABILITIES AND SHAREOWNERS' EQUITY

Liabilities
Accounts payable ................................... $ 933 $ 836
Debt ............................................... 1,457 1,218
Postretirement benefits liability .................. 1,341 1,299
Other liabilities .................................. 965 877
-------- --------
Total liabilities .............................. 4,696 4,230
-------- --------
Shareowners' equity
Series G convertible preferred stock
(liquidation preference $240 million) ............ 240 240
Series D convertible junior preference stock
(liquidation preference $4 million) .............. 4 4
Common stock (50.9 million and 50.0 million shares
issued)........................................... 1,641 1,628

Class B Common stock (24.3 million and 25.0 million
shares issued) 491 501
Retained earnings (deficit) - balance accumulated
after the deficit reclassification as of
October 31, 1987 ................................. (1,478) (1,538)
Common stock held in treasury, at cost ............. (28) (18)
-------- --------
Total shareowners' equity ...................... 870 817
-------- --------
Total liabilities and shareowners' equity .......... $ 5,566 $ 5,047
======== ========

- -----------------------------------------------------------------------------------
<FN>
See Notes to Financial Statements.

Manufacturing* Financial Services*
---------------------- ---------------------

1995 1994 1995 1994
----------------------------------------------------------------------------

$ 461 $ 499 $ 24 $ 58
415 166 140 138
-------- -------- -------- --------
876 665 164 196
274 176 1,672 1,342
416 429 - -
642 549 41 29
282 249 - -
122 151 44 14
319 371 1 1
1,087 1,134 - -
-------- -------- -------- --------
$ 4,018 $ 3,724 $ 1,922 $ 1,582
======== ======== ======== ========

$ 876 $ 779 $ 146 $ 70
127 127 1,330 1,091
1,334 1,292 7 7
811 709 157 165
-------- -------- -------- --------
3,148 2,907 1,640 1,333
-------- -------- -------- --------

240 240 - -

4 4 - -

1,641 1,628 178 178

491 501 - -

(1,478) (1,538) 104 71
(28) (18) - -
-------- -------- -------- --------
870 817 282 249
-------- -------- -------- --------
$ 4,018 $ 3,724 $ 1,922 $ 1,582
======== ======== ======== ========

STATEMENT OF CASH FLOW
Navistar International Corporation
and Consolidated Subsidiaries
----------------------------------
For the Years Ended October 31
(Millions of dollars) 1995 1994 1993
- -------------------------------------------------------------------------------------

Cash flow from operations
Net income (loss) ............................... $ 164 $ 82 $ (501)
Adjustments to reconcile net income (loss)
to cash provided by operations:
Depreciation and amortization ................. 81 72 75
Supplemental Trust contribution ............... - - 513
Equity in earnings of Financial Services,
net of dividends received ................... - - -
Deferred income taxes ......................... 89 51 (170)
Additional pension funding .................... (72) - -
Provision for loss of discontinued operations . - 20 -
Cumulative effect of changes
in accounting policy ........................ - - 228
Other, net .................................... (4) (26) (2)
Change in operating assets and liabilities:
Receivables ................................. (91) (173) (164)
Inventories ................................. 35 (19) (51)
Prepaid and other current assets ............ 10 (4) (10)
Accounts payable ............................ 63 99 107
Other liabilities ........................... 142 52 10
-------- -------- --------
Cash provided by operations ................... 417 154 35
-------- -------- --------
Cash flow from investment programs
Purchase of retail notes and lease receivables .. (1,099) (916) (770)
Collections/sales of retail notes
and lease receivables ......................... 850 1,176 895
Acquisitions in excess of cash collections
of wholesale notes and accounts receivable .... - - -
Purchase of marketable securities ............... (722) (710) (371)
Sales or maturities of marketable securities .... 480 621 326
Proceeds from property sold under sale/leaseback. - 87 -
Capital expenditures ............................ (139) (87) (110)
Base Program Trust pre-funding .................. - - (300)
Other investment programs, net .................. (11) 31 (57)
-------- -------- --------
Cash provided by (used in) investment programs. (641) 202 (387)
-------- -------- --------
Cash flow from financing activities

Principal payments on debt ...................... (121) (222) (117)
Issuance of debt ................................ - 100 -
Net increase (decrease)in notes and debt
outstanding under bank revolving credit
facility and asset-backed and other
commercial paper programs ..................... 312 (28) 75
Net proceeds from issuance of Common stock ...... - - 492
Dividends paid .................................. (29) (58) -
Repurchase of Class B Common stock .............. (10) (12) (2)
-------- -------- --------
Cash provided by (used in) financing activities 152 (220) 448
-------- -------- --------
Cash and cash equivalents
Increase (decrease) during the year ........... (72) 136 96
At beginning of the year ...................... 557 421 325
-------- -------- --------
Cash and cash equivalents at end of the year .... $ 485 $ 557 $ 421
======== ======== ========

- ------------------------------------------------------------------------------------
<FN>
See Notes to Financial Statements.

Manufacturing* Financial Services*
---------------------------------- ----------------------------------

1995 1994 1993 1995 1994 1993
----------------------------------------------------------------------------

$ 164 $ 82 $ (501) $ 40 $ 38 $ 30

75 68 69 6 4 6
- - 509 - - 4

(28) (10) (10) - - -
89 51 (170) - 3 4
(72) - - - - -
- 20 - - - -

- - 228 - - 9
6 (12) 3 (10) (17) (9)

(88) (49) 7 1 (1) 2
35 (19) (51) - - -
10 (4) (10) - - -
72 103 106 68 (7) 19
137 50 12 10 - (2)
-------- -------- -------- -------- -------- --------
400 280 192 115 20 63
-------- -------- -------- -------- -------- --------

- - - (1,099) (916) (770)

- - - 850 1,176 895

- - - (86) (118) (187)
(646) (651) (296) (76) (59) (75)
399 569 240 81 52 86
- 87 - - - -
(139) (87) (110) - - -
- - (300) - - -
8 36 (43) (19) (5) (14)
-------- -------- -------- -------- -------- --------
(378) (46) (509) (349) 130 (65)
-------- -------- -------- -------- -------- --------

(21) (42) (18) (100) (180) (99)
- - - - 100 -

- - - 312 (28) 75
- - 492 - - -
(29) (58) - (12) (28) (33)
(10) (12) (2) - - -
-------- -------- -------- -------- -------- --------
(60) (112) 472 200 (136) (57)
-------- -------- -------- -------- -------- --------

(38) 122 155 (34) 14 (59)
499 377 222 58 44 103
-------- -------- -------- -------- -------- --------
$ 461 $ 499 $ 377 $ 24 $ 58 $ 44
======== ======== ======== ======== ======== ========

-----------------------------------------------------------------------------
<FN>
* "Manufacturing" includes the consolidated financial results of the
Company's manufacturing operations with its wholly-owned financial
services subsidiaries included under the equity method of accounting.
"Financial Services" includes the Company's wholly-owned subsidiary,
Navistar Financial Corporation, and other wholly-owned finance and
insurance subsidiaries. Transactions between Manufacturing and Financial
Services have been eliminated from the "Navistar International
Corporation and Consolidated Subsidiaries" columns on the preceding page.
The basis of consolidation is described in Note 1.

STATEMENT OF NON-REDEEMABLE PREFERRED,
PREFERENCE AND COMMON SHAREOWNERS' EQUITY
Non-Redeemable Convertible
--------------------------
Preferred Preference Class B
SHARES OUTSTANDING Stock Stock Common Common
(Thousands) Series G Series D Stock Stock Warrants
- ----------------------------------------------- -------- ---------- ------ ------- --------

Balance at October 31, 1992 ................... 4,800 179 25,410 - 14,834

Public stock offering ......................... - - 23,600 - -
Issuance of Class B Common stock .............. - - - 25,642 -
Repurchase of stock and other additions/
(conversions) ............................... - (1) 9 (96) -
Stock accumulation fund settlement ............ - - 136 - -
Expiration of warrants ........................ - - - - (4,000)
------ ------ ------ ------ ------

Balance at October 31, 1993 ................... 4,800 178 49,155 25,546 10,834

Repurchase of stock and other additions/
(conversions) ............................... - (1) 164 (511) -
Expiration of warrants ........................ - - - - (10,834)

Balance at October 31, 1994 ................... 4,800 177 49,319 25,035 -
Repurchase of stock and other additons/
(conversions) ............................... - - 162 (742) -
------ ------ ------ ------ ------

Balance at October 31, 1995 ................... 4,800 177 49,481 24,293 -
====== ====== ====== ====== ======

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

EQUITY
(Millions of dollars) 1995 1994 1993
- ----------------------------------------------- -------- -------- --------

Preferred Stock Series G ...................... $ 240 $ 240 $ 240
-------- -------- --------

Preference Stock Series D ..................... 4 4 4
-------- -------- --------

Common Stock
Balance at beginning of the year .............. 1,628 1,615 508
Public stock offering ......................... - - 492
Reclassification of NOL (a) ................... - - 618
Conversion of Class B Common stock and other .. 13 13 (3)
-------- -------- --------
Balance at end of the year .................... 1,641 1,628 1,615
-------- -------- --------

Class B Common Stock
Balance at beginning of the year .............. 501 513 -
Issuance of stock ............................. - - 513
Repurchase of stock ........................... (10) (12) -
-------- -------- --------
Balance at end of the year .................... 491 501 513
-------- -------- --------

Retained Earnings
Balance at beginning of the year .............. (1,538) (1,592) (404)
Reclassification of NOL (a) ................... - - (618)
Net income (loss) ............................. 164 82 (501)
Preferred dividends ........................... (22) (36) (29)
Minimum pension liability adjustment/other .... (82) 8 (40)
-------- -------- --------
Balance at end of the year .................... (1,478 (1,538) (1,592)
-------- -------- --------

Common Stock Held in Treasury
Balance at beginning of the year .............. (18) (5) (11)
Repurchase of Common stock and other .......... (10) (13) 6
-------- -------- --------
Balance at end of the year .................... (28) (18) (5)
-------- -------- --------

Total shareowners' equity ..................... $ 870 $ 817 $ 775
======== ======== ========
<FN>
See Notes to Financial Statements.

(a) Reclassification required as a result of the 1987 deficit reclassification and
adoption of SFAS 109 in 1993.

NOTES TO FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED OCTOBER 31, 1995

1. SUMMARY OF ACCOUNTING POLICIES

Basis of Consolidation

Navistar International Corporation is a holding company, whose principal
operating subsidiary is Navistar International Transportation Corp.
(Transportation). Transportation operates in one principal industry segment,
the manufacture and marketing of medium and heavy trucks, including school
buses, mid-range diesel engines and service parts in the United States and
Canada and selected export markets. As used hereafter, "Company" refers to
Navistar International Corporation and its consolidated subsidiaries.

In addition to the consolidated financial statements, the Company has
elected to provide financial information in a format that presents the
operating results, financial condition and cash flow designated as
"Manufacturing" and "Financial Services." Manufacturing includes the
consolidated financial results of the Company's manufacturing operations with
its wholly-owned financial services subsidiaries included on a one-line basis
under the equity method of accounting. Financial Services includes the
consolidated financial results of Navistar Financial Corporation (Navistar
Financial), its domestic insurance subsidiary and foreign finance and
insurance companies. Navistar Financial's primary business is the retail and
wholesale financing of products sold by Transportation and its dealers within
the United States and the providing of commercial physical damage and
liability insurance to Transportation's dealers and retail customers and to
the general public through an independent insurance agency system.

The effects of transactions between Manufacturing and Financial Services
have been eliminated to arrive at the consolidated totals. The distinction
between current and long-term assets and liabilities in the Statement of
Financial Condition is not meaningful when finance, insurance and
manufacturing subsidiaries are combined; therefore, the Company has adopted
an unclassified presentation. Certain 1994 and 1993 amounts have been
reclassified to conform with the presentation used in the 1995 financial
statements.

Revenue Recognition

Manufacturing recognizes shipments of new trucks and service parts to
independent dealers and retail customers as sales. Price allowances,
expected in the normal course of business, and the cost of special incentive
programs are recorded at the time of sale. Engine sales are recognized at
the time of shipment to original equipment manufacturers. An allowance for
losses on receivables is maintained at an amount that management considers
appropriate in relation to the outstanding receivables portfolio and it is
charged when receivables are determined to be uncollectible.

Financial Services recognizes finance charges on retail notes and
finance leases as income over the term of the receivables on the accrual
basis utilizing the interest method. Interest due from interest bearing
notes and accounts is recognized on the accrual basis. Selected receivables
are sold and securitized to public and private investors with limited
recourse. Gains or losses on sales of receivables are credited or charged to
revenue in the period in which the sale occurs. Financial Services continues
to service the sold receivables and receives a fee for such services from the
investor. An allowance for losses is maintained at a level deemed
appropriate based on loss experience and other factors and it is charged when
receivables are determined to be uncollectible.

Insurance premiums are earned on a pro rata basis over the terms of the
policies. Underwriting losses and outstanding loss reserve balances are
based on individual case estimates of the ultimate cost of settlement,
including actual losses, and determinations of amounts required for losses
incurred but not reported.

NOTES TO FINANCIAL STATEMENTS
(Continued)

1. SUMMARY OF ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents

All highly liquid financial instruments with maturities of three months
or less from date of purchase, consisting primarily of bankers' acceptances,
commercial paper, U.S. government securities and floating rate notes, are
classified as cash equivalents in the Statement of Financial Condition and
Statement of Cash Flow.

Marketable Securities

Marketable securities are classified as available-for-sale securities
and are reported at fair value.

Inventories

Inventories are valued at the lower of average cost or market.

Property and Other Long-Lived Assets

Significant expenditures for replacement of equipment, tooling and
pattern equipment, and major rebuilding of machine tools are capitalized.
Depreciation and amortization are generally provided on the straight-line
basis over the estimated useful lives of the assets which average 35 years
for buildings and improvements and 8 years for machinery and equipment.
Gains and losses on property disposals are included in other income and
expense. The carrying amount of all long-lived assets is evaluated annually
to determine if adjustment to the depreciation and amortization period or to
the unamortized balance is warranted.

Engineering and Research Expense

Engineering and research expense includes routine ongoing costs
associated with improving existing products and manufacturing processes.
Included are expenditures for research, manufacturing and product engineering
and development activities for the introduction of new truck and diesel
engine products and major improvements to existing products and processes.
These costs are expensed as incurred and are classified as research and
development expenses. Research and development expenditures totalled $91
million, $88 million and $86 million in 1995, 1994 and 1993, respectively.

Product Related Costs

The Company accrues warranty expense at the time of end product sale.
Product liability expense is accrued based on the estimate of total future
payments to settle all product liability claims.

NOTES TO FINANCIAL STATEMENTS
(Continued)

1. SUMMARY OF ACCOUNTING POLICIES (continued)

Derivative Financial Instruments

The Company uses derivatives to transfer or reduce risks of foreign
exchange and interest rate volatility and to potentially increase the return
on invested funds. Navistar Financial uses a variety of contracts to manage
its exposure to fluctuations in funding costs from the anticipated
securitization and sale of retail notes. All derivatives are held for
purposes other than trading and Company policy does not allow the use of
derivatives for speculative purposes. Gains and losses on hedges of existing
assets or liabilities, firm commitments or anticipated transactions are
included in the carrying amounts of the related asset or liability and
recognized in income when the hedged event occurs. Gains or losses related
to qualifying hedges of anticipated sales of receivables are deferred and are
recognized in income when the receivables are sold.

Changes in Accounting Policy

In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123), which the Company must adopt by fiscal 1997.
This Statement allows for, and the Company intends to, retain the current
method of accounting for employee stock-based compensation arrangements with
certain additional disclosures. The new standard is not expected to have a
material effect on the Company's net income or financial position.

2. SUPPLEMENTAL CASH FLOW INFORMATION

On the Statement of Cash Flow, "Acquisitions in excess of cash
collections" relating to Financial Services' wholesale notes and accounts
receivable are included on a consolidated basis as a change in operating
assets and liabilities under cash flow from operations and in Financial
Services as cash flow from investment programs.

Consolidated interest payments were $82 million, $76 million and $91
million in 1995, 1994 and 1993, respectively. Consolidated tax payments
during 1995, 1994 and 1993 were $9 million, $5 million and $2 million,
respectively.

NOTES TO FINANCIAL STATEMENTS
(Continued)

3. POSTRETIREMENT BENEFITS

The Company provides postretirement benefits to substantially all of its
employees. Costs associated with postretirement benefits include pension
expense for employees, retirees and surviving spouses, and postretirement
health care and life insurance expense for employees, retirees, surviving
spouses and dependents. In addition, as part of the 1993 restructured
retiree health care and life insurance plans, profit sharing payments to an
independent retiree Trust are required. The cost of postretirement benefits
is segregated as a separate component in the Statement of Income and is as
follows:

Millions of dollars 1995 1994 1993
- ----------------------------------------------------------------------------
Pension expense .............................. $ 110 $ 108 $ 107
Health/life insurance ........................ 70 64 102
Profit sharing provision to Trust ............ 26 4 -
------ ------ ------

Total postretirement benefits expense ........ $ 206 $ 176 $ 209
====== ====== ======

In the Statement of Financial Condition, the postretirement benefits
liability of $1,341 million in 1995 and $1,299 million in 1994 includes $587
million and $549 million, respectively, for pension and $754 million and $750
million, respectively, for postretirement health care and life insurance
benefits.

Pension Benefits

Generally, the pension plans are non-contributory with benefits related
to an employee's length of service and compensation rate. The Company's
policy is to fund its pension plans in accordance with applicable United
States and Canadian government regulations and to make additional payments as
funds are available to achieve full funding of the vested accumulated benefit
obligation. The pension plans vary in the extent to which they are funded,
but for plan years which ended during the current year, all legal funding
requirements have been met. During 1995, the Company contributed $72 million
in excess of its normal funding requirement. Plan assets are invested
primarily in dedicated portfolios of long-term fixed income securities with
more recent contributions invested in equity securities.

Pension Expense

Net pension expense included in the Statement of Income is composed of
the following:

Millions of dollars 1995 1994 1993
- ----------------------------------------------------------------------------
Service cost for benefits earned
during the period .......................... $ 24 $ 34 $ 27
Interest on projected benefit obligation ..... 232 211 220
Other pension costs .......................... 57 50 43
Less expected return on assets ............... (203) (187) (183)
------ ------ ------

Net pension expense .......................... $ 110 $ 108 $ 107
====== ====== ======

Actual return on assets ...................... $ 398 $ (127) $ 427
====== ====== ======

"Other pension costs" in the above table include principally the
amortization of the net transition obligation and amortization of the cost of
plan amendments.

NOTES TO FINANCIAL STATEMENTS
(Continued)

3. POSTRETIREMENT BENEFITS (continued)

Pension Assets and Liabilities

Included in the Statement of Financial Condition is the minimum pension
liability for certain unfunded pension obligations. The unfunded liability
in excess of the unamortized prior service cost and net transition obligation
was recorded as a reduction in shareowners' equity of $219 million, net of
deferred income taxes of $124 million as of October 31, 1995 and $132
million, net of deferred income taxes of $81 million as of October 31, 1994.
The change in the minimum pension liability at October 31, 1995 resulted
primarily from settlement rate changes, offset partially by investment gains.

The funded status of the Company's plans as of October 31, 1995 and 1994
and a reconciliation with amounts recognized in the Statement of Financial
Condition are provided below.

Plans in Which Plans in Which
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
------------------- -------------------
Millions of dollars 1995 1994 1995 1994
- ----------------------------------------------------------------------------
Actuarial present value of:
Vested benefits .............. $ (51) $ (81) $ (2,612) $ (2,282)
Non-vested benefits .......... (5) (5) (270) (223)
-------- -------- -------- --------
Accumulated benefit
obligation ............... (56) (86) (2,882) (2,505)
Effect of projected future
compensation levels ........ (4) (2) (27) (21)
-------- -------- -------- --------
Projected benefit obligation ... (60) (88) (2,909) (2,526)
Plan assets at fair value ...... 87 118 2,295 1,968
-------- -------- -------- --------
Funded status at October 31 .... 27 30 (614) (558)
Unamortized pension costs:
Net losses ................... 9 7 372 235
Prior service costs .......... 1 14 50 43
(Asset) liability
at date of transition ...... (1) (1) 233 266
Adjustment for the minimum
liability .................... - - (628) (522)
-------- -------- -------- --------
Net asset (liability) .......... $ 36 $ 50 $ (587) $ (536)
======== ======== ======== ========

The weighted average rate assumptions used in determining pension costs
and the projected benefit obligation were:

1995 1994 1993
- ----------------------------------------------------------------------------
Discount rate used to determine present
value of projected benefit obligation
at end of year ......................... 7.8% 9.3% 7.3%
Expected long-term rate of return on
plan assets for the year ............... 9.9% 8.1% 8.8%
Expected rate of increase in future
compensation levels .................... 3.5% 3.5% 3.5%

NOTES TO FINANCIAL STATEMENTS
(Continued)

3. POSTRETIREMENT BENEFITS (continued)

Other Postretirement Benefits

In addition to providing pension benefits, the Company provides health
care and life insurance for a majority of its retired employees, spouses and
certain dependents in the United States and Canada. Under the terms of an
agreement between the Company and its employees, retirees and collective
bargaining organizations, a Plan was implemented in fiscal 1993 which
provided for cost sharing between the Company and participants in the form of
premiums, co-payments and deductibles. A Trust was established to provide a
vehicle for funding the health care liability through Company contributions
and retiree premiums. In October 1993, the Company pre-funded $300 million
of this liability from the partial proceeds of a public offering of Common
Stock. The funds in this Trust are invested primarily in equity securities.
The Company is required to make an additional pre-funding contribution of
$200 million on or prior to June 30, 1998. See also Note 19.

The Company adopted SFAS 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," for its United States and Canadian plans in
1993 and recognized the transition obligation as a one-time non-cash charge
to earnings. The cumulative effect of this change in accounting policy was
$729 million, net of a deferred income tax benefit of $420 million. The $228
million cumulative charge for the changes in accounting policy reported in
the Statement of Income for 1993 includes the $729 million charge from the
adoption of SFAS 106 offset by the $501 million benefit from the adoption of
SFAS 109, as discussed in Note 4.

The components of expense for other postretirement benefits included in
the Statement of Income are as follows:

Millions of dollars 1995 1994 1993
- ----------------------------------------------------------------------------
Service cost for benefits earned during
the year .................................... $ 10 $ 10 $ 12
Interest cost on the accumulated benefit
obligation ................................. 90 81 91
Expected return on assets ..................... (30) (27) (1)
------ ------ ------

Net other postretirement benefits expense ..... $ 70 $ 64 $ 102
====== ====== ======

Actual return on assets ....................... $ 65 $ 12 $ -
====== ====== ======

The funded status of other postretirement benefits as of October 31 is
as follows:

Millions of dollars 1995 1994
- ----------------------------------------------------------------------------
Accumulated other postretirement benefit
obligation (APBO):
Retirees and their dependents ............. $ (729) $ (662)
Active employees eligible to retire ....... (201) (198)
Other active participants ................. (227) (178)
------ ------
Total APBO ................................ (1,157) (1,038)
Plan assets at fair value ................. 364 308
------ ------
APBO in excess of plan assets ............. (793) (730)
Unrecognized net (gain) loss .............. 39 (20)
------ ------
Net liability ............................. $ (754) $ (750)
====== ======

NOTES TO FINANCIAL STATEMENTS
(Continued)

3. POSTRETIREMENT BENEFITS (continued)

Other Postretirement Benefits (continued)

The expected return on plan assets was 10% for 1995 and 9% for 1994 and
1993. The weighted average of discount rates used to determine the
accumulated postretirement benefit obligation was 7.8% and 9.0% at October
31, 1995 and 1994, respectively. For 1996, the weighted average rate of
increase in the per capita cost of covered health care benefits is projected
to be 9.8%. The rate is projected to decrease to 5.0% by the year 2003 and
remain at that level each year thereafter. If the cost trend rate
assumptions were increased by one percentage point for each year, the
accumulated postretirement benefit obligation would increase by approximately
$150 million and the associated expense recognized for the year ended
October 31, 1995 would increase by an estimated $13 million.

4. INCOME TAXES

The Company adopted SFAS 109, "Accounting for Income Taxes," in 1993.
The $228 million cumulative charge for the changes in accounting policy
reported in the 1993 Statement of Income includes a $501 million benefit from
the adoption of SFAS 109. The Income Tax section of Management's Discussion
and Analysis includes disclosures related to the determination of the amount
of the net deferred tax asset included in the Statement of Financial
Condition.

The income tax benefit (expense) for the years ended October 31 is as
follows:

Millions of dollars 1995 1994 1993
- ----------------------------------------------------------------------------
Tax benefit (expense) on income (loss)
of continuing operations:
Manufacturing .............................. $ (76) $ (34) $ 190
Financial Services ......................... (22) (22) (22)
------ ------ ------

Total income tax benefit (expense) of
continuing operations ...................... $ (98) $ (56) $ 168
====== ====== ======

Taxes on income (loss) of continuing operations are analyzed by categories as
follows:

Millions of dollars 1995 1994 1993
- ----------------------------------------------------------------------------
Current:
Federal .................................... $ (7) $ (3) $ -
State and local ............................ (2) (2) (2)
------ ------ ------
Total current (expense) .................. (9) (5) (2)
------ ------ ------

Deferred:
Federal .................................... (77) (44) 149
State and local ............................ (12) (7) 21
------ ------ ------

Total deferred benefit (expense) ......... (89) (51) 170
------ ------ ------

Total income tax benefit (expense)
of continuing operations ................... $ (98) $ (56) $ 168
====== ====== ======

NOTES TO FINANCIAL STATEMENTS
(Continued)

4. INCOME TAXES (continued)

The deferred tax expense does not represent cash payment of income taxes
and was primarily generated by the utilization of net operating loss (NOL)
carryforwards and the increase of temporary differences and will not require
future cash payments.

The domestic and foreign components of income (loss) from continuing
operations before income taxes and the cumulative effect of changes in
accounting policy consist of the following:

Millions of dollars 1995 1994 1993
- ----------------------------------------------------------------------------
Domestic ..................................... $ 251 $ 145 $ (453)
Foreign ...................................... 11 13 12
------ ------ ------

Total income (loss) .......................... $ 262 $ 158 $ (441)
====== ====== ======

The relationship of the tax (expense) benefit to the income (loss) of
continuing operations for 1995, 1994 and 1993 differs from the U.S. statutory
rate (35%) because of state income taxes and benefit of NOLs in foreign
countries. The effective tax rates on the income (loss) of continuing
operations for the years 1995, 1994 and 1993 were 37.4%, 35.4% and 38.1%,
respectively.

Undistributed earnings of foreign subsidiaries were $28 million and $16
million at October 31, 1995 and 1994, respectively. Taxes have not been
provided on these earnings because no withholding taxes are applicable upon
repatriation and U.S. tax would be substantially offset by utilization of NOL
carryforwards.

The following is a summary of deferred tax assets and liabilities at
October 31:

Millions of dollars 1995 1994
- ----------------------------------------------------------------------------
Deferred tax assets:
Total deferred tax assets .................. $1,394 $1,431
Less valuation allowances .................. (307) (297)
------ ------
Net deferred tax assets .................. $1,087 $1,134
====== ======

Deferred tax liabilities,
included in Other Liabilities .............. $ (16) $ (16)
====== ======

NOTES TO FINANCIAL STATEMENTS
(Continued)

4. INCOME TAXES (continued)

The components of the deferred tax asset (liability) at October 31 are
as follows:

Millions of dollars 1995 1994
- ----------------------------------------------------------------------------
United States
- -------------

Deferred tax assets:
Net operating loss carryforwards .......... $ 768 $ 872
Alternative minimum tax ................... 10 3
Product liability .......................... 60 63
Warranty ................................... 42 38
Other liabilities .......................... 170 138
Postretirement benefits .................... 390 347
-------- -------

Total deferred tax assets .............. 1,440 1,461
-------- -------
Deferred tax liabilities:
Prepaid pension assets ..................... (23) (10)
Depreciation ............................... (42) (39)
-------- -------

Total deferred tax liabilities ......... (65) (49)
-------- -------

Total .................................. 1,375 1,412
Less valuation allowance ..................... (288) (278)
-------- -------
Net deferred tax asset ................. $ 1,087 $ 1,134

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

Millions of dollars 1995 1994
- ---------------------------------------------------------------------------

Foreign
- -------

Deferred tax assets:
Net operating loss carryforwards .......... $ - $ 3
Postretirement benefits ................... 19 16
-------- --------
Total deferred tax assets ............... 19 19
Less valuation allowance ...................... (19) (19)
-------- --------
Net deferred tax assets ................... - -

Deferred tax liabilities - prepaid
pension assets .............................. (16) (16)
-------- --------

Net deferred tax liabilities .............. $ (16) $ (16)
======== ========

NOTES TO FINANCIAL STATEMENTS
(Continued)

4. INCOME TAXES (continued)

A valuation allowance has been provided for those net operating loss
carryforwards and temporary differences which are estimated to expire before
they are utilized. Because the foreign tax carryforward period is relatively
short, a full allowance has been provided against the total deferred tax
assets. The valuation allowance increased $10 million during 1995 resulting
from tax benefits associated with a stock acquisition which are not expected
to be realized.

Tax paying entities of the Company offset all deferred tax assets and
liabilities within each tax jurisdiction and present them in a single amount
in the Statement of Financial Condition. Amounts in different tax
jurisdictions cannot be offset against each other. Accordingly, the net U.S.
deferred tax asset is shown in the Statement of Financial Condition as a
deferred tax asset, whereas the net foreign deferred tax liability is
included in the amount shown for Other Liabilities.

At October 31, 1995, the Company had $2,020 million of domestic NOL
carryforwards available to offset future taxable income. Such carryforwards
reflect income tax losses incurred which will expire as follows, in millions
of dollars:

1998 ...................... $ 236
1999 ...................... 29
2000 ...................... 300
2001 ...................... 143
2002 ...................... 47
2004 ...................... 238
2005 ...................... 7
2006 ...................... 128
2007 ...................... 56
2008 ...................... 817
2009 ...................... 19
--------
Total ................ $ 2,020
========

Additionally, the estimated reversal of net temporary differences of
$1,620 million as of October 31, 1995 will create net tax deductions which,
if not utilized previously, will expire subsequent to 2009, as indicated, in
millions of dollars:

Estimated Year Estimated Year
of Reversal Amount of Expiration
-------------- ------ --------------

United States:
1996 ................................... $ 393 2011
1997 ................................... 214 2012
1998 ................................... 17 2013
1999-2003 .............................. 24 2014-2018
2004 and thereafter .................... 924 2019 and thereafter
--------
Total United States .................. 1,572
Canada:
2001 and thereafter .................... 48 2009 and thereafter
--------
$ 1,620
========

NOTES TO FINANCIAL STATEMENTS
(Continued)

5. DISCONTINUED OPERATIONS

In the fourth quarter of 1994, Transportation recorded a $20 million
charge, net of $13 million of income taxes, as a loss of discontinued
operations for environmental liabilities at production facilities of two
formerly owned businesses, Wisconsin Steel and Solar Turbine, Inc. The $33
million pretax charge, which included an $11 million settlement for various
environmental related commercial issues and a $22 million charge for cleanup
costs for these sites, was included in Other Liabilities. See also Note 17.

6. MARKETABLE SECURITIES

The fair value of marketable securities is estimated based on quoted
market prices, when available. If a quoted price is not available, fair
value is estimated using quoted market prices for similar financial
instruments.

Information related to the Company's marketable securities at October 31
is as follows:

1995 1994
------------------ ------------------
Amortized Fair Amortized Fair
Millions of dollars Cost Value Cost Value
- ---------------------------------------------------------------------------
MANUFACTURING
Corporate securities ............... $ 23 $ 23 $ 31 $ 31
U.S. government securities ......... 358 359 125 124
Mortgage and asset-backed securities 33 33 11 11
------ ------ ------ ------

Manufacturing debt securities ...... 414 415 167 166

FINANCIAL SERVICES
Corporate securities ............... 33 33 28 28
U.S. government securities ......... 53 54 67 65
Mortgage and asset-backed securities 32 33 28 28
Foreign government securities ...... 9 9 9 8
------ ------ ------ ------

Financial Services
debt securities .................. 127 129 132 129
Financial Services equity securities 10 11 9 9
------ ------ ------ ------

Financial Services
marketable securities ............ 137 140 141 138
------ ------ ------ ------

Total marketable securities .......... $ 551 $ 555 $ 308 $ 304
====== ====== ====== ======

Gross unrealized gains and losses on marketable securities at
October 31, 1995 and 1994 are not material.

NOTES TO FINANCIAL STATEMENTS
(Continued)

6. MARKETABLE SECURITIES (Continued)

Contractual maturities of marketable debt securities at October 31 are
as follows:
1995 1994
------------------ ------------------
Amortized Fair Amortized Fair
Millions of dollars Cost Value Cost Value
- ---------------------------------------------------------------------------
MANUFACTURING
Due in one year or less ........... $ 98 $ 98 $ 32 $ 32
Due after one year
through five years .............. 283 284 124 123
------ ------ ------ ------
381 382 156 155

Mortgage and asset-backed securities 33 33 11 11
------ ------ ------ ------

Manufacturing debt securities 414 415 167 166
------ ------ ------ ------

FINANCIAL SERVICES
Due in one year or less ........... 22 22 17 17
Due after one year through five years 35 36 61 60
Due after five years through ten years 27 27 17 16
Due after ten years ............... 11 11 9 8
------ ------ ------ ------
95 96 104 101
Mortgage and asset-backed securities 32 33 28 28
------ ------ ------ ------

Financial Services
debt securities ........... 127 129 132 129
------ ------ ------ ------

Total debt securities ............. $ 541 $ 544 $ 299 $ 295
====== ====== ====== ======

Proceeds from sales or maturities of investments in securities were $480
million during 1995 and $621 million during 1994. Gross gains and losses
realized on such sales or maturities were not material for each of the two
years. Shareowners' equity includes an unrealized holding gain of $3
million, net of income taxes, at October 31, 1995 and a loss of $3 million,
net of income taxes, at October 31, 1994. At October 31, 1995 and 1994,
Financial Services' domestic insurance subsidiary had $23 million and $30
million, respectively, of marketable securities on deposit with various state
departments of insurance or otherwise not available. These securities are
included in total marketable securities balances at October 31, 1995 and
1994.

NOTES TO FINANCIAL STATEMENTS
(Continued)

7. RECEIVABLES

Receivables at October 31 are summarized by major classification as
follows:

Millions of dollars 1995 1994
- -------------------------------------------------------------------------
MANUFACTURING
Customers .......................................... $ 200 $ 180
Financial Services ................................. 92 13
Allowance for losses ............................... (18) (17)
-------- --------

Manufacturing receivables, net ................... 274 176
-------- --------

FINANCIAL SERVICES
Retail notes and lease financing ................... 747 514
Wholesale notes .................................... 268 231
Accounts receivable ................................ 388 370
Amounts due from sales of receivables .............. 248 193
Reinsurance balance receivables .................... 31 42
Allowance for losses ............................... (10) (8)
-------- --------
Financial Services receivables, net .............. 1,672 1,342
-------- --------

Eliminations ..................................... (92) (10)
-------- --------

Total receivables, net ............................... $ 1,854 $ 1,508
======== ========

The allowance for losses of Manufacturing includes amounts associated
with receivables financed by Navistar Financial and receivables on products
sold to distributors in export markets.

Reflecting higher consumer demand for light trucks and vans, sales of
mid-range diesel engines to a domestic automobile manufacturer have increased
from 9% of consolidated sales and revenues in 1993 to 10% in 1994 and 12% in
1995.

Financial Services

Navistar Financial purchases the majority of the wholesale notes
receivable and some retail notes and accounts receivable arising from
Transportation's operations in the United States.

A portion of Navistar Financial's funding for retail and wholesale notes
comes from sales of receivables by Navistar Financial to third parties with
limited recourse. Proceeds from sales of retail notes receivable were $727
million in 1995, $995 million in 1994 and $558 million in 1993. Uncollected
sold retail and wholesale receivable balances totalled $1,673 million and
$1,347 million as of October 31, 1995 and 1994, respectively. Navistar
Financial's maximum exposure under all receivable sale recourse provisions at
October 31, 1995 is $210 million which includes holdback reserves of $44
million, subordinated retained interest in securitized receivable sales of
$99 million and $67 million of certain cash deposits established as a
result of the securitized receivables recourse provisions.

NOTES TO FINANCIAL STATEMENTS
(Continued)

7. RECEIVABLES (continued)

Contractual maturities of finance receivables including unearned finance
income at October 31, 1995 are summarized below. Prepayments may cause the
average actual life to be shorter.

Retail Notes and Wholesale Accounts
Millions of dollars Lease Financing Notes Receivable
- -------------------------------------------------------------------------
Gross finance receivables due in:

1996 ........................ $ 239 $ 181 $ 388
1997 ........................ 203 87 -
1998 ........................ 184 - -
1999 ........................ 140 - -
2000 ........................ 92 - -
2001 and thereafter ......... 8 - -
-------- -------- --------

Gross finance receivables ..... 866 268 388
Unearned finance charges ...... 119 - -
-------- -------- --------

Total finance receivables ..... $ 747 $ 268 $ 388
======== ======== ========

NOTES TO FINANCIAL STATEMENTS
(Continued)

8. PROPERTY

At October 31, property includes the following:

Millions of dollars 1995 1994
- -------------------------------------------------------------------------
MANUFACTURING
Land ............................................... $ 11 $ 8
-------- --------

Buildings, machinery and equipment at cost:
Plants ........................................... 1,223 1,070
Distribution ..................................... 75 71
Other ............................................ 90 78
-------- --------

Subtotal ....................................... 1,388 1,219
-------- --------

Total property ..................................... 1,399 1,227
Less accumulated depreciation and amortization ..... (757) (678)
-------- --------
Manufacturing property, net .................... 642 549
-------- --------

FINANCIAL SERVICES
Total property ..................................... 48 35
Less accumulated depreciation and amortization ..... (7) (6)
-------- --------

Financial Services property, net ................. 41 29
-------- --------

Total property and equipment, net .................... $ 683 $ 578
======== ========

Included in the gross property of Manufacturing is property under
capitalized lease obligations of $24 million at October 31, 1995 and $27
million at October 31, 1994.

9. INVENTORIES

Inventories at October 31 are as follows:

Millions of dollars 1995 1994
- -------------------------------------------------------------------------
Finished products .................................... $ 167 $ 169
Work in process ...................................... 91 103
Raw materials and supplies ........................... 158 157
-------- --------

Total inventories .................................... $ 416 $ 429
======== ========

NOTES TO FINANCIAL STATEMENTS
(Continued)

10. LEASES

The Company has long-term noncancellable leases for use of various
equipment and facilities. Lease terms are generally for 5 to 25 years and in
many cases provide for renewal options. The Company is generally obligated
for the cost of property taxes, insurance and maintenance.

The Company leases office buildings, distribution centers, furniture and
equipment, machinery and equipment and computer equipment. Total operating
lease expense was $42 million in 1995, $38 million in 1994 and $35 million in
1993. Income received from sublease rentals was $6 million in 1995, 1994
and 1993.

At October 31, 1995, consolidated future minimum lease payments required
under capital and noncancellable operating leases having lease terms in
excess of one year are as follows:

Capital Operating
Millions of dollars Leases Leases
- -------------------------------------------------------------------------
1996 ................................................. $ 3 $ 35
1997 ................................................. 3 32
1998 ................................................. 3 31
1999 ................................................. 3 30
2000 ................................................. 3 30
Thereafter ........................................... 5 78
-------- --------

Total minimum payments ............................... 20 $ 236
Less imputed interest ................................ (7) ========
--------
Present value of minimum lease payments ............ $ 13
========

Future income from subleases ...................... $ 26
========

NOTES TO FINANCIAL STATEMENTS
(Continued)

11. ACCOUNTS PAYABLE

Major classifications of accounts payable at October 31 are as follows:

Millions of dollars 1995 1994
- -------------------------------------------------------------------------
MANUFACTURING
Trade .............................................. $ 857 $ 776
Other .............................................. 19 3
-------- --------
Manufacturing accounts payable ................... 876 779
-------- --------

FINANCIAL SERVICES
Other .............................................. 57 57
Manufacturing ...................................... 89 13
-------- --------
Financial Services accounts payable .............. 146 70
-------- --------

Eliminations ......................................... (89) (13)
-------- --------

Total accounts payable ............................... $ 933 $ 836
======== ========

12. OTHER LIABILITIES

Major classifications of other liabilities at October 31 are as follows:

Millions of dollars 1995 1994
- -------------------------------------------------------------------------
MANUFACTURING
Product liability and warranty .................... $ 294 $ 288
Employee incentive programs ....................... 104 35
Payroll, commissions and employee related benefits. 91 94
Long-term disability .............................. 55 46
Taxes ............................................. 45 44
Environmental ..................................... 25 31
Other ............................................. 197 171
-------- --------
Manufacturing other liabilities ................. 811 709
-------- --------

FINANCIAL SERVICES
Loss reserves and unearned premiums ............... 118 136
Interest .......................................... 12 11
Other ............................................. 27 18
-------- --------
Financial Services other liabilities ............ 157 165
-------- --------

Eliminations ........................................ (3) 3
-------- --------

Total other liabilities ............................. $ 965 $ 877
======== ========

NOTES TO FINANCIAL STATEMENTS
(Continued)

13. DEBT

Millions of dollars 1995 1994
- -------------------------------------------------------------------------

MANUFACTURING
Notes payable and current maturities
of long-term debt ............................... $ 10 $ 3
-------- --------

6 1/4% Sinking Fund Debentures, due 1998 .......... 6 7
9% Sinking Fund Debentures, due 2004 .............. 60 65
8% Secured Note, due 2002 secured by plant assets . 31 37
Capitalized leases/other .......................... 20 15
-------- --------
Total long-term debt ............................ 117 124
-------- --------
Manufacturing debt .................................. 127 127
-------- --------

FINANCIAL SERVICES
Commercial paper ................................. 50 19
Bank borrowings .................................. - 400
Current maturities of long-term debt ............. 118 100
-------- --------
Total short-term debt ........................ 168 519
-------- --------

Senior Debentures and Notes
9.5% medium-term, due 1996 ..................... - 117
Asset-backed commercial paper program,
variable rate, due October 1998 ................ 302 -
Bank revolver, variable rate, due October 1998 ... 760 355
-------- --------
Total senior debt .............................. 1,062 472
-------- --------

Subordinated Term Debt - Senior notes, 8 7/8%,
due November 1998 .............................. 100 100
-------- --------
Total long-term debt ........................... 1,162 572
-------- --------
Financial Services debt .......................... 1,330 1,091
-------- --------

Total debt ......................................... $ 1,457 $ 1,218
======== ========

Navistar Financial issues commercial paper with varying terms and has
short-term borrowings with various banks on a non-committed basis.
Compensating cash balances and commitment fees are not required under these
borrowings.

NOTES TO FINANCIAL STATEMENTS
(Continued)

13. DEBT (continued)

The aggregate annual maturities and sinking fund requirements for debt
for the years ended October 31 are as follows:

Financial
Millions of dollars Manufacturing Services Total
- ------------------------------------------------------------------------
1996 .......................... $ 10 $ 168 $ 178
1997 .......................... 19 - 19
1998 .......................... 20 1,062 1,082
1999 .......................... 17 100 117
2000 .......................... 16 - 16
Thereafter .................... 45 - 45
-------- -------- --------

Weighted average interest rate on debt including the effect of
discounts and related amortization:
1995 ...................... 9.0% 7.4% 7.6%
1994 ...................... 8.7% 7.1% 7.3%

In November 1994, Navistar Financial amended and restated its $727
million bank revolving credit agreement extending the scheduled maturities
for 1996 to October 31, 1998 and expanding the commitment to $900 million.
In addition, the commitments to sell retail notes under the $600 million
retail notes purchase facility agreement were terminated and Navistar
Financial established a $300 million asset-backed commercial paper (ABCP)
program backed by a $300 million bank liquidity facility which terminates
October 31, 1998. The amended revolving credit facility removes dividend
restrictions, provides that Navistar Financial maintain certain covenant
requirements and grants security interests in substantially all of its assets
consistent with the previous credit agreement. Facility fees will be paid
quarterly regardless of usage.

Under the terms of the ABCP program, a special purpose wholly-owned
subsidiary of Navistar Financial will purchase retail notes and lease
receivables. All assets of the subsidiary will be pledged or sold to a trust
that will fund the receivables with investment grade commercial paper.
Navistar Financial will pay a commitment fee on the unused portion of the
$300 million ABCP liquidity facility.

Available funding under the amended and restated credit agreement and
ABCP program was $148 million, of which $50 million was used to back short-
term debt at October 31, 1995. The remaining $98 million when combined with
unrestricted cash and cash equivalents made $101 million available to fund
the general business purposes of Navistar Financial at October 31, 1995.

NOTES TO FINANCIAL STATEMENTS
(Continued)

13. DEBT (continued)

Navistar Financial's wholly-owned subsidiaries, Navistar Financial
Retail Receivables Corporation (NFRRC) and Navistar Financial Securities
Corporation (NFSC), have a limited purpose of purchasing retail and wholesale
receivables, respectively, and transferring an undivided ownership interest
in such notes to investors in exchange for pass-through notes and
certificates. The subsidiaries have limited recourse on the sold
receivables and their assets are available to satisfy the claims of their
creditors prior to such assets becoming available to Navistar Financial or
affiliated companies.

NFSC utilizes a revolving wholesale note sales trust providing for the
continuous sale of wholesale notes on a daily basis. In June 1995, the
Navistar Financial Dealer Note Master Trust issued an additional $200 million
of 9.3 year asset-backed certificates to the public increasing the sales
trust from $300 million to $500 million. The net proceeds of $195 million
were used by Navistar Financial for general working capital purposes. Under
the terms of the sale, the amount subordinated to the investors' interest
increased from $47 million to $87 million. These sales trusts comprise three
$100 million pools of notes maturing serially from 1997 to 1999 and a $200
million pool maturing in 2004.

During 1995, Navistar Financial sold $740 million of retail notes, net
of unearned finance income, through NFRRC in two separate sales to two
individual owner trusts which, in turn, sold $714 million of notes and $26
million of certificates to investors. The net proceeds of $738 million were
used by Navistar Financial for general working capital purposes and to
establish a $45 million reserve account with the trust. At October 31, 1995,
the remaining shelf registration available to NFRRC for issuance of asset-
backed securities was $1,430 million.

In November 1995, Navistar Financial sold $525 million of retail notes
through NFRRC. The net proceeds of $524 million were used for general
working capital purposes and to establish a $25 million reserve account with
the trust. On November 14, 1995, NFRRC filed an additional registration with
the Securities and Exchange Commission providing for the issuance from time
to time of an additional $2,000 million of asset-backed securities.

NOTES TO FINANCIAL STATEMENTS
(Continued)

14. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The carrying amounts of financial instruments, as reported in the
Statement of Financial Condition and described in various Notes to the
Financial Statements, and their fair values at October 31, are as follows:

1995 1994
------------------ ------------------
Carrying Fair Carrying Fair
Millions of dollars Amount Value Amount Value
- ---------------------------------------------------------------------------
Receivables, net .................. $1,854 $1,867 $1,508 $1,504
Investments and other assets ...... 166 166 165 187
Debt .............................. 1,457 1,460 1,218 1,215

Cash and cash equivalents approximate fair value. The cost and fair
value of marketable securities are disclosed in Note 6.

Manufacturing's customer receivables and Navistar Financial's wholesale
notes and retail and wholesale accounts and other variable-rate retail notes
approximate fair value as a result of the short-term maturities of the
financial instruments. The fair value of Navistar Financial's truck retail
notes is estimated based on quoted market prices of similar sold receivables.
The fair value of amounts due from sales of receivables is estimated by
discounting expected cash flows at estimated current market rates.

The fair value of investments and other assets is estimated based on
quoted market prices or by discounting future cash flows.

The short-term debt and variable-rate borrowings under Navistar
Financial's bank revolving credit agreement, which is repriced frequently,
approximate fair value. The fair value of long-term debt is estimated based
on quoted market prices, when available. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
financial instruments or discounting future cash flows.

NOTES TO FINANCIAL STATEMENTS
(Continued)

14. FINANCIAL INSTRUMENTS (continued)

Derivatives Held or Issued for Purposes Other Than Trading

Derivatives are used by the Company to transfer or reduce risks in
foreign exchange and purchase transactions, reduce interest rate risks and
potentially increase the return on invested funds.

During the fourth quarter of 1995, Manufacturing entered into three
forward contracts to hedge its foreign exchange exposure to the Canadian
dollar on firm commitments. These foreign currency contracts were valued at
$33 million as of October 31, 1995 and mature within three months of
origination. Gains or losses on these contracts are recognized at the
completion of the related contract. In addition, collateralized mortgage
obligations (CMOs) are purchased that have pre-determined fixed-principal
payment patterns that are relatively certain. Manufacturing had $33 million
of CMOs in its investment portfolio at October 31, 1995. At October 31,
1995, the unrecognized loss on the three forward contracts and the CMOs was
not material.

Navistar Financial manages its exposure to fluctuations in interest
rates by limiting the amount of fixed rate assets funded with variable rate
debt, by selling fixed rate retail receivables on a fixed rate basis and, to
a lesser extent, by utilizing financial derivative instruments. These
instruments may include interest rate swaps, interest rate caps and forward
interest rate contracts. Navistar Financial enters into forward interest
rate contracts to manage its exposure to fluctuations in funding costs from
the anticipated securitization and sale of retail notes.

During 1995, there were no swap agreements outstanding and only one
interest rate cap purchased in 1985 for a notional amount of $50 million
which serves to hedge the interest cost of variable rate debt. The premium
paid for this interest rate cap agreement has been fully amortized to
interest expense. The effect of this cap on Navistar Financial's interest
expense was not material.

Between June and October 1995, Navistar Financial entered into $325
million of forward interest rate lock agreements on a Treasury note maturing
in 1997 related to the anticipated November 1995 sale of retail receivables.
These hedge agreements were closed on October 18, 1995, and the loss, which
was not material, was deferred and included in the gain recognized on the
sale of receivables in November 1995.

Financial Services' insurance companies use CMOs and foreign exchange
future contracts to increase the yield on their investment portfolio. These
instruments totalled $37 million at October 31, 1995. At October 31, 1995,
the unrecognized gain on the CMOs and the foreign exchange future contracts
was not material.

NOTES TO FINANCIAL STATEMENTS
(Continued)

15. COMMITMENTS, CONTINGENT LIABILITIES AND RESTRICTIONS ON ASSETS

At October 31, 1995, commitments for capital expenditures in progress
were approximately $56 million.

At October 31, 1995, the Canadian operating subsidiary was contingently
liable for retail customers' contracts and leases financed by a third party.
The Company is subject to maximum recourse of $150 million on retail
contracts and $11 million on retail leases. In addition, as of October 31,
1995, the Company is contingently liable for approximately $47 million for
various guarantees, buyback programs and performance bonds; however, based on
historical loss trends, the Company's exposure is not considered material.

The Canadian operating subsidiary and certain subsidiaries included in
Financial Services are parties to agreements which restrict the amounts which
can be distributed to Transportation in the form of dividends or loans and
advances which can be made. As of October 31, 1995, these subsidiaries had
$410 million of net assets of which $212 million was restricted as to
distribution.

The Company and Transportation are obligated under certain agreements
with public and private lenders of Navistar Financial to maintain the
subsidiary's income before interest expense and income taxes at not less than
125% of its total interest expense. No income maintenance payments were
required for the three years ended October 31, 1995.

16. LEGAL PROCEEDINGS

In May 1993, a jury issued a verdict in favor of Vernon Klein Truck &
Equipment, Inc. (Klein Truck) and against Transportation in the amount of $11
million in compensatory damages and $15 million in punitive damages. The
Company appealed the verdict and in order to do so was required to post a
bond collateralized with $30 million in cash. In November 1994, the Court of
Appeals of the State of Oklahoma reversed the verdict and entered judgment in
favor of Transportation on virtually all aspects of the case. Klein Truck
appealed to the Oklahoma Supreme Court where the case is now pending. The
bond and the related collateral will be released when the order of the
Oklahoma Supreme Court is filed.

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

NOTES TO FINANCIAL STATEMENTS
(Continued)

17. ENVIRONMENTAL MATTERS

In the fourth quarter of 1994, Transportation recorded a $20 million
charge, net of $13 million of income taxes, as a loss of discontinued
operations. The $33 million pretax charge consists of an $11 million
payment to be made to the Economic Development Administration (EDA) and a $22
million charge for cleanup costs at production facilities of two formerly
owned businesses: Wisconsin Steel and Solar Turbine, Inc.

Transportation and the EDA, a division of the U.S. Department of
Commerce, reached an agreement in the fourth quarter of 1994 in settlement of
commercial and environmental disputes related to the Wisconsin Steel
property. EDA and Transportation became 90% and 10% beneficiaries,
respectively, of a trust which was created after the party that purchased
Wisconsin Steel filed for bankruptcy. At the time of bankruptcy, EDA had
guaranteed repayment of 90% and Transportation of 10% of loans made to
Wisconsin Steel. The settlement provides that EDA transfer its interest in
the trust to Transportation, which in turn will assume responsibility for
completing the investigation of the environmental condition at the site and
for any cleanup work that may be necessary. Transportation has agreed to pay
EDA $11 million to settle various commercial issues as well as reimburse them
for a portion of environmental response costs spent by EDA. The U.S.
Department of Justice must approve the final settlement before the interest
in the trust, or the property, is transferred to Transportation. At October
31, 1995, a final consent decree remained subject to approval by the U.S.
Department of Justice and by Transportation.

An agreement with Solar was signed during the third quarter of 1995.

The Company has been named a potentially responsible party (PRP), in
conjunction with other parties, in a number of cases arising under an
environmental protection law known as the Superfund law. These cases involve
sites which allegedly have received wastes from current or former Company
locations. Based on information available to the Company, which in most
cases consists of data related to quantities and characteristics of material
generated at or shipped to each site as well as cost estimates from PRPs
and/or Federal or State regulatory agencies for the cleanup of these sites, a
reasonable estimate is calculated of the Company's share, if any, of the
costs and is provided for in the financial statements. The Company believes
that, based on these calculations, its share of the potential additional
costs for the cleanup of each site, other than the Wisconsin Steel and Solar
sites, will not have a material effect on the Company's financial results.
The Company reviews its accruals on a regular basis.

NOTES TO FINANCIAL STATEMENTS
(Continued)

18. PREFERRED AND PREFERENCE STOCKS

The Company's Nonconvertible Junior Preference Stock Series A is held
for the Retiree Supplemental Benefit Program by the Supplemental Trust which
is currently entitled to elect two members to the Company's Board of
Directors. The United Automobile, Aerospace and Agricultural Implement
Workers of America (UAW) holds the Nonconvertible Junior Preference Stock
Series B and is currently entitled to elect one member of the Company's Board
of Directors. At October 31, 1995, there was one share each of Series A and
Series B Preference stock authorized and outstanding. The value of the
preference shares is minimal.

Other information pertaining to preferred and preference stocks
outstanding is summarized as follows:

Series G Convertible Series D Convertible
Cumulative Preferred Junior Preference
- ----------------------------------------------------------------------------

Number authorized ............ 4,800,000 3,000,000
Number issued ................ 4,800,000 3,000,000

Optional redemption price and $50 per share $25 per share
liquidation preference ..... plus accrued plus accrued
dividends dividends

Conversion rate per share
into Common Stock
(subject to adjustment in
certain circumstances) ..... 0.133 shares 0.3125 shares

Ranking as to dividends
and upon liquidation ....... Senior to all other Senior to Common;
equity securities junior to Series G

Dividend rate ................ Annual rate of $6.00 120% of the cash
per share, dividends on
payable quarterly Common Stock as
declared on a
common equivalent
basis

Dividends may be paid out of surplus as defined under Delaware corporation
law. At October 31, 1995, the Company had such defined surplus of $857
million.
- ----------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS
(Continued)

19. COMMON STOCK

Common Stock

The Company has authorized 110 million shares of Common Stock with a par
value of $.10 per share. Common shares outstanding exclude Common Stock held
in treasury in the amount of 1,424,038 and 667,241 shares at October 31, 1995
and 1994, respectively. Included in the shares of Common Stock outstanding
are 319,332 shares of restricted stock which have been issued in accordance
with the provisions of the 1988 and 1994 Performance Incentive Plans. The
market value of the restricted stock at the date of grant is recorded as
unearned stock compensation in Shareowners' Equity and amortized to expense
over the minimum periods of restriction. Unearned stock compensation was $4
million and $3 million at October 31, 1995 and 1994, respectively.

In October 1993, the Company completed a public offering of 23,600,000
Common shares which realized gross and net proceeds of $516 million and $492
million, respectively.

Class B Common Stock

The Company has authorized 26,000,000 shares of Class B Common Stock of
which 25,641,545 shares, originally valued at $513 million, were contributed
in 1993 to a separate independent retiree Supplemental Trust. The Class B
Common Stock has a par value of $.10 per share and also has restricted voting
rights and transfer provisions. The per share value was determined by the
closing price of the Common Stock on the New York Stock Exchange on the
contribution date, less a discount factor of 20% reflecting restrictions on
voting and transfer rights and for a control premium.

The circumstances are limited under which the Supplemental Trust can
transfer or sell Class B Common Stock and any Class B Common Stock
transferred or sold will convert automatically into Common Stock. Any
remaining Class B Common Stock will convert into Common Stock on June 30,
1998. During 1995 and 1994, the Company repurchased 742,255 and 511,173,
respectively, of Class B Common shares which were converted to Common Stock
and are held in treasury.

Dividends on common stock

All shares of Common Stock and Class B Common Stock share equally in
dividends except that stock dividends are payable in shares of Common Stock
to holders of that class and in Class B Common Stock to holders of that
class. Upon liquidation, all shares of Common Stock and Class B Common Stock
are entitled to share equally in the assets of the Company available for
distribution to the holders of such shares. Dividends may be paid out of
surplus as defined under Delaware corporation law.

NOTES TO FINANCIAL STATEMENTS
(Continued)

20. STOCK COMPENSATION PLANS

The Navistar 1994 Performance Incentive Plan (Incentive Plan), which
replaced the Navistar 1988 Performance Incentive Plan, provides for the
granting of stock options and restricted stock to key employees as determined
by the Committee on Organization of the Board of Directors (Committee).
Under the Incentive Plan, one percent of the outstanding shares of Common
Stock as of the end of the preceding year are reserved for issue each year.
Any amount not used in one year may be used in the following year. Shares to
be used under the Incentive Plan will be either shares authorized, but
previously unissued, or shares reacquired by the Company.

The Incentive Plan includes the granting of two types of stock option
awards, non-qualified options and incentive options. Non-qualified and
incentive options, which may be granted by the Committee in amounts and at
times as it may determine, have a term of not more than ten years and one day
and ten years, respectively, and are exercisable at a price equal to the fair
market value of the stock on the day of the grant. Generally, these options
are not exercisable during the first year. Payment for the exercise of any of
the options may be made by cash or by delivering, at fair market value,
shares of Common Stock already owned by the option-owner or by a combination
of cash and shares.

The following table summarizes changes in Common Stock under option
plans for the years ended October 31:

Number of shares 1995 1994 1993
- ----------------------------------------------------------------------------

Outstanding at beginning of the year ..... 1,146,154 639,234 675,269
Granted .................................. 635,900 614,560 2,500
Exercised ................................ - (8,850) (13,340)
Terminated ............................... (43,750) (98,790) (25,195)
--------- --------- --------
Outstanding at end of the year ........... 1,738,304 1,146,154 639,234
========= ========= ========

Exercisable at October 31 ................ 1,122,804 554,374 636,984
========= ========= =======

Available for grant ...................... - 146,406 346,839
========= ========= =======

Average price per share
- ----------------------------------------------------------------------------

Outstanding at October 31 ................ $ 51 $ 52 $ 56
Granted .................................. $ 12 $ 19 $ 25
Exercised ................................ $ - $ 22 $ 22

NOTES TO FINANCIAL STATEMENTS
(Continued)

21. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------- -------------
(Millions of dollars,
except per share data) 1995 1994 1995 1994 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------

Sales and revenues .... $1,416 $1,139 $1,640 $1,395 $1,514 $1,254 $1,772 $1,549
====== ====== ====== ====== ====== ====== ====== ======

Manufacturing
gross margin ........ 12.4% 13.1% 14.0% 11.9% 14.0% 12.7% 14.4% 13.5%
====== ====== ====== ====== ====== ====== ====== ======

Net income ............ $ 23 $ 16 $ 46 $ 23 $ 39 $ 20 $ 56 $ 23
Net income
per common share..... $ .21 $ .12 $ .52 $ .21 $ .43 $ .17 $ .66 $ .22

Market price range
- Common stock
High ............ $17 1/2 $27 5/8 $16 3/8 $26 $16 5/8 $19 1/4 $15 1/8 $16 5/8
Low ............. $12 3/4 $22 3/8 $12 1/4 $19 3/8 $13 7/8 $12 3/8 $ 9 1/4 $12 1/2

Transactions between Manufacturing and Financial Services
operations have been eliminated from the consolidated financial
results. See also Note 1. Net income per common share is
computed independently based on the weighted average number of
Common and Class B Common shares at the end of each quarter.
Therefore, the sum of the quarterly earnings per share does not
equal the total for the year.

TEN YEAR SUMMARY OF SELECTED FINANCIAL AND STATISTICAL DATA
-------------------------------------------------------------------------------------------------
For the Years Ended October 31
(Millions of dollars,
except per share data) 1995 1994 1993 1992
-------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS

Total sales and revenues ......................... $ 6,342 $ 5,337 $ 4,721 $ 3,897

Net income (loss) of continuing operations ....... $ 164 $ 102 $ (273) $ (147)

Net income (loss) ................................ $ 164 $ 82 $ (501) $ (212)

Income (loss) per common share
of continuing operations ....................... $ 1.83 $ .99 $ (8.63) $ (6.97)

Net income (loss) per common share ............... $ 1.83 $ .72 $(15.19) $ (9.55)

Average number of Common, Class B Common
and dilutive common equivalent shares
outstanding (millions) ......................... 74.3 74.6 34.9 25.3
------------------------------------------------------------------------------------------------
FINANCIAL DATA

Total assets ..................................... $ 5,566 $ 5,047 $ 5,060 $ 3,627

Debt
Manufacturing ................................. $ 127 $ 127 $ 175 $ 187
Financial Services ............................ 1,330 1,091 1,199 1,218
------- ------- ------- -------
Total debt ....................................... $ 1,457 $ 1,218 $ 1,374 $ 1,405

Shareowners' equity .............................. $ 870 $ 817 $ 775 $ 338

Total Manufacturing debt as a percent of total
Manufacturing capitalization ................... 12.7% 13.4% 18.4% 35.6%
Return on equity (a) ............................. 18.9% 12.5% (35.2)% (43.5)%
------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA

Capital expenditures ............................. $ 139 $ 87 $ 110 $ 55
Engineering and research expense ................. $ 113 $ 97 $ 94 $ 92
------------------------------------------------------------------------------------------------
OPERATING DATA

North American market share (b) .................. 26.7% 27.0% 27.6% 28.4%
Unit shipments
Trucks ......................................... 110,200 95,000 87,200 73,200
OEM engines .................................... 156,100 130,600 118,200 97,400
Service parts sales .............................. $ 730 $ 714 $ 632 $ 571

<FN>
(a) Return on equity is calculated based on income of continuing operations.

(b) Based on retail deliveries of medium trucks (Classes 5, 6 and 7), including school buses,
and heavy trucks (Class 8) in the United States and Canada.

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

1991 1990 1989 1988 1987 1986
- ---------------------------------------------------------------------

$ 3,496 $ 3,903 $ 4,296 $ 4,321 $ 3,752 $ 3,632

$ (165) $ (11) $ 87 $ 259 $ 146 $ 2

$ (165) $ (11) $ 87 $ 244 $ 33 $ 2

$ (7.71) $ (1.56) $ 2.28 $ 8.94 $ 5.00 $ (1.40)

$ (7.71) $ (1.56) $ 2.28 $ 8.36 $ .30 $ (1.40)

25.1 25.2 25.6 25.7 23.9 8.9
- ---------------------------------------------------------------------

$ 3,443 $ 3,795 $ 3,609 $ 4,037 $ 3,287 $ 3,372

$ 154 $ 164 $ 176 $ 194 $ 206 $ 758
1,052 1,217 1,199 1,303 1,048 1,081
------- ------- ------- ------- ------- -------
$ 1,206 $ 1,381 $ 1,375 $ 1,497 $ 1,254 $ 1,839

$ 577 $ 815 $ 914 $ 866 $ 643 $ 53

21.1% 16.8% 16.1% 18.2% 24.2% 93.5%
(28.6)% (1.3)% 9.5% 29.9% 22.7% 3.8%
- ---------------------------------------------------------------------

$ 77 $ 182 $ 118 $ 127 $ 110 $ 70
$ 87 $ 84 $ 91 $ 80 $ 79 $ 62
- ---------------------------------------------------------------------

29.3% 27.2% 27.1% 26.7% 25.8% 26.8%

70,200 80,200 90,200 95,900 84,900 82,200
74,800 100,900 106,700 95,400 81,700 90,700
$ 530 $ 558 $ 544 $ 540 $ 480 $ 450

INFORMATION FOR OUR INVESTORS

About Your Stock

Navistar International Corporation Common Stock is listed on the New
York, Chicago and Pacific Stock Exchanges and is quoted as "Navistar" in
stock table listings in daily newspapers. The abbreviated stock symbol is
"NAV."

The stock transfer agent who can answer inquiries about your Navistar
International Corporation Common Stock such as name changes, changes of
address or missing certificates is: Harris Trust and Savings Bank, 311 West
Monroe Street, 11th Floor, Chicago, Illinois 60606; Telephone: (312) 461-
3932.

For information about other shareowner matters, contact: Investor
Relations, Navistar International Corporation, 455 North Cityfront Plaza
Drive, Chicago, Illinois 60611; Telephone: (312) 836-2143.

There were approximately 66,284 owners of Common Stock at October 31,
1995.

Annual Meeting

The 1996 Annual Meeting of Shareowners is scheduled to take place at
10:15 a.m., CST on March 20, 1996, at the Art Institute of Chicago in the
Arthur Rubloff Auditorium.

Shareowners are invited to attend this meeting, take part in discussions
of Company affairs and meet personally with the directors and officers
responsible for the operations of Navistar.

A Proxy Statement and Form of Proxy will be mailed to each shareowner on
or about January 26, 1996.

Commitment to Equal Employment Opportunity

Navistar International Corporation has a longstanding commitment to
equal employment opportunity dating back to 1919 when the Company issued its
first written statement against discrimination in the workplace.

Today, Navistar continues to comply with all federal, state and local
employment laws; provides equal opportunity to all employees and applicants
for employment; and prohibits discrimination in all employment practices
because of age, race, sex, religion, national origin, disability, or veteran
status.

Corporate Headquarters

The corporate offices of Navistar International Corporation and its
principal subsidiary, Navistar International Transportation Corp., are
located at 455 North Cityfront Plaza Drive, Chicago, Illinois 60611;
Telephone: (312) 836-2000.

Reports and Publications

This Annual Report includes a substantial portion of the financial
information and certain other data required to be filed with the Securities
and Exchange Commission.

A copy of the Company's 1995 Annual Report on Form 10-K to the
Securities and Exchange Commission will be provided, without charge, to
shareowners upon written request to the Corporate Secretary, Corporate
Headquarters, after January 31, 1996.

In order to provide shareowners with immediate access to financial
information and news about the Company, Navistar distributes its corporate
news releases through PR Newswire, an electronic news service, and files its
financial statements with the Securities and Exchange Commission
electronically through the EDGAR system. PR Newswire and EDGAR can be
accessed by computer via the Internet, and through such services as America
On-Line and CompuServe. In addition, this information can be accessed
through such databases and information services as Lexis/Nexus, Dow Jones and
Bloomberg, which frequently are available at libraries and brokerage firms.

Navistar also offers a toll-free, "Company News on Call" service, which
allows shareowners to receive copies of recent Navistar corporate news
releases via telefax. To access this service, call (800) 758-5804, and enter
Navistar's six digit code when prompted: 103895. Using a touch-tone phone,
shareowners can select from a menu of news releases and request specific news
releases to be faxed directly to them.

Navistar encourages shareowners to take advantage of these electronic
databases and the Company News on Call" service to access the Company's
quarterly financial results on the same day that the results are announced.
Navistar's fiscal 1996 quarterly financial results will be announced on the
following dates:

First quarter February 14, 1996
Second quarter May 15, 1996
Third quarter August 14, 1996
Fourth quarter December 4, 1996

News releases, Form 10-Qs, Navistar's Annual Environmental Health &
Safety Report, and other publications are available by writing:

Corporate Communications
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611

Trademarks

Navistar logotype and Navistar are registered trademarks of Navistar
International Corporation. The Diamond Road symbol and International are
registered trademarks of Navistar International Transportation Corp.

Directors and Officers
(As of December 31, 1995)

- -------------------------------------------------------------------------------------------------------------------------------
NAVISTAR INTERNATIONAL
NAVISTAR INTERNATIONAL CORPORATION TRANSPORTATION CORP.
- -------------------------------------------------------------------------------------------------------------------------------

Board of Directors Principal Officers Principal Officers
- ------------------------------------------------------------------ ---------------------------- -----------------------------

James C. Cotting Jerry E. Dempsey John R. Horne John R. Horne
Chairman of the Board Chairman President Chairman, President
Navistar International and Chief Executive Officer and Chief Executive Officer and Chief Executive Officer
Corporation PPG Industries Inc. Robert C. Lannert Robert C. Lannert
William F. Andrews Diversified Global Manufacturer Executive Vice President Executive Vice President
Chairman of Glass, Protective Coatings and Chief Financial Office and Chief Financial Officer
Schrader Inc. and Chemicals Robert A. Boardman
Manufacturer of Tire Valves John F. Fiedler Senior Vice President
and Automotive Accessories President and General Counsel Group Vice Presidents
Chairman and Chief Executive Officer Thomas M. Hough
Scovill Fasteners, Inc. Borg Warner Automotive, Inc. Vice President John J. Bongiorno
Manufacturer of Apparel Supplier of Engineered and Treasurer General Manager
and Industrial Fasteners Components and Systems, J. Steven Keate Financial Services
Wallace W. Booth primarily for Automotive Vice President David J. Johanneson
Retired Chairman Drivetrain Applications and Controller Truck Businesses
and Chief Executive Officer Mary Garst Steven K. Covey James T. O'Dare, Jr.
Ducommun Incorporated Manager, Cattle Division Corporate Secretary Sales and Distribution
Manufacturer of Garst Company Daniel C. Ustian
Components and Assemblies Agri-Business Company General Manager
for the Aerospace Industry Charles A. Haggerty Engine and Foundry
Dr. Andrew F. Brimmer Chairman Dennis W. Webb
President and Chief Executive Officer International Operations
Brimmer & Company, Inc. Western Digital Corporation
Economic and Financial Manufacturer of Disk Drives
Consulting and Integrated Circuits Senior Vice Presidents
Richard F. Celeste Dr. Arthur G. Hansen
Managing General Partner Educational Consultant Robert A. Boardman
Celeste & Sabety, Ltd. President Emeritus General Counsel
Public Policy Consulting Firm Purdue University John M. Sheahin
John D. Correnti John R. Horne Employee Relations
Chief Executive Officer, President and Administration
President and Vice Chairman and Chief Executive Officer
Nucor Corporation Navistar International
Steel Manufacturer Corporation Vice Presidents
William C. Craig Robert C. Lannert
Former Executive Vice President Executive Vice President Kirk A. Gutmann
Mack Trucks and Chief Financial Officer Truck Engineering
Manufacturer of Trucks Navistar International Thomas M. Hough
Corporation Treasurer
Walter J. Laskowski J. Steven Keate
International Vice President Controller
of the UAW Robert I. Morrison
Corporate Development
Thomas E. Rigsby
Truck Manufacturing
James L. Simonton
Materials Management
Dean P. Stanley
Quality Management
and Technology
Brian B. Whalen
Public Affairs

Secretary

Gregory Lennes
Committees of the Board
- ---------------------------------------------------------------------------------------------------------------------------------

Executive Committee Finance Committee Public Policy Committee
James C. Cotting, Chair Jerry E. Dempsey, Chair Mary Garst, Chair
Wallace W. Booth Wallace W. Booth William F. Andrews
Andrew F. Brimmer Andrew F. Brimmer Andrew F. Brimmer
William C. Craig James C. Cotting Richard F. Celeste
Jerry E. Dempsey William C. Craig Walter J. Laskowski
Mary Garst Walter J. Laskowski
John R. Horne
Walter J. Laskowski

Committee on Organization Audit Committee
Wallace W. Booth, Chair Andrew F. Brimmer, Chair
William F. Andrews Richard F. Celeste
John D. Correnti John D. Correnti
William C. Craig Mary Garst
Jerry E. Dempsey Charles A. Haggerty
Charles A. Haggerty Arthur G. Hansen
Arthur G. Hansen