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corresp040105

[Navistar Letterhead]

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April 1,
2005

      Mr.
      Joseph A. Foti

      Senior
      Assistant Chief Accountant

      U.S.
      Securities and Exchange Commission

      Ms.
      Jean Yu

      Staff
      Accountant

      U.S.
      Securities and Exchange Commission

Dear Ms.
Yu and Mr. Foti:

On behalf
of Navistar International Corporation (the company), this letter responds to
your letter dated March 18, 2005, concerning the company’s Form 10-K for the
fiscal year ended October 31, 2004 filed on February 15, 2005. For your
convenience, we have repeated your comments in full, in bold, and have noted all
responses to the numbering of the comments and headings used in your
letter.

Pursuant
to your request, the company filed this letter via EDGAR as correspondence on
April 1, 2005.

Form
10-K for the Fiscal Year Ended October 31, 2004

Financial
Statements

Note
23 - Restatement of Prior Period Financial Statements, page
79

      1.

      Reference
      is made to the second paragraph relating to NFC Securitization of Assets.
      You disclose that the restatement is related to your accounting for (i)
      the securitization of NFC’s retail notes and finance lease receivables and
      its retained interest in such securitizations, (ii) deferred taxes related
      to retail note and finance lease securitization transactions and secured
      borrowings to fund operating leases and (iii) an agreement to repurchase
      equipment. In this regard, please tell us and disclose in further detail
      the nature of the error relating to your accounting for retail note
      securitizations. Specifically explain how you originally accounted for
      each type of transaction in your consolidated financial statements for the
      first three quarters of fiscal 2004 and the fiscal years ended October 31,
      2003 and 2002 and why you believe your prior accounting treatment was
      incorrect. Also, please provide the specific accounting literature that
      supports your treatment. We refer you to paragraph 37 of APB No. 20. We
      may have further comment upon receipt of your
      response.

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The
company’s financial services subsidiary, Navistar Financial Corporation (NFC),
sells retail notes and finance leases via a two-step securitization process
involving a special purpose corporation, Navistar Financial Retail Receivables
Corporation (NFRRC), and a qualified special purpose entity (QSPE), generally a
trust. NFC recognizes a gain on the sale upon transfer of receivables to the
QSPE. NFRRC retains subordinated interests in the trusts, primarily in the form
of a cash reserve account and an interest only asset.

Gains
under the original accounting were calculated using a net present value
methodology. Estimates were made of prepayment speed, a weighted average
interest rate on the entire pool of notes, discount rate, etc. The gains were
estimated based on enterprise wide cash flows related to the securitization
including:

    ·

      interest
      earned on the receivables transferred to the
QSPE

    ·

      investor
      interest paid on the asset backed securities issued by the
      QSPE

    ·

      fees
      to service the portfolio

    ·

      interest
      expense to fund the cash reserve account

    ·

      interest
      received on the collections account

    ·

      underwriting
      and legal expenses

A portion
of the gain on sale was initially capitalized and recorded on the Statement of
Financial Condition at the net present value of the estimated cash flows. These
capitalized elements of the gain calculation were amortized over the life of the
transaction, based on the original estimates, as contra values to the cash flows
received. An allowance for the receivables that were sold was also maintained,
separately, on the Statement of Financial Condition. In addition, the company’s
original practice was to discontinue recording income on notes once they had
been identified for inclusion in a retail sale and including this amount in the
gain on sale once the sale was finalized.

The
company’s original accounting treatment did not appropriately include the
company’s retained interest in the cash reserve accounts as part of the original
calculation of the gain on sale and measurement of the retained interests, as
required, by SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities.
Consequently, the company recorded its interest in the cash reserve accounts
using the “cash in” method versus the “cash out” method. Additionally, it did
not accrete income related to a discount on a retrospective level-yield basis.
The company also did not record the retained interest-only asset at fair value
as required by SFAS No. 115 (SFAS 115), Accounting
for Certain Investments in Debt and Equity Securities nor
recognize income in accordance with EITF No. 99-20 (EITF 99-20), Recognition
of Interest Income and Impairment on Purchased and Retained Beneficial Interests
in Securitized Financial Assets.

The
principal adjustments made to the company’s accounting for retail note
securitizations:

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    ·

      consider
      the cash flows related to the specific receivables sold into the trust and
      their distribution to determine the relative fair value of the beneficial
      interests in the trust

    ·

      allocate
      the cost basis of the loans sold into the trust among those beneficial
      interests based on their relative fair
values

    ·

      use
      the allocated basis of the assets to determine the gain on sale for those
      interests sold and to determine the carrying value of certain of those
      interests retained

    ·

      apply
      SFAS 115 to the retained interest-only asset recording it at fair
      value

    ·

      recognize
      income on the retained interest-only asset in accordance with EITF 99-20
      in the restated Statements of Income and Financial
    Condition

    ·

      record
      the assets for the retained interest in the cash reserves at its allocated
      basis and accretes the discount into income using the retrospective
      level-yield method

Other
adjustments:

    ·

      eliminate
      the separate allowance related to the sold
notes

    ·

      continue
      to recognize income on notes selected for inclusion in a retail sale until
      the sale is finalized

    ·

      reconsiders
      the appropriate risk adjusted discount rates used in determining the
      estimated fair values of the retained interest-only strip and cash reserve
      accounts

As part
of the re-evaluation of gain accounting, it was determined that the trust, for
tax purposes, was a pass-through entity that should be consolidated. In
addition, the interest expense related to the secured borrowings involving
operating leases was determined to have been deducted for tax purposes though
these transactions were considered sales for tax purposes.

The
company believes that it is currently accounting for the securitization of its
retail notes and finance lease receivables in accordance with US GAAP. As
required by paragraph 37 of APB No. 20, the company also believes that it has
properly disclosed the nature of the errors to its previously issued financial
statements and its impact on net income and the related per share amounts in the
correct period based on discovery of the errors, in all material
respects.

      2.

      Reference
      is made to the fifth paragraph. Please quantify the additional adjustment
      to recognize certain assets and liabilities relating to the agreements to
      repurchase equipment.

The
company recognized a residual value guarantee of $12 million in Other assets and
a corresponding increase in Other liabilities for the repurchase of equipment.
This equipment was repurchased in fiscal 2004. This disclosure was included in
the Navistar

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Financial
Corporation Form 10-K for the year ended October 31, 2004 and incorporated by
reference as Exhibit 99 to the company’s Form 10-K for the year ended October
31, 2004. Although the company believes that its disclosure was adequate, the
company will consider repeating this disclosure to the financial statements
included in its Form 10-K for October 31, 2005.

      3.

      Please
      tell us and disclose in further detail the nature of the error relating to
      the understatement of trade payables at your Mexican truck assembly
      facility and the overstatement of certain accruals relating to employee
      plans. Explain how you originally accounted for each type of transaction
      in your consolidated financial statements for the first three quarters of
      fiscal 2004 and the fiscal years ended October 31, 2003 and 2002 and why
      you believe your prior accounting treatment was incorrect. Further, we
      note that you disclose the adjustments necessary to conform the prior
      period financial statements with GAAP resulted in $5 million net increase
      to retained loss as of the beginning of fiscal 2002. However, it would
      appear that $22 million understatement relating to trade payables and $27
      million overstatement relating to accrued employee plans results in a $5
      million decrease in retained loss (i.e. net credit). Please clarify and
      revise your disclosure as necessary. Further, it is also unclear whether
      any adjustments were necessary for the first three quarters of fiscal 2004
      and the fiscal years ended October 31, 2003 and 2002. If so, please
      quantify for us and disclose in your footnote. We may have further
      comments upon receipt of your
response.

Mexico
Trade Payables: Prior
to and during fiscal 2002, the company’s Mexican operating subsidiary
experienced a period of rapid growth, implemented a new general ledger system
and entered into a joint venture, among other changes. As a result of demands on
financial resources, certain internal controls were not followed consistently.

To
improve the financial reporting in Mexico, the company embarked on a program to
strengthen internal controls. One of these efforts required a detailed
reconciliation of the trade payable balances year-by-year. This effort involved
the cooperation of personnel from several company locations. Upon the conclusion
of this effort in October 2004, the company determined that debit balances of
approximately $22 million dollars, predating and unchanged since fiscal 2002,
could not be substantiated. Prior to October 2004, management believed that the
result of the unreconciled difference would not be significant to the financial
statements. These amounts were included in the company’s trade payables balance
and, as a result, this balance was understated for fiscal 2002 and 2003 and the
first three quarters of fiscal 2004. To correct this error, as part of the
restatement, the company wrote the balance off to expense in the years it first
arose and adjusted beginning retained earnings for fiscal 2002.

Employee
Plan Accruals: The
company maintains two plans in which employees share in the profits earned by
the company, a profit sharing plan and a supplemental trust program. The profit
sharing plan provides for payments to be made to certain

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represented
and non-represented employees based on the income from continuing U.S.
operations. The company also participates in a supplemental trust plan which
benefits certain classes of company retirees who receive healthcare benefits.
This program provides for payments by the company to an independent, third party
trust based on the certain components of the company’s income. This trust can
use these funds to reduce the cost of or enhance retiree healthcare
benefits.

The
expense related to these programs is accrued over the fiscal year. In fiscal
2000, the company accrued amounts based on original forecast income levels.
However, in October 2000, the company’s Board of Directors approved a plan of
restructuring which resulted in a pretax charge to income of $289 million. The
accruals related to these two employee plans were not identified timely for
adjustment and thus were not adjusted in fiscal 2000 to reflect this change in
income. The company made an assessment that these amounts were not material to
the fiscal 2000 financial statements. As a result, the liability for these plans
was overstated.

In
periodically assessing the resulting over accrual, the company considered the
provisions of SEC Staff Accounting Bulletin No. 99 (SAB 99) - Materiality to
identify whether a portion of the accrual could be reversed in any given year
without altering investors’ or analysts’ views of the company’s earnings stream.
In fiscal 2001 and 2003, the company originally reported net losses of $(23)
million and $(18) million. In those years, management determined not to adjust
the over accrual. In fiscal 2002, the company reported a net loss of $(536)
million and reversed $6.8 million ($4.2 million, net of tax) of the over
accrual. In July 2004, the company reversed $3.3 million ($2.0 million, net of
tax) of the liability in anticipation of full year net income in excess of $125
million. In these two years, management concluded that these amounts were not
material based on the provisions of SAB 99.

Reconciliation
of the adjustments to the beginning retained loss as of October 31,
2002
(Millions of dollars):

    DR
      Mexico trade payables

    $

      (22

    )

    CR
      Employee plans

      27

    DR
      Federal income tax - employee plans

      (10

    )

    DR
      (Increase) in beginning retained loss

    $

      (5

    )

The
company does not believe that it is likely that the write-off of the trade
payable debit balances in Mexico is tax deductible; consequently, the company
recorded no income tax benefit.

The
company believes that its disclosures related to these items were adequate as of
October 31, 2004 and that no further disclosures are necessary. However, in
response to your request, the company will evaluate the need to explain the tax
impact of these adjustments on its retained loss in the financial statements
included in the Form 10-K for October 31, 2005.

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Adjustments
recorded to reverse the prior adjustment to the over accrual

As part
of the restatement in fiscal 2002, 2003 and the first three quarters of fiscal
2004 the following adjustments were recorded to reverse the prior adjustment to
the over accrual:

    Dr
      (Cr)

      2004

    (Millions
      of dollars)

      2002

      2003

      Jan

      Apr

      July

    Employee
      plans, net of tax

    $

    4.2

    -

    -

    -

    $

    2.0

There
were no adjustments made in fiscal 2002, 2003 or the first three quarters of
fiscal 2004 related to the previously understated Mexico trade payable debit
balance.

The
company does not believe that the adjustments made in fiscal 2002 or the third
quarter of fiscal 2004 related to the Employee plans are material and,
consequently, no further disclosures in the financial statements were considered
necessary.

The
company acknowledges that it is responsible for the adequacy and accuracy of the
disclosures in the Form 10-K for the fiscal year ended October 31, 2004 (the
filing). The company also recognizes that its responses to the staff’s comments
do not foreclose the Commission from taking any action with respect to the
filing nor will the company assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws of
the United States.

If you
have any questions, please do not hesitate to contact me at (630) 753-2400 or
Mark Schwetschenau, our Chief Accounting Officer, at (630) 753-3106 for
additional clarification or information.

Sincerely,

/s/ Robert C. Lannert

Robert C.
Lannert

Vice
Chairman and Chief Fin