Interview with Jack Allen, CEO of Engine Group, Inc.

(March 29, 2007)

Brief Bio of CEO and Corporate Background :

Jack Allen serves as Engine Group president for International Truck and Engine Corporation, the nation’s largest combined commercial truck, school bus and mid-range diesel engine manufacturer. International is the operating company of Warrenville, Ill.-based Navistar International Corporation (NYSE: NAV). Allen reports directly to Navistar’s chairman, president and chief executive officer and serves on the company’s executive council. He was named to the position in January 2004.

Allen is responsible for setting the Engine Group’s strategic vision. Under his leadership, the group has broadened its product line to drive scale and provide customers with cost-effective solutions to meet increasingly stringent global emission standards.

He played a pivotal role in acquiring MWM Diesel Motores, a leading Brazilian diesel engine manufacturer, in 2005. Combined with International’s existing South American operations, the new MWM-International is the largest independent diesel manufacturer in South America, offering customers a wider range of products that can serve a world market.

In addition, Allen solidified an alliance with MAN AG of Germany in 2005 to develop and manufacture an International big bore engine. The engine will be integrated with International’s class 8 vehicles starting in late 2007.

Prior to joining the Engine Group, Allen served as vice president and general manager of the company’s Parts organization since November 2002. Under his leadership, the organization achieved a record $2 billion in sales in 2003. Previously, he was vice president, general manager of the Blue Diamond Truck Company, a joint venture between International and Ford Motor Company. He served in that capacity since 2001. Allen was responsible for leading the commercial truck portion of the joint venture.

Allen joined the company in 1981 as a design engineer. He was named vice president, sales, of the Western Region in 1993, and vice president, marketing and product development, of the Heavy Vehicle Center in 1996.

Allen holds a bachelor’s degree from the Milwaukee School of Engineering and a MBA from the Illinois Institute of Technology. He also serves on the Milwaukee School of Engineering’s Corporation Council.

Interview Transcript :  

Munoz : What is your view on globalization and how has globalization affected your business?

Allen :Globalization has both helped us and hurt us. On one hand, it has given us opportunities in new markets—particularly emerging markets, and it also has provided us with sourcing opportunities that will help us to reduce costs. In addition, globalization has enabled us to strike up partnerships with other global companies to increase our scale and give us a foothold in other parts of the world. But at the same time, it has also opened opportunities to our competitors, and has enabled them to grow their scale as well.

Munoz : What are the key challenges in global business? How may these challenges be addressed?

Allen : One obvious challenge is exchange rates. To some extent, we can overcome these issues through our financial strategies. But it’s important to fully understand the economies and markets where we want to do business and not just jump in. In Brazil, for example, we took a company with an established management team as opposed to starting from scratch. This helped us to better understand exchange rates as well as localized sourcing requirements.

There are also communication barriers. But the more people learn about different cultures, the easier it becomes to bridge these barriers. It’s important to note that we need to learn more about the cultures where we want to do business versus expecting others to learn about us.

Munoz : What are opportunities brought about by globalization? How did these work for you?

Allen :In India, we have the opportunity to bring an existing product to a new market. As a result, we will be able to source commodities that we can bring back to North America. This will help us to reduce costs and further improve our competitiveness. We have similar opportunities in China: We’re taking something that we have already developed and are plugging it into the local market. Instead of developing products from scratch to suit the market, we are transitioning older, proven products that will meet local needs.

Munoz : Which organization would you consider as a role model in the practice of global business? Why? What are this organization’s attributes?

Allen :Companies such as Caterpillar, GE and Motorola are role models. In each case, they are positioned well in all emerging markets and also have local operations. This enables them to enter new markets easily. No matter where they operate in the world, they also demonstrate brand consistency.

Munoz : Who would you consider as a successful global business leader? Why? What are the characteristics of this person?

Allen : Jack Welch, former chairman and CEO of General Electric, is an obvious example. Under his leadership, the company continued to expand profitably in all world markets.

Munoz : What types of policies should governments provide to effectively support globalizing companies?

Allen :The U.S. has typically had low tariffs, which has helped to promote globalization. Foreign companies have taken advantage of this and have prospered, but their governments have not necessarily reciprocated. Governments can support globalization through open economies/markets and low tariffs, as well as policies to stabilize currencies or quickly react if currencies become unstable.

Munoz : What resources are beneficial to globalizing companies?

Allen :Multicultural workforces are vital for globalizing companies. Any company that has its eye on global growth must have people “on the ground” who understand the culture. It’s a lot easier to travel with people who know the language and how to get around.  

When we expanded our South American operations, it was also important for us to acquire a strong, viable company with good, established leadership. That’s what has made us successful in that part of the world.  

Munoz : What is your view of globalization in the future? How will it affect business?

Allen :Globalization will only continue. Eventually, you’ll probably see economies come together to create one world business market. That will take awhile, but someday regulations will line up, borders will become more open, and globalization will continue at a more rapid pace. Companies will need to think beyond borders, or they won’t survive.

Munoz : How is your company responding to the challenges and opportunities brought about by globalization? How has it affected your corporate strategies?

Allen :Our company is responding to the challenges/opportunities brought about by globalization by expanding globally. We are looking for opportunities in new and emerging markets, and we are taking a broader view of technology applications and strategies. We are also looking at low-cost countries for sourcing opportunities, and that has dramatically impacted our sourcing strategy. In addition, we are integrating our North and South American engineering talent to create a “borderless” company.

Munoz : What advice will you give students and young professionals in order to help them prepare for global business success?

Allen :Learn about other cultures. Take the opportunity to learn a foreign language. If you have the opportunity to study abroad, do so—and working abroad would be even better. Also, look for ways to learn about world economies.

(This interview was facilitated by Bradley May, B.S. Finance ’08)