Navistar International replaced CEO Daniel Ustian with former Textron CEO Lewis Campbell on an interim basis, after the truck maker’s bet on a new generation of diesel engines failed to live up to its promise.

The company, which was hit hard by its failed engine strategy and has withdrawn its 2012 earnings forecast, also promoted Troy Clarke, currently head of its truck and engine operations, to president and chief operating officer.

Navistar announced the executive changes on Monday morning but did not give a reason for Ustian’s departure.

The moves also come after missing out on a major defense program. Last week the U.S. Army and Marine Corps awarded Humvee maker AM General as well as Lockheed Martin and Oshkosh contracts valued at $56 million to $66 million to work on prototypes for a new truck to replace the workhorse Humvee - beating Navistar International, General Dynamics, and Britain’s BAE Systems, who had also bid for the 27-month Joint Light Tactical Vehicle development contracts.

Ustian, who spent 37 years at Navistar, was ousted over the weekend after the board lost confidence in him and his engine strategy, a person familiar with the situation said. The source was not authorized to speak to the media and asked not to be named.

After an independent probe, the board concluded that Ustian had made a wrong bet on a new generation of diesel engines and his technology solution would not work on trucks, the person said.

Campbell, who will also serve as Navistar’s executive chairman, is tasked with stabilizing the company, restoring relations with long-time suppliers, and launching the search for a permanent chief executive, the source said.

“Naming new Chairman/Interim-CEO and new President removes a key sticking point from the investment decision for many investors,” Robert W. Baird analyst David Leiker said in a research note.

“While we are supportive of Dan Ustian’s energy and focus as CEO, the challenges bringing new technology to market proved too great,” Leiker said.