Bad News For Navistar

In 2001, the EPA enacted a rule requiring a 95% reduction in emissions of nitrogen oxide from heavy-duty engines. The start date of the new rules were delayed until 2010 to allow the industry to create the necessary technologies needed to meet the new restrictions.

Navistar International Corp., the third largest U.S. and Canadian engine manufacturer, adopted a different technology from its competitors and were able to continue selling its engines by using “banked emission credits”. On January 31st 2012 Navistar had used up all of their credits and the EPA issued a rule allowing them to continue selling noncompliant engines, but they would have to pay a non-conformance fine.

Recently Mack Trucks Inc. and Volvo Group North America LLC filed a lawsuit and objected that the proposed rule gives Navistar an unfair advantage. All other engine manufacturers have complied with the EPA rules and regulations.

On June 12th, the U.S. Court of Appeals in Washington threw out the interim rule by the EPA designed to allow Navistar sell non compliant engines if it paid a fine. This has left Navistar scrambling to develop a 13 liter engine that meets EPA certification. Navistar has fallen 12 percent since the ruling. Last week, Navistar lowered its annual profit forecast to a range of break-even to $2 a share as it copes with the repercussions.