Navistar to pay $3,800 per non-compliant engine

| August 30, 2012

The U.S. Environmental Protection Agency is issuing a final rule that will allow Navistar to continue selling diesel engines that do not comply with 2010 diesel exhaust emissions regulations, assessing a fine of up to $3,775 per engine to do so.

Navistar president and chief operating officer Troy Clarke says the ruling provides “clarity” for Navistar, it’s employees, union workers, dealers and customers. “We can now provide our dealers and customers with clarity and certainty as we transition to our clean engine technology and loot forward to utilizing the final rule as needed,” Clarke said after the ruling was announced.

The White House on Wednesday, Aug. 29, finished its work on a final rule that will determine whether Navistar will be allowed to continue to pay fines to sell diesel engines that do not meet 2010 diesel exhaust emissions standards. The U.S. Environmental Protection Agency on Aug. 7 filed its final rule for review with the Office of Management and Budget but did not disclose details at the time. Late Thursday, Aug. 30, EPA issued a release explaining the final rule.

An earlier interim rule had allowed Navistar to pay noncompliance penalties of $1,200 while continuing to sell exhaust gas recirculation-based engines that did not meet EPA emissions guidelines pending the final rule. The interim rule was challenged in federal court by Navistar competitors who claimed the NCPs did not constitute a realistic penalty for not meeting emissions regulations and therefore gave Navistar a competitive advantage over companies that had invested in – and delivered – selective catalytic reduction-based emissions solutions that met the emissions regulations. The court agreed with the plaintiffs, and the status of Navistar’s heavy-duty diesel engine lineup has been in limbo since, pending EPA’s final ruling.

Navistar spokesperson Karen Denning said on Aug. 7 that the company “is encouraged by the submittal of the final rule (to OMB), and we hope that it generally mirrors what was in the interim rule.”

Navistar in early August announced that it would reestablish a relationship with Cummins and begin offering the new ISX15 15-liter diesel engine in certain models in January 2013 with the introduction of its ICT+ emissions solution in early 2013. Navistar said that during the transition to ICT+ that it would continue to build “compliant” MaxxForce diesel engines while it awaits EPA’s final rule.

Navistar said the addition of the Cummins 15-liter engine was one component of a multitiered plan designed to “enhance the company’s competitive position and growth and shareholder value.” These actions include:
• Adopting a U.S. market-proven aftertreatment solution to accelerate delivery of ICT+, Navistar’s next-generation clean engine solution;
• A market transition plan for Class 8 engine sales; and
• Securing a $1.0 billion loan commitment, which the company said will further enhance its liquidity.

Navistar on Aug. 27 announced that Daniel Ustian – the company’s president, chairman and CEO – was stepping down and that its board of directors had appointed Lewis Campbell – former chairman, president and CEO of Textron Inc. – as executive board chairman and interim CEO. Navistar also announced that it had promoted Troy Clarke, currently president of Truck and Engine Operations, to president and chief operating officer.

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