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Navistar: ‘Operational Changes’ Forthcoming

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July 5, 2012 by   Leave a Comment

Navistar International Corp. is set to announce “operational changes” during an investor webinar on Friday morning (July 6) amid multiple reports the company will be ditching its advanced exhaust-gas recirculation (EGR) technology for meeting EPA 2010 emissions requirements. The announcement was made in a filing with the Securities and Exchange Commission (SEC) on Monday, Fleet Owner magazine reported.

“Navistar International Corp. (the “company”) announced today that it will present a live webcast on Friday, July 6, to provide an update to various operational matters related to the company,” the announcement said. Speakers will include Daniel C. Ustian, chairman, president and CEO, A. J. Cederoth, executive vice president & CFO, and other company leaders, it said.

The announcement preceded by mere hours a report in the Wall Street Journal that said the company planned to announce it is switching its emissions technology to selective catalytic reduction (SCR) to meet EPA 2010. This report followed one from Friday afternoon that said the company is considering purchasing engines from Cummins, which uses SCR.

Steve Schrier, manager-corporate communications, did not confirm nor deny the Wall Street Journal report in response to Fleet Owner questions, but did note the Friday webinar would address “various operational matters.”

Navistar is the parent company of RV maker Monaco RV LLC, which uses the EGR technology in its diesel-powered motorhomes.

Navistar’s most recent financials showed an unexpected $172 million loss in the second quarter, including significant costs related to warranty claims. Since then, the company stock has fallen 28%.

Following the earnings announcement, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of Navistar competitors, including Cummins Inc.; Daimler Trucks North America and its subsidiary Detroit Diesel; and by sister OEMs Mack Trucks and Volvo Trucks North America, in a suit against the EPA. The EPA allowed Navistar to pay non-conformance penalties (NCPs) on diesel engines that did not meet the 0.20 grams of NOx 2010 standards. EPA fast-tracked the interim rule to authorize penalties, bypassing traditional regulatory process, the suit claimed. EPA agreed with Navistar that if EPA did not let it pay NCPs, it would have to end production of its Class 8 engines and trucks.

“In January 2012, EPA promulgated an interim final rule (IFR) to permit manufacturers of heavy-duty diesel engines to pay nonconformance penalties (NCPs) in exchange for the right to sell noncompliant engines,” stated circuit Judge Janice Rogers Brown in her written opinion.

“EPA took this action without providing formal notice or an opportunity for comment, invoking the ‘good cause’ exception provided in the Administrative Procedure Act (APA),” Judge Brown continued. “Because we find that none of the statutory criteria for ‘good cause’ are satisfied, we vacate the IFR.”

Navistar submitted its 13L engine to EPA for 2010 approval at the 0.20 grams of NOx level earlier this year, but no formal announcement regarding the progress of that has been made.

On June 29, the Chicago Daily Herald reported on a report from OTR Global that said that Navistar may offer Cummins engines, possibly as early as 2013. Karen Denning, a Navistar spokeswoman, told the Daily Herald the company doesn’t respond to “rumor and speculation.”

The report did not specify whether the Cummins engines would be sold alongside Navistar engines or in place of Navistar engines.

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