Navistar Friday Announcement Could Signal Emissions-Strategy Switch

July 03, 2012

Amid rumors that it will switch its engine-emissions strategy, Navistar International has scheduled a webcast for Friday to announce "an update to various operational matters related to the company."

The EPA has yet to certify Navistar's MaxxForce 13 to its 0.2g NOx regs.



Company executives aren't saying what matters they'll discuss, but rumors have it that Navistar will switch from its troubled Advanced Exhaust Gas Recirculation (A-EGR) method to exhaust aftertreatment similar to the selective catalytic reduction (SCR) used by all its competitors. The two methods aim to meet the Environmental Protection Agency's 2010 emissions limits, which concentrate on virtually eliminating nitrogen oxide.

The Wall Street Journal reported this morning that Navistar plans to switch to SCR for its engines. On Friday the newspaper said Navistar was considering resumption of engine purchases from Cummins, which supplied pre-2010 diesels for International trucks and still supplies diesels for export-model Internationals.

Cummins switched its strategy from all-EGR to EGR plus SCR several years ago, and now builds SCR engines for Freightliner, Western Star, Kenworth, Peterbilt and Volvo. Those engines have proven more reliable and less costly to operate than the A-EGR engines from Navistar, according to fleet reports.

Navistar has fielded 2010-certified diesels that don't quite meet the regulation's absolute limit for NOx, but had thus far been able to meet the regs with the use of emissions credits. Early this year, the agency said it would allow continued sales of heavy-duty engines by means of the company paying non-conformance penalties of about $1,900 per engine. But a federal judge recently threw out that arrangement in a suit brought by competitors, and Navistar has had trouble trying to certify a 13-liter engine that meets the absolute NOx limit of 0.2 gram, compared to 0.5 gram it's producing now.

Its medium-duty engines continue in production under EPA credits that are good into 2013, a company spokesman has said.

Meanwhile, billionaire investor Carl Icahn and hedge-fund manager Mark Rachesky recently raised their stakes in Navistar to 11.9% and 13.6%, respectively. Icahn has been pushing for Navistar to merge with Oshkosh Corp., in which he is major shareholder. Rachesky said in a June 25 disclosure statement he planned to talk to management about Navistar's "business, operations, strategy and future plans," according to the Daily Herald of suburban Chicago, where Navistar is headquartered.

The company reported two straight quarters of massive financial losses, and its stock price has steadily fallen. However, the stock price strongly rebounded on the reports that Navistar would offer Cummins engines in 2013, according to published reports.

The outside pressures, legal entanglements, financial woes and product problems have harmed Navistar's ability to manage its business and sell trucks. High warranty costs have caused many of the recent losses, executives have said.

Up to now, offering Cummins engines and/or switching to SCR were not options because top executives declared that they would not build trucks using SCR.

Friday's webcast will deal with these issues and others, observers believe. The webcast will be available through a link on the investor relations page of Navistar's website, http://ir.navistar.com/events.cfm. Investors, press and others should log on to the website at least 15 minutes prior to the 9 a.m. EDT start to allow time for downloading any necessary software, the Navistar statement said.

Related Stories:

6/13/2012 Court Rules for Navistar Competitors in Clean Air Case

6/7/2012 Navistar Makes Management Changes After Worse-Than-Expected Second Quarter Results

1/31/2012 EPA Sets Penalties for Emissions Non-Compliance