Navistar gets a win

Updated Sep 17, 2012

Most companies wouldn’t be too excited to learn they’d have to pay nearly $3,800 each time they sell one of their products. Navistar is probably the exception to that rule.

The U.S. Environmental Protection Agency announced details of its final rule regarding penalties and fines the Lisle, Ill.-based company would be assessed for selling noncompliant diesel engines – and the news, for once, was good for Navistar. The company will pay a fine of up to $3,775 for each noncompliant engine it has sold or will sell between now and March 2013, when its ICT+ SCR aftertreatment system becomes available.

Even more importantly, from Navistar’s point of view, EPA confirmed that all Navistar EGR diesel engines are, in fact, legal and – assuming the noncompliance fine has been paid – can be operated and resold without penalty. It’s logical to assume that at some point, the California Air Resources Board will go back and revisit those EGR-only MaxxForce engines. But for now, Navistar is good to go.

That’s huge for the beleaguered truck manufacturer, because one of the biggest causes of “angst” in the trucking industry today has been the status of MaxxForce engines already in the market and their potential resale value going forward given the uncertainty as to what EPA’s final rule would be. When new Navistar COO Troy Clarke says the ruling gives Navistar dealers and customers “clarity,” he’s not kidding.

The final rule will not be greeted warmly in all quarters, though. Many of Navistar’s competitors have taken a dim view of the company’s actions during the EGR-SCR debate and likely will see the fines determined by EPA to be a “slap on the wrist” or – worse – an unfair competitive advantage.

But it’s clear that new management at Navistar and a fresh approach to dealing with EPA has paid off in spades. EPA noted in explaining the final rule that Navistar was “a technological laggard” in adopting emissions technology to meet the 2010 regulations. I know more than a few other engine manufacturers that will argue that far from being a laggard, Navistar chose to ignore viable technology that every other engine manufacturer on the planet was using to meet the regulations and went charging off alone down the EGR path – and later refused to abandon the technology long after it was clear it was not going to work in real-world trucking applications.

But that’s an argument that doesn’t seem to carry much water with EPA right now. For its part, Navistar argues that it could have made EGR-only engines work; they simply ran out of time and EPA credits before they could perfect the technology.

No matter. It’s clear today that EPA took mercy on Navistar. Before the ruling was released, experts in the industry told me they expected noncompliance penalties in the neighborhood of $9,000 per engine. In explaining its decision, EPA noted that Navistar would be “forced from the marketplace” if excessive fines were levied. Clearly, the government has no interest in seeing a 110-year-old American company fail on its watch. It’s an election year, after all, and a lot of jobs – not to mention pensions – depend on Navistar’s continued viability.

All that said, Navistar desperately needed some good news. This story is far from over, but for now, Navistar, its dealers and its customers can breathe a little easier going into the New Year.