Navistar incurs $10 million in fines for non-EPA 2010 compliant engines

Christopher Goodfellow - 12 June 2012

Navistar has incurred $10 million in fines for the production of non-EPA 2010 compliant engines, according to its second quarter results.

Navistar ran out of emissions credits, which it had previously relied on to meet the 2012 emissions standards in its GVWR >14,000 pounds engine family, on  February 29, 2012. The Environmental Protection Agency (EPA) said it would impose a penalty of at least US$1,900 per non-compliant engine after this point.

Daniel C. Ustian, Navistar chairman, president and chief executive officer, said: "Certainly, our first half performance was unacceptable. It included a warranty reserve to repair early 2010 and 2011 vehicles. We were also affected by speculation surrounding our engine certification for our Class 8 engine, which is why we are working tirelessly with the U.S. EPA to get resolution."

Navistar submitted an EGR-only 0.2 NOx emissions engine in February. The company says talks on certification are "ongoing".

Navistar's competitors have challenged the EPA's decision to permit Navistar to continue producing non-compliant engines incurring a fine. The case began in May.

Navistar reported a loss of $172 million, or $2.50 per diluted share, for the second quarter ended April 30, 2012.

Regarding the company's truck business, a statement from Navistar said: "For the second quarter 2012, the truck segment recorded a loss of $89 million, compared with a year-ago second quarter profit of $92 million. Results included unfavorable shifts in military product mix, reflective of lower military budgets, industry-wide higher commodity and fuel costs, an asset impairment charge of $28 million relating to the company's decision to idle its Workhorse Custom Chassis business, and a charge for $24 million for certain extended warranty costs."

Navistar is the only manufacturer not to use SCR technology in its EPA 2010 models.

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