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Navistar International announces new engine to comply with emissions standards

Navistar International's shares plunged after it announced its new engine plans.

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A Navistar truck on display during final round play in the Navistar LPGA Classic at the Robert Trent Jones Golf Trail in Prattville, Alabama. (Dave Martin/AFP/Getty Images)

Navistar International, the manufacturer of International brand trucks, announced its plans Friday for a new engine that will comply with US emission standards after its earlier engine model failed to comply, Reuters reported

The company's share value plummeted following the announcement, and was down 15.2 percent to $24.40 in New York Friday, Bloomberg Businessweek reported

Investors are concerned that, among other things, the uncertainty over the company's engine strategy will discourage trucking companies from buying Navistar vehicles, Reuters reported. 

The new diesel engines will use liquid urea to help cut nitrogen oxide emissions, a pollutant linked to asthma, according to Bloomberg. Liquid urea is already used in diesel engines by some of Navistar's rival companies, including engine maker Cummins Inc and truck maker Paccar Corp, Bloomberg reported. 

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"Our distinctive solution will leverage the investment and advancement we've made in clean engine technology while providing immediate certainty for our customers, dealers, employees and investors," Daniel C. Ustian, Navistar's President CEO, said in a statement. "...Our goal is to offer the world's cleanest and most fuel efficient diesel engine—benefiting both our customers and the environment for years to come."

Investors and analysts vocalized their disappointment in the trucking company's decision to develop its' own engine, especially in a competitive market. 

"It fell short of my expectations," said Morningstar analyst Basili Alukos, Reuters reported. "I was expecting or hoping for them to abandon their engine business completely and start buying from a third-party supplier."

In 2010, Navistar invested $600 million to develop EGR heavy truck engines, which failed to comply to the US' Environmental Protection Agency (EPA) standards, Bloomberg reported.

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On June 12, Washington's US Court of Appeals in Washington dismissed a temporary EPA rule that would have allowed the company to continue to sell its noncompliant engines if it paid penalties of as much as $2,000 each, according to Bloomberg. 

The company's CFO Andrew Cederoth told reporters Friday that Navistar would not update its earnings or revenue forecasts until after it receives approval for the new engine from California regulators and the EPA, Reuters reported. 

"We've shared our new technology path with the EPA and California Air Resources Board (CARB), and both agencies are encouraged by our plans," Ustian said in his statement. "We will continue to work with the agencies to ensure that our customers receive uninterrupted deliveries in all 50 states during this transition."

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