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Local news feed just popped this up. Navistar is hurting badly. :popcorn:

Agency says company could go out of business if fine is not allowed.

By Everdeen Mason ,Staff Writer, Springfield —

Navistar International Corp. will be able to sell engines that do not meet 2010 emissions standards — but the company will pay a fine of up to $3,800 per engine to do so.

The Environmental Protection Agency announced Thursday night approval of the final rule, which is double the amount originally proposed. Last week the U.S. Court of Appeals upheld its decision to block Navistar from selling engines that do not meet carbon emissions standards in exchange for a fine of around $1,900 per engine.


Navistar President and COO Tony Clarke said the EPA ruling provided clarity.

“We can now provide our dealers and customers with clarity and certainty as we transition to our clean engine technology and look forward to utilizing the final rule as needed,” Clarke said in a statement.

Navistar has a plant in Springfield that employs around 850 workers. The plant owes some of its recent growth to the production of trucks that use the heavy duty engines currently in contention.

“There’s definitely a concern there,” said Jason Barlow, president of United Auto Workers Local 402, which represents local employees. “We’ve been able to gain work and production because of the WorkStar, ProStar and TranStar, which were all originally produced at other facilities.”

After renewing a favorable contract with Local 402, Navistar hired local workers for the first time in a decade.

“If they can’t manufacture those models, it’s bad for all plants, but we want to have as much production as possible in this plant,” Barlow said.

The federal court ruling said Navistar must stop production of trucks with the noncompliant engines once it runs out of banked emissions credits, but it also allowed the EPA to come up with a final rule that would be more appropriate.

Noncompliance penalties are allowed under the Clean Air Act — which establishes the carbon emissions standards — but trucking manufacturing competitors and the court maintained the EPA’s initial $1,900 fine was unfair to those who became compliant with standards.

The EPA increased the cost of the noncompliance penalty. In the final rule document from the EPA, it says the increase in cost is mostly because of a change in fuel and diesel exhaust prices. The penalty is not meant to punish noncompliant manufacturers but to take away the competitive disadvantage compliant manufacturers face by accruing the costs associated with meeting carbon emissions standards.

The rule also states that there must be three criteria met to enact a noncompliance penalty: that the new standards are more difficult to meet, that a lot of work is required to meet them, and that there is a company unable to meet them due to technological reasons that could go out of business without the penalty.

The EPA argues that Navistar is the company that could go out of business without the penalty.

“EPA estimated that Navistar’s inability to certify any Class 8 engines early in model year 2012 would cause layoffs of thousands of Navistar employees, the loss of billions of dollars in revenue to Navistar, and negative impacts on customers and suppliers,” according to federal court documents.

National analyst Vicki Bryan verified the danger Navistar faces manufacturing noncompliant engines.

“When those (banked emissions) credits are gone, any time between now and the next few months at the latest, Navistar will be forced to stop selling all new engines and trucks in the U.S.,” said Bryan, analyst for Gimme Credit, in a report released Thursday before the new EPA rule was announced.

That could have caused production shutdowns and a loss of up to $1 billion in revenue a month. In July the company announced it would combine the technology it developed with the treatment its competitors use to ensure the heavy duty engines are compliant with emissions standards and have it ready by 2013.

Bryan called that plan “exceedingly ambitious for management to accomplish in a matter of months …”

Navistar has been plagued with problems since courts overturned the EPA rule. Since June, Navistar:

Stock has declined more than 50 percent and activist investors sought to gain more shares — prompting rumors of a takeover, change in management or even bankruptcy.
Reported two straight quarters of revenue loss including $172 million loss in second quarter 2012.

Was taken out of the running for a $14 billion military contract to engineer and develop 55,000 Humvees.

Announced a Securities and Exchange Commission investigation of Navistar’s finances because of concerns about disclosure and accounting.

CEO Dan Ustian announced his retirement effective immediately Monday. He was replaced by on an interim basis by former Textron Inc. exec
utive Lewis Campbell.
 

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The EPA increased the cost of the noncompliance penalty. In the final rule document from the EPA, it says the increase in cost is mostly because of a change in fuel and diesel exhaust prices. The penalty is not meant to punish noncompliant manufacturers but to take away the competitive disadvantage compliant manufacturers face by accruing the costs associated with meeting carbon emissions standards.
That is what I was wondering. it must cost less than that per engine over a rational period to develop properly emitting engines.
 
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