Within the next year Navistar will transition its engines to selective catalytic reduction technology, the system its competitors have used to reach carbon emissions standards set by the Environmental Protection Agency, said Jason Barlow, president of United Auto Workers Local 402 which represents local workers.
Navistar spokesman Steve Schrier said that the company will use competitor Cummins engines in the heaviest duty trucks while it continues to build its own big bore engines.
Until that is ready, the company will turn to Cummins to help avoid amassing fines from the EPA for using noncompliant engines.
Once banked emissions credits run out, the company faces up to $3,800 in fines per engine sold. The issue has harmed the company’s credibility and resulted in falling stocks, big moves by activist investors, revenue losses and changes in management.
Navistar did not release the details of the agreement, but announced it would begin production on those trucks in November and begin delivering trucks with Cummins engines by December.
“It shouldn’t have much of an impact on Springfield,” said Schrier said. “Most trucks (Springfield) makes are medium duty trucks.”
Schrier acknowledged the Springfield plant does make some ProStar trucks, which do use the new engines, but that it is a small part of production.
Barlow said new engines or parts could require some training.
“But it’s nothing our people can’t handle,” he said. “We’ve positioned ourselves to compete for new work, so we feel we’re there.”
In the past, Navistar officials have said they expect to have all engines compliant by EPA standards by 2013 and will return to profitability. But analysts such as Vicki Bryan remain skeptical.
Bryan, a high-yield analyst with Gimme Credit who has been following Navistar since problems began earlier this year, said she believes Navistar will have a hard time selling more expensive Navistar trucks with Cummins engines. She believes it will take longer and be costlier to adapt all the other engines.
“Production targets also do not mean instant sales, and we continue to be concerned about the marketability of Navistar’s new much higher-priced trucks, which will offer little if any meaningful differentiation versus fiercely competitive trucks already for sale by more credible manufacturers (and just as commercial truck demand is shrinking),” Bryan said in a report released this week.
Other national auto analysts such as Dave Cole continue to believe Navistar will make a comeback once the engine trouble is taken care of.
“They’ve got a basic engine to work with,” Cole said. The failed technology “was inconvenient and it was expensive … But it’s just a big bump in the road. You get past the bump and away you go.”
About the Author