Navistar Gets Emissions OK
This story appears in the March 14 print edition of Transport Topics.
Truck and engine maker Navistar Inc. said it has won regulatory approval for its 15-liter power plant, which it will unveil later this month at the Mid-America Trucking Show, and that it has submitted documents to the U.S. Environmental Protection Agency and California Air Resources Board for a 13-liter engine that meets nitrogen oxide limits without the use of emission credits.
The announcements came during the March 9 conference call of parent company Navistar International Corp, which lost $6 million, or 8 cents a share, on revenue of $2.74 billion during its fiscal first quarter. The company earned $19 million, or 26 cents a share, on revenue of $2.81 billion, in the year-ago first quarter ended Jan. 31.
Navistar, Warrenville, Ill., has been using credits earned from its medium-duty engine production to meet the new NOx standard for heavy-duty engines since the middle of last year. The company will continue to do that, said Chairman and CEO Daniel Ustian, but he also wants to have a compliant-without-credits model as an option.
“We don’t plan on using this for awhile, but we’re going to have it out there on the shelf, so it says that it can be done and we can meet the standards,” Ustian said.
All of Navistar’s North American heavy-duty competitors use selective catalytic reduction, SCR, for meeting the 2010 federal standard for NOx. Navistar uses a third generation of exhaust gas recirculation to comply, but so far it has also used credits to do so.
Ustian said the 15-liter engine has received written approval from EPA and oral approval from CARB. He also said the EGR technology could be supplanted within two or three years in heavy- and medium-duty trucks by EGNR — exhaust gas NOx reduction technology.
Amminex, a Danish company, has been working on alternative ways to meet the NOx regulatory challenge and Navistar invested in the firm in December 2009. Ustian said he picked up an ally in French company Faurecia, which bought 21.2% of Amminex in January.
Amminex said its method entails injecting ammonia gas stored in a replaceable cartridge into the cylinder head. In contrast, SCR is an after-treatment approach that generates ammonia.
Among Navistar’s four main divisions, trucks and parts remained profitable, but at lower levels, even though quarterly revenue increased. The engine division posted a loss in the most recent quarter and declining revenue, but a profit a year ago.
Chief Financial Officer A.J. Cederoth said during the call he expects the engine division to return to profitability in the current quarter ending April 30. The engine division had reduced shipments due to the loss of its long-time business with Ford Motor Co., but Ustian said South American truck OEMs are a growing source of engine business for Navistar.
The finance division had a dip in revenue, but its operating profit more than doubled. Finance now concentrates on floor-plan arrangements for dealers as the retail financing of truck purchases has been moved to GE Capital.
Ustian said the company’s sales of school buses have been hurt by the budget difficulties of state and local governments that often buy buses.
The company reiterated its estimate of full-year earnings of $5 to $6 a share, but closer to the upper end of that range.
The company’s Class 8 truck market share has fluctuated widely, from more than 30% in May through July to 19% in the quarter just ended. Ustian predicted Navistar would benefit as share returns to top 25% and industrywide sales volumes expand by the end of the company’s current fiscal year on Oct. 31.
Navistar said its reported earnings were complicated by corporate restructuring that yielded a charge of $22 million in the current quarter and a benefit of $17 million a year ago. Truck and engine engineering is being consolidated in the Chicago suburb of Lisle, Ill. Without those one-time effects, Navistar said it would have made $12 million in the current quarter and $2 million a year ago.
The company also said it restated its year-ago net income to $19 million from $17 million because of a change in accounting for incentive compensation.
