Navistar Says It Is Losing Sales, Blames EPA’s Stance on SCR

This story appears in the Nov. 30 print edition of Transport Topics.

Navistar Inc., which said it has spent $600 million to develop its 2010 exhaust gas recirculation engine, said the company is losing sales of next year’s model because federal regulators “helped create the false impression” among customers that only urea-based after-treatment systems would meet 2010 federal emissions standards.

An affidavit by a top Navistar engineer, part of a 154-page Navistar court filing, also blamed the Environmental Protection Agency for helping to create confusion over the company’s use of EPA credits to meet the 2010 standards.

Navistar is the largest U.S. producer of medium-duty diesel engines, but it is relatively new to the heavy-duty engine market.

Navistar said it is using banked credits — a process EPA has allowed since 1990 that permits a manufacturer to store credits when its engines exceed emissions standards — to reach the nitrogen oxides standard of 0.20 gram per brake horsepower-hour. By contrast, manufacturers using selective catalytic reduction have said they will meet the 2010 NOx standard “at the tailpipe” without credits.

SCR uses a urea-water solution called diesel exhaust fluid, which enables a catalytic converter to eliminate NOx from engine ex-haust. EGR recirculates exhaust gas into the engine to reduce high combustion temperatures, which cause NOx.

Navistar said the confusion over use of credits hurts sales mainly to municipal fleets. It said the engine maker effectively has been excluded from bidding on several orders, according to the documents filed Nov. 20 with the U.S. Circuit Court of Appeals for the District of Columbia.

“Based on numerous personal discussions with truck customers, many buyers mistakenly believed an SCR-urea engine will meet the 0.20g NOx standard while in use,” David Piech, Navistar’s director of global powertrain/vehicle compliance, stated in a Nov. 19 affidavit. “Much of this is driven by USEPA itself, which through its SCR guidances has helped create the false impression among customers that SCR-urea engines actually comply with the 0.20g NOx standard on the road.”

The documents are the latest developments in a Navistar lawsuit asking a federal court to review EPA’s 2009 guidance on SCR. Navistar said that SCR — which all of its major competitors plan to use in 2010 to meet the new standards — would improperly allow trucks to exceed the standard because SCR works only if truck drivers maintain diesel exhaust fluid in their truck tanks.

Navistar also has argued that EPA reversed its position on the SCR technologies and did not follow proper rulemaking procedures in setting out the SCR requirements in a February guidance document. In its recent filing, Navistar argued that EPA’s 2009 SCR guidance was “neither consistent with the law nor neutral among competing control technologies.”

“As a result, after investing $600 million in EGR and generating credits to benefit the environment, Navistar finds itself in competition with non-compliant engines that are being ‘tuned up’ to increase NOx emissions for commercial advantage,” Navistar stated in the filing.

“Because the total market for trucks in model year 2010 is limited by current economic conditions, and because Navistar will be competing for engine sales with SCR manufacturers it would have had no competition [with] in the absence of 2009 guidance, Navistar necessarily will be injured by lost sales,” Navistar stated.

EPA officials have declined to comment on the lawsuit but have denied Navistar’s allegations in court documents. Earlier this month, EPA formally approved SCR and the system’s requirement that the driver keep the urea tank filled (click here for previous story).

Several manufacturers that will be producing or utilizing SCR engines did not return requests for comment by press time, but some recently have denied Navistar’s allegations and said their 2010 engines are ready.

Navistar spokesman Roy Wiley declined to discuss the extent of the lost sales Navistar claimed in Piech’s affidavit.

Some city governments in the eastern United States have contracting requirements that do not permit Navistar to bid on fleet purchases because Navistar’s EGR technology does not meet the standard without the use of credits, Wiley told Transport Topics.

“Some municipalities are saying you have to reach compliance of 0.20g without any use of credits,” Wiley added, “but the EPA allows credits.” He did not identify the municipalities.

Navistar originally had planned to use EGR engines that were manufactured by Cummins Inc.

However, Cummins decided earlier this year to build only SCR engines, and the two companies ended their supply agreement. Navistar now plans to build its own EGR engines.

“We were well down the path for EGR,” Wiley said. “You can’t change that late in the game, and we wouldn’t have, anyway.”