The arbitrary timing of this newsletter doesn’t always fit events, and as the Navistar engine story has developed over the last few weeks, the important moments have happened in between my send-out dates. But this report is mostly about analysis anyway, so let’s review what’s been going on and where things seem to be sitting right now.
There are four key elements to the Navistar tale as we end the summer of 2012: one, competing engine makers successfully sued to have the Environmental Protection Agency scrap the miniscule $1900 fine Navistar was paying in order to sell non-compliant engines; two, try as they might, the company’s valiant engineers couldn’t make Advanced Exhaust Gas Recirculation work well enough to meet the 2010 EPA emissions mandate, and in mid-July the company finally admitted as much; three, having announced it would add Selective Catalytic Reduction to its EGR approach like everyone else, Navistar later said it would turn to a long-standing engine partner of old, Cummins, to supply both SCR systems and a 2010-compliant engine, the ISX15; and four, the man who seems to be universally blamed for the company’s EGR folly, former chairman and CEO Dan Ustian, announced his retirement earlier this week, as many shareholders had been urging for quite a while.
For what it’s worth, not being able to see Navistar succeed with the 2010 standard, I have long predicted that Cummins would find its way back into International trucks as a mainstream engine option. There simply weren’t any other choices. Navistar promises the Cummins ISX15 will be in production ProStar trucks by the end of the year, and the engine-maker’s SCR system tacked onto the International MaxxForce 13 early in 2013.
It has to be noted, however, that as of this writing, there is no more than a memorandum of understanding between the two companies. No agreement has yet been signed.
Must say, I’d love to be party to these negotiations. Third party, I hasten to add.