Navistar‘s announcement last week that it will introduce its next-generation clean engine solution – In-Cylinder Technology Plus (ICT+) – to meet 2010 US Environmental Protection Agency (EPA) emissions regulations was both predictable and unexpected.
The ICT+ technology – which will position the company to meet greenhouse gas (GHG) rules in advance of 2014 and 2017 requirements – combines Navistar’s advanced in-cylinder engine expertise with urea-based after-treatment and is expected to be available beginning early 2013.
ICT+ combines Navistar’s advanced in-cylinder engine expertise with urea-based after-treatment
For some time now, doubt has been openly expressed concerning the ability of any OEM’s engine to function in a manner fit for purpose at 0.2 NOx, the prevailing level for EPA 2010 legislation. To date, Navistar has been the only OEM to pursue so-called in-cylinder compliance.
Although a change in strategy was expected, the solution was less predictable. Navistar itself was – perhaps understandably – shy on details, and took no questions during the somewhat one-sided conference call to announce its new strategy. Although no supplier name was mentioned, other commentators point to its SCR technology as arriving courtesy of its Brazilian subsidiary MWM. MWM has some track record in SCR manufacturing – perhaps ironic given the antipathy of its parent company towards the technology in North America. It is awkward enough that Navistar – previously so opposed to AdBlue (DEF) – should now embrace the technology. It is perhaps even more awkward that the same technology might be offered to an already cynical North American audience bearing not a household brand name, but one that is new to North American Class 8.
Just as interesting as Navistar’s new technology strategy will be the strategy it employs to fund it. Navistar dipped into its revolver to the tune of US$138m in June, and with now well-documented warranty costs being joined by the cost of integrating ICT+ to its North American range, just at the point that the North American Class 8 market looks set to stumble, this timing is far from convenient.
News of stake raises on the part of both MHR and Franklin have changed the landscape somewhat; recent changes mean that the four biggest shareholders now hold close to 50%
Can Navistar pull it off? Friday’s announcement looks likely to have opened a veritable Pandora’s Box, not just of technological, but also of legal, and, ultimately, financial issues. Navistar hopes to be up and running with something to sell by early 2013. But, before then, the spectre of shareholder activism is looming larger. News of stake raises on the part of MHR and Franklin have changed the landscape somewhat; whereas previously Navistar’s three largest shareholders controlled 32% of the stock, recent changes mean that the four biggest shareholders now hold close to 50%. Whether or not this block decides to demand more fundamental changes remains to be seen, but what happens between now and Q1 2013 – when Navistar says the new engine will be ready – is sure to keep the attention of analysts, investors, customers and employees.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Oliver Dixon is Editor, World Truck Analysis.
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