Expert Call Summary

Takeaway: $NAV- Other manufacturers have yet to decide on further legal action on the EPA's NCP regime at Navistar. Decision due in about 50 days.

Emissions Call Summary

Below, we highlight some of the key topics covered on our emissions expert call with Dick Penna today.  Dick currently represents Paccar and previously represented Volvo on truck emissions issues related to the non-conformance penalties applied to Navistar’s engine.  The call was excellent and contained a number of valuable details, which can be heard by listening to a replay of the call at



       Legal Options

  • Volvo, Daimler and Paccar, among others, are meeting tomorrow to discuss litigation strategies regarding the EPA’s non-conformance penalties with respect to Navistar.
  • Further litigation could shatter the “clarity” that Navistar has said the “Final” rule provides.
  • If competing manufacturers decides they want to challenge the EPA ruling (which they must do no more than 60 days after appearance in the Federal Register, which was September 5th, 2012) they will have a good shot, but it is still very difficult to predict court cases in the DC Circuit.
  • There is a citizen suit provision in the Clean Air Act where if somebody believes the EPA is not enforcing the law, they can give the EPA 60 days notice to do so.   If the EPA does not change what it is doing, then they can be taken to court.  The odds of that happening are pretty slim, but that is another possible legal path.  The most likely groups to attempt this would be the environmental and other public interest groups.

The Landscape Created by the EPA

  • The EPA will create deterrents for companies who do not comply with their regulations, but they will also stand on their head to not put anyone out of business.
  • As for the competitors who were complying with EPA standards, you can quarrel whether or not the $3,700 fine was enough to act as a deterrent.
  • Navistar may purchase emissions credits from Cummins to gain compliance.

2014-2018 Regulations

  • To comply with the 2014-2018 emissions standards, companies will be using different tires and aerodynamics which will likely introduce additional costs.  There is not much concern here about a pre-buy mainly because despite the additional costs these new EPA regulations will align fuel efficiency incentives for both truck manufacturers and operators.
  • The manufacturers all signed on to meet the 2014-2018 regulations, so they probably think they can meet the standards at a reasonable cost.

Looking Ahead

  • The EPA has just completed the 2017-2025 emissions rules for light-duty trucks, and we can expect to start hearing about future heavy duty regulations in the next few months.
  • These post 2018 regulations will likely depend on the outcome of the presidential election.
    • If Romney is elected he will most likely not make future regulations more stringent than the 2014-2018 regulations.
    • If Obama wins the election, regulations are likely to become even more rigorous after 2018.
    • We would probably need to switch to lower sulfur fuels for further tailpipe emissions gains.  That has ripple effects because there are costs that the refiners must now pay to reduce the level of sulfur in their diesel.

Light Vehicles

  • New emissions standards for light vehicles are rigorous. The changes coming over the next 7 to 10 years are likely to be rather aggressive.
  • In the future we are also going to see a lot more “light weighting”, as manufacturers turn to lighter metals or carbon fibers. 
  • We will also see multispeed transmissions and continuously variable transmissions as well as direct injection gasoline.

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