SACRAMENTO, Calif. — Navistar says it withdrew a lawsuit it filed against the California Air Resources Board (CARB) over the agency’s certification of 2010 SCR engines.

Similar to a suit Navistar filed against the EPA over that agency’s federal 2010 regulation, the Chicago-based truckmaker had sought a ruling in a San Francisco Superior Court declaring that CARB improperly certified 2010 engines equipped with SCR.

As it’s well known, Navistar decided to continue with EGR to meet 2010 NOx reduction levels, while all its competitors went with SCR, which requires the injection of diesel exhaust fluid (DEF) to be injected into the aftertreatment system from an on-board tank.

Navistar said that CARB effectively adopted the same guidance as the EPA, which, Navistar contends, "allows (SCR) engines to operate for multiple and lengthy periods of time with the NOx emission control SCR Systems turned off, causing uncontrolled NOx to be discharged into the air." Navistar likens this allowance to a "licence to pollute."

Navistar is actually referring to SCR engines’ "ramp shutdown" feature, which systematically degrades engine torque power to allow drivers to "limp" temporarily into a nearby DEF fueling station in rare situations that the DEF tank runs dry. If the tank is not filled, the truck will eventually shut down.

Critics suggest Navistar got little traction with its suit
against CARB, while the company hints the
settlement means its message against
liquid DEF was received ‘loud and clear.’

Because of this, SCR engine manufacturers counter that Navistar is grossly exaggerating the risk. They say audible in-cab warnings which indicate the tank is running low ensures that the vast majority of drivers will not neglect DEF their tanks (A 13-liter DEF tank will be set for 3,000 to 3,600 miles per fill-up). In fact, many insist it’s about as likely to happen as a trucker running out of fuel on the highway.

As part of its agreement with CARB, Navistar said that the agency agreed that the 2009 (EPA) guidance documents are not California’s own policy. And CARB agreed to convene a public workshop this summer to address the issues Navistar raised in the lawsuit.

"Navistar expects the workshop to produce an outcome that will eliminate the opportunity for SCR equipped trucks to operate with uncontrolled NOx emissions," the company stated.

An industry source from another engine manufacturer very much doubts that’ll be the case, though. In an email exchange with todastrucking.com, he downplayed the significance of the settlement and even questioned whether it ‘s a victory for Navistar, as the company is painting it.

The way he interprets the situation, the settlement looks like a brush-off by CARB. "A public workshop in California? That will take years and even then it’s merely a forum in which the public can voice opinions. (It’s) nothing short of a public airing of Navistar’s frivolous and baseless argument."

Navistar spokesman Roy Wiley categorically dismissed that sentiment. He told todaystrucking.com that the agreement is significant since California arguably sets the environmental agenda for the continent.

"A workshop, similar to the rulemaking process, is an opportunity for interested members of the public to be heard by regulators before the regulators make important decisions," he says. "We are confident that CARB now fully understands the issues that we have raised and since California is the leader in emissions, our messages have not fallen on deaf ears."

"It is important to note that we reached an agreement with CARB. (Industry competitors) would have preferred that the suit be dismissed." 

It’s unknown how long Navistar’s emission credits
will last. How the company sells heavy-duty engines
beyond that has yet to be determined.

Those critics routinely insist that Navistar’s legal tactics are a smokescreen for the fact its own EGR engines do not meet the EPA 2010 rule. The company is using banked emission credits (it amassed by building compliant medium-duty engines) in order to sell 11 and 13-liter MaxxForce engines coming out later this year. Navistar also continues to sell pre-2010 Cummins engines it ordered in abundance prior to Jan. 1.

(There’s speculation that the company will exhaust its credits by the end of 2011, at which point its EGR engines will have to be made to comply with the standard. It could also choose to pursue its own non-liquid DEF engine or, however unlikely, reestablish a supply agreement with another engine maker).

And not only competitors are taking notice. In a scathing review of the company today, investment bank Morgan Joseph questioned Navistar’s emissions solutions strategy over the last couple of years.

"Navistar’s management seems oblivious to the fundamental flaws, and the consequent risk, in its strategy for manufacturing its own heavy-duty EGR engines," an analyst wrote. "There appears to be no path to make the motors genuinely compliant …And they aren’t scalable to deal with additional EPA laws that appear imminent."

Wiley notes that out of half a dozen or so securities analysts, Morgan Joseph is the only overly negative firm. (It’s also worth noting that the Morgan Joseph author is a former Cummins executive).

Wiley says the majority of analysts have been neutral on Navistar, while Jeffries and Co. today raised target price on the company after learning of the CARB settlement.

The deal with CARB doesn’t affect Navistar’s near identical suit against the EPA in Washington.

Recently, the EPA updated its guidance, perhaps in reaction to Navistar’s challenge.

The original guidance from the EPA in February 2009, required engine performance to be degraded after a truck traveled a set distance with an empty DEF tank. In the new version, though, any mention of miles or hours driven on an empty DEF tank was removed. Instead, the EPA only suggests that it would likely take a 25 percent reduction in torque for a driver to notice decreased operation.

It will now be up to the manufacturer to determine how long after a DEF tank runs dry that engine performance begins to decline.