Navistar Faces Higher NCPs

Posted on August 31, 2012

The U.S. Environmental Protection Agency has finalized its Non-Conformance Penalties for engines that fail to meet the agency’s 2010 standards for NOx emissions reductions. While ostensibly covering any non-compliant engine, the ruling primarily affects Navistar, which is the only manufacturer that has not yet certified its engines as meeting the 2010 regulations.

Under the final penalty regulations, a nonconforming manufacturer with engines at the upper NOx limit of 0.50 g/bhp-hr would pay a penalty of $3775 for each model year 2012 engine it produces. Manufacturers would pay a lesser penalty if the NOx emissions of the engine are lower. For example, the penalty for a 2012 engine with NOx emissions at 0.30 g/bhp-hr would be $1259. The final rule raises the NCP from the agency’s interim $2000 level.

“We are pleased that the U.S. Environmental Protection Agency (EPA) has issued the Final Rule for nonconformance penalties for on-highway heavy heavy-duty diesel engines,” said Troy Clarke, Navistar president and chief operating officer. “We can now provide our dealers and customers with clarity and certainty as we transition to our clean engine technology and look forward to utilizing the final rule as needed. Implementation of the final NCP Rule will have no impact on our vehicles previously certified by the EPA under the interim NCP rule.”

During the comment period that began following the EPA’s announcement of its interim rule approximately eight months ago, a number of other truck and engine manufacturers argued that allowing Navistar to manufacturing non-compliant engines by paying relatively light NCPs gave the company a competitive advantage over the manufacturers that invested in the development of engines using selective catalytic reduction (SCR) systems that allowed them to comply with the standards. In issuing it final rule, EPA appeared to reject that argument, noting that “while commenters provided arguments why Navistar could have a competitive advantage over compliant engines, none provided any evidence of an actual competitive advantage.”

Further, the agency cited Navistar’s assertion that the company spent upwards of $700 million to develop its in-cylinder technology as evidence that the company was sincere in its efforts to meet the standards. The agency added that “NCPs were intended to give a manufacturer that has made every effort to comply, but has been unable to achieve compliance, a chance to continue to participate in the market.”

EPA said that “clearly, Navistar chose to pursue a non-SCR solution long before NCPs were available. Navistar has made considerable efforts to meet the standard, and has not simply weighed the costs of compliance with the cost of NCPs. Navistar’s choice of innovative in-cylinder control has led to a delay in its full compliance should not be confused with a manufacturer that has failed to meet standards based on a weighing of costs.”

A copy of the final rule is available on the EPA website.