Ruling May Halt Sales of Navistar 13-Liter Diesel

A U.S. appeals court in Washington, D.C., has thrown out an Environmental Protection Agency rule that allowed Navistar International Corp. to sell a 13-liter heavy-duty diesel engine that doesn't comply with U.S. 2010 emission standards.

The EPA decided in January that Navistar could continue to sell the noncompliant engines, which are used in big Class 8 highway trucks, in exchange for a fine of as much as $1,900 for each one sold. The company said last week it paid $10 million in penalties to the EPA between February and March this year and expects the fines to total $40 million for 2012 if its engine isn't certified.

The court ruled that the EPA violated federal procedures by issuing its interim rule without formal notice or comment period. The decision was a win for Mack Trucks and AB Volvo, which had challenged the agency's position. The court agreed with them that Navistar is to blame for its plight because it pursued a technology advanced exhaust gas recirculation that ultimately didn't meet emissions standards. The company's rivals use selective catalytic reduction systems.

Navistar says it will seek a rehearing. The company also could get a reprieve when the EPA issues its final rule on compliance, which is expected to confirm its interim decision.