Ruling May Stop Navistar Sales of Big Diesels

A U.S. appeals court in Washington, D.C., has thrown out an Environmental Protection Agency rule that has allowed Navistar International Corp. to sell 13-liter heavy-duty diesel engines 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 power Class 8 heavy-duty trucks, in exchange for a fine of as much as $1,900 for each one sold. The company disclosed last week that it paid $10 million penalties to the EPA in the February-April quarter this year and expects to pay as much as $40 million for 2012 if its engine isn't certified this year.

The court ruled that the agency violated federal procedures by issuing its interim rule without formal notice or comment period. This week's decision was a win for Mack Trucks Inc. and AB Volvo's North American unit, which sued to contest the EPA's position. The court agreed with them that Navistar is to blame for its plight because it pursued a technology that ultimately didn't meet emissions standards.

Navistar says it will seek a rehearing. The company isn't sure when it will win certification for its engine. But it could get a reprieve when the EPA issues the final rule, which is expected to confirm its interim decision. The comment period for the proposal ended in April and the agency is expected to issue the rule soon.