The Shareholders Foundation Inc. announced that an investor who currently holds shares of Navistar International Corp (NAV) filed a lawsuit against certain directors over alleged breaches of fiduciary duties and waste of corporate assets.
The plaintiff alleged that certain directors are responsible for the company's failure to abide by U.S. governmental environmental regulations and that this failure subjected the company to significant fines and penalties.
In 2001, the U.S. Environmental Protection Agency or "EPA" drafted new, strict regulations on trucks that were set to go into effect in 2010, which, among other things, stated that no heavy-duty diesel engine could emit levels of nitrogen oxides higher than 0.20 g/bhp-hr. The two primary engine technologies that emerged were Exhaust Gas Recirculation or "EGR" and Selective Catalytic Reduction or "SCR".
The plaintiff claimed that despite clear indications that EGR was not a viable method to achieve 0.20g NOx limit, certain defendants repeatedly claimed that Navistar International Corp. could develop an EGR engine that would be certified by the EPA.
The plaintiff said that although Navistar invested approximately $700 million on developing its proprietary Advanced EGR engine, it was later revealed that the Company had not even applied for certification of the EPA emissions standard (0.20g NOx) until early 2011, one year after the EPA Standards in 2010 had become effective.
The plaintiff alleged that in July 2012, Navistar International Corp. shocked the market when the Company admitted its failure to achieve an EPA-compliant EGR engine.
On August 2, 2012, Navistar issued a press release announcing that it was withdrawing its full-year fiscal 2012 guidance until the release of its third fiscal quarter 2012 results in September. Furthermore, Navistar disclosed that it received a letter of inquiry from the SEC involving an investigation of various accounting and disclosure matters dating back to November 2010.
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