Too Little, Too Late for Navistar?

Navistar’s announcement today that it plans to introduce a “clean engine technology” appears to be a sputtering effort to save face.

Source: Navistar.com

Navistar Logo

Wall Street greeted the news by bidding the shares down, after the company held a brief webcast (with no question/answer period) to introduce its new engine, which it says will be EPA compliant.

Navistar calls the engine In-Cylinder Technology Plus, but a number of analysts I spoke with said it is really just another name for the industry standard Selective Catalytic Reduction, or SCR, which Navistar had shunned.

“This seems to be little more than smoke and mirrors,” scoffed Gimme Credit analyst Vicki Bryan, a vocal Navistar bear.

Navistar had embraced its own controversial technology, known as Exhaust Gas Recirculation, or EGR, which not only failed to win EPA certification, but was hobbled by costly warranty repairs.

The company says the new engine will be rolled out next year, but also said it would require an expansion of its “product development efforts.”

While the company said “we believe” it will have access to additional capital, it didn’t, however, say what the cost would be or how this would impact earnings forecasts.

Bryan, who in the past has suggested that bankruptcy could be an optionfor Navistar, was hardly impressed.

“NAV doesn't know how much it will cost to develop, how long it will take, or even if the EPA will approve it,” she told me. “They won't reveal how much cash they have or even state definitely that liquidity is adequate for the transition. My estimates of potential cash depletion in two to three quarters may have been too generous.”

In the meantime, the company says it will continue to ship its EGR engines, but analyst Oliver Dixon of West End Companies is dubious.

“They’ve just invalidated what they’ve been working on for two years. Nobody will buy one of these things,” he told me.

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