Navistar Hit With $30.8 Million Judgment in ProStar/MaxxForce Lawsuit

[kscarbel2]

Heavy Duty Trucking  /  August 14, 2017

Navistar Inc. disputes allegations that it didn’t thoroughly test its MaxxForce EGR engines – allegations that surfaced in a lawsuit where a jury last week awarded $30.8 million in damages – including testimony about the engine program by former executive Jim Hebe that the company "did not test s**t".

The Tennessee jury found that Navistar committed fraud and violated the Tennessee Consumer Practice Act in connection with the sale of 243 Navistar International ProStars with MaxxForce engines to Milan Supply Chain Solutions. It awarded $10.8 million in actual damages and $20 million in punitive damages.

Tennessee-based Milan alleged that Navistar misled them, saying the truck maker failed to disclose that the MaxxForce 13L engine, which used exhaust gas recirculation to meet 2010 emissions standards rather than the selective catalytic reduction being used by other truck and engine makers, was launched with “serious known defects.”

Milan also alleged that Navistar, while touting the quality of its testing program, knew that the testing had serious flaws, was incomplete at launch, and put the trucks into customers’ hands knowing that the customers would end up becoming the de facto test fleet for Navistar’s new 2010 year model engine.

In a statement, Navistar said it is disappointed in the jury’s verdict and is evaluating its options to challenge it, noting it has successfully defended similar claims in several jurisdictions, including dismissal of claims of fraud in courts in Texas, Wisconsin, Michigan, Indiana, Alabama, and Illinois.

“Navistar tested the MaxxForce 13 engine consistent with industry standards,” the company said in a statement. “They were tested for 12 million miles prior to launch under rigorous conditions, in test cells and on the road. At the time of the product launch, we were confident, based on this testing, that the product would perform. All products undergo continuous improvement throughout their lifecycle. When some parts unexpectedly failed, we fixed them under warranty for our customers, including Milan Supply. We've invested a significant amount of resources standing behind our products and supporting our customers.”

Indeed, those warranty claims have dogged Navistar, being a key factor in many quarters of disappointing financial results.

EGR vs. SCR

Milan purchased the MaxxForce-powered ProStars in 2011 and 2012. The MaxxForce engine used Navistar’s go-it-alone strategy of “advanced exhaust gas recirculation” to meet EPA 2010 emissions regulations, which it used hoping to avoid the use of selective catalytic reduction (SCR) adopted by other truck and engine makers. However, Navistar was never able to get EPA approval for the MaxxForce engine after the expiration of its emissions credits, at which point it switched emissions-control technologies to SCR.

Since that time, Navistar has overhauled its management team and product lineup, moving to engines supplied by Cummins and a new Navistar A26 engine just going into production developed based on proven engine technology from new partner Volkswagen.

What would eventually turn out to be an ill-fated decision by Navistar to use Advanced EGR instead of SCR led to numerous quality problems with the engine, which resulted in hundreds of millions of dollars of warranty costs to Navistar and losses on the resale market for trucking companies like Milan.

During the trial, numerous executives testified either live or by deposition, including the aforementioned comment from Jim Hebe, former senior vice president of North American sales, who said Navistar never tested the final version of the engine before selling it to customers.

In an email to current CEO Troy Clarke, Navistar’s current Senior Vice President of Engineering Dennis Mooney quoted former Vice President of Quality Tom Cellitti (who was in charge of testing the Maxxforce engine) as saying over and over again prior to the launch to customers, “we have no field testing,” because the company only tested engineering development trucks rather than validation trucks. 

In the same email, according to plaintiff’s attorneys, Mooney admitted that customers ended up uncovering problems that Navistar would have uncovered with the Maxxforce had it been able to do more testing.  

In another email exchange between Mooney and Clarke revealed at the trial, Mooney said the management had told the board of directors in 2013 that the “physics of the EGR strategy is (sic) not sound.” None of these things were ever revealed to the public prior to trial, according to attorneys.

The jury also heard evidence that Navistar knew when it launched the engine that critical engine components had serious quality problems and a shortened life span. For instance, the EGR cooler allegedly had a life span of less than 20% of the design requirement based upon testing done before the sale of the engines to the public, according to the attorneys.

While the attorneys for the plaintiffs charged that none of this information was disclosed to customers, Jack Allen, the former chief operating officer and president of truck operations, testified for Navistar that in his opinion it was “normal business practice” for companies to not disclose to customers in advance of a sale about known defects in the products or to disclose to customers that they were buying a product that had not been fully validated or tested by the manufacturer.  

“The jury seemed shocked to hear this testimony about the corporate culture and philosophy of Navistar from one of the company’s top executives,” said Clay Miller of the Dallas law firm Miller Weisbrod, lead trial attorney for Milan, referring to Allen's testimony. Miller said he believed this played a key factor in the punitive award.

Milan and its attorneys also criticized Navistar, saying the company refused to work with the fleet to address issues and instead went the litigation route.

Navistar said it “strongly disagrees with plaintiff counsel's characterizations of Navistar's conduct. Navistar has and will continue to defend our products, our reputation in the market, and the integrity of our employees.”

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[kscarbel2]

Jury awards trucking company $30 million in Navistar engine case

Neil Abt, Fleet Owner  /  August 14, 2017

Tennessee case involves older EGR engines

A Tennessee jury awarded a trucking company more than $30 million in a case involving Navistar’s older generation of trucks and engines.

On Aug. 10, the jury in Jackson found Navistar violated the Tennessee Consumer Practice Act, and provided Milan Supply Chain Solutions $10.8 million in actual damages and $20 million in punitive damages. The trucking company sued after purchasing 243 Navistar 2011 and 2012 International Prostars with Maxxforce engines.

Navistar said it was “disappointed in the jury's verdict and are evaluating our options to challenge it."

Milan accused Navistar of failing to disclose that the Maxxforce 13 liter engine had defects. The engine used exhaust gas recirculation to meet federal emissions standards. However, Navistar later abandoned that technology after it failed to meet regulations.

“It appeared the jury’s punitive damage verdict was a message to Navistar that it is not acceptable for the company to cover up important defects in the engines and the engines’ testing program in order to make a sale,” said Clay Miller of the Dallas law firm Miller Weisbrod, lead trial attorney for Milan.   

The law firm said the jury heard evidence that Milan had lost over $35,000 per truck on trade-in values over the last several years.

In an e-mailed statement to Fleet Owner, Navistar defended its actions. 

“We have successfully defended similar claims regarding our MaxxForce 13 engines in several other jurisdictions, including dismissal of claims of fraud in courts in Texas, Wisconsin, Michigan, Indiana, Alabama, and Illinois. 

“Navistar tested the MaxxForce 13 engine consistent with industry standards.  They were tested for 12 million miles prior to launch under rigorous conditions, in tests cells and on the road.  At the time of the product launch, we were confident, based on this testing, that the product would perform.  All products undergo continuous improvement throughout their lifecycle.  When some parts unexpectedly failed, we fixed them under warranty for our customers, including Milan Supply.  We’ve invested a significant amount of resources standing behind our products and supporting our customers.”

.

[kscarbel2]

Navistar Ordered to Pay Milan $30.8 Million in Connection With Flawed Engines

Transport Topics  /  August 14, 2017

A civil jury has awarded a Tennessee trucking company more than $30 million in civil damages for fraud and violation of the state’s consumer protection act in connection with the sale of 243 Navistar International Prostars with Maxxforce engines.

The 12-member jury’s unanimous decision upheld allegations that Navistar Inc. failed to disclose to Milan Supply Chain Solutions that it sold the International heavy duty trucks and 13-liter exhaust gas recirculation engines in 2011 and 2012 with “serious known defects in the engine and its components,” Milan said in an Aug. 14 statement.

The jury said that the Milan, Tenn.-based motor carrier is entitled to $10.8 million in actual damages and $20 million in punitive damages.

In its lawsuit filed in Jackson, Tenn., Milan alleged that Navistar, while touting the quality of its testing program, knew that the trucks had serious flaws and sold the trucks “knowing that the customers would end up becoming the de facto test fleet for Navistar’s new 2010 year model engine,” Milan said.

The Maxxforce engine in question was Navistar’s advanced EGR sold between 2010 and 2012.

Milan is a logistics company and owner of a commercial trucking fleet that hauls refrigerated and dry van commodities across 48 states.

Milan said after it purchased the tractors it experienced numerous breakdowns, specifically with the EGR system EGR coolers and EGR valves.

 “We’re disappointed in the jury’s verdict and are evaluating our options to challenge it,” Lyndi McMillan, Navistar’s external communications manager, said in a written statement. “We have successfully defended similar claims regarding our MaxxForce 13 engines in several other jurisdictions, including dismissal of claims of fraud in courts in Texas, Wisconsin, Michigan, Indiana, Alabama and Illinois.”

McMillan said Navistar tested the MaxxForce 13 engine consistent with industry standards.

“They were tested for 12 million miles prior to launch under rigorous conditions, in tests cells and on the road,” McMillan said. “At the time of the product launch, we were confident, based on this testing, that the product would perform. All products undergo continuous improvement throughout their life cycle. When some parts unexpectedly failed, we fixed them under warranty for our customers, including Milan Supply. We’ve invested a significant amount of resources standing behind our products and supporting our customers.”

In court documents, the truck maker said it conducted millions of miles of road testing with no serious issue or defects in design, components or materials. But when Navistar could not obtain EPA approval for the Maxxforce engine after the expiration of its emissions credits, Navistar switched emission-control technologies using the same selective catalytic reduction technology as its competitors.

During the trial, Milan said its attorneys offered evidence and solicited testimony from current and former Navistar executives who said that prior to the launch of the trucks the truck maker had not completed field testing.

However, Jack Allen, Navistar’s former president of truck operations, testified in the two-week trial that in his opinion it was “normal business practice” for companies to not disclose to customers in advance of a sale information about known defects in the products or to disclose to customers that they were buying a product that had not been fully validated or tested by the manufacturer, Milan’s lead trial attorney, Clay Miller of Dallas law firm of Miller Weisbrod, told Transport Topics.

“Their attitude during the whole trial was arrogance,” Miller said. “They just don’t think they have to stand up and do right by the customer.”

But McMillan said, “Navistar strongly disagrees with plaintiff counsel’s characterizations of Navistar’s conduct. Navistar has and will continue to defend our products, our reputation in the market and the integrity of our employees.”

[Dirtymilkman]

If they actually did test that setup, that doesn't say much for Navistar's standards. I have seen the maxxfarce's on the interstate coming from the factory broke down on numerous occasions. 

[kscarbel2]

 

If they actually did test that setup, that doesn't say much for Navistar's standards. I have seen the maxxfarce's on the interstate coming from the factory broke down on numerous occasions. 

This is all about Dan Ustian, the former head who was fired way back in 2012.

https://www.bigmacktrucks.com/topic/44620-ex-navistar-ceo-ustian-faces-sec-suit-over-emissions-disclosures-misleading-investors/?tab=comments#comment-329265

Ustian tried to take the EGR solution too far, further than MAN did (the source of the engines). It wasn't possibly, reliably, with the EGR technology of the time.

There is no relationship, whatsoever, with what transpired in 2010 and today's Navistar.

[1958 F.W.D.]

The City of Boston Fire Department got tangled up in a huge lawsuit with firetruck manufacturer KME over these engines and how the rigs with them spent more time at the Motor Pool than in the firehouses. Boston filed Lemon Law claims against KME and wound up returning the trucks. 

[Red Horse]

Well the stock closed today at 31.19 after opening at 30.93.  Will see what tomorrow brings.

[DailyDiesel]

That would have been an interesting jury to be on.

[kscarbel2]

 

Well the stock closed today at 31.19 after opening at 30.93.  Will see what tomorrow brings.

The market hates uncertainty, and now the uncertainty revolving around this issue has been removed. It's over and done with, so the market is back to buying NAV stock for the reasons justifying it's current value. Just a blip in the big picture.

[Dirtymilkman]

 

This is all about Dan Ustian, the former head who was fired way back in 2012.

https://www.bigmacktrucks.com/topic/44620-ex-navistar-ceo-ustian-faces-sec-suit-over-emissions-disclosures-misleading-investors/?tab=comments#comment-329265

Ustian tried to take the EGR solution too far, further than MAN did (the source of the engines). It wasn't possibly, reliably, with the EGR technology of the time.

There is no relationship, whatsoever, with what transpired in 2010 and today's Navistar.

Have you heard anything about no def use in the upcoming Volvo engines?  I heard 2020 for a date. Is this possible?

[kscarbel2]

 

Have you heard anything about no def use in the upcoming Volvo engines?  I heard 2020 for a date. Is this possible?

No, I have not.

[kscarbel2]

Judge denies Navistar’s bid to dismiss verdict on engines

Trailer-Body Builders  /  December 19, 2017

A Tennessee judge has denied Navistar’s attempt to disapprove the jury’s $30.8 million verdict on behalf of a Tennessee-based trucking company in a case involving Navistar’s older generation of trucks and engines.

Back in August, a jury in Jackson, TN, found Navistar violated the Tennessee Consumer Practice Act, and provided Milan Supply Chain Solutions $10.8 million in actual damages and $20 million in punitive damages. The trucking company sued after purchasing 243 Navistar 2011 and 2012 International Prostars with Maxxforce engines.

Milan accused Navistar of failing to disclose that the Maxxforce 13 liter engine had defects. The engine used exhaust gas recirculation to meet federal emissions standards. However, Navistar later abandoned that technology after it failed to meet regulations.

On Dec. 1, Judge Roy Morgan of the 26th Judicial Court considered multiple motions by Navistar challenging the verdict awarded to Milan. Morgan stated the proof showed that Navistar knew before launching the trucks that they had issues with the Maxxforce engine but “took a course of action not to disclose and claimed it was just normal business practice.”

“We're disappointed in the jury's verdict and we will be filing an appeal," Navistar told Fleet Owner. "We have successfully defended similar claims regarding our MaxxForce 13 engines in several other jurisdictions, including dismissal of claims of fraud in courts in Texas, Wisconsin, Michigan, Indiana, Alabama, and Illinois. Navistar respectfully disagrees with judge’s characterizations of Navistar’s conduct and the plaintiff’s characterization of its employees. Navistar has and will continue to defend our products, our reputation in the market, and the integrity of our employees.”

In addition to damages, Judge Morgan added $1.337 million of attorneys’ fees to the award since the jury found Navistar’s conduct violated the Tennessee Consumer Protection Act.