Owners of Navistar International Corp. trucks with faulty MaxxForce engine technology will qualify for a no-questions-asked $2,500 payout or a $10,000 rebate on a new truck under a $135 million class action settlement announced Wednesday.
Navistar will take a $159 million charge against second-quarter earnings to cover the payouts and other pending lawsuits. The U.S. District Court for the Northern District of Illinois must approve the settlement, involving about 65,000 trucks.
The settlement resulted from Navistar’s use of exhaust gas recirculation, or EGR, to control nitrous oxide emissions from its International brand of heavy-duty trucks equipped with 11- and 13-liter engines. The technology failed to meet federal emissions standards. Other truck makers used a system known as selective catalytic reduction to control emissions.
MORE THAN $1 BILLION
Not including the latest settlement, Navistar has paid more than $1 billion in warranty costs to cover reliability and fuel-economy problems with the trucks. It wrote off almost $500 million to cover used trucks it repurchased from angry customers and resold at a loss. That was on top of the $700 million development cost of the engines.
The MaxxForce engines tarnished the manufacturer’s reputation. Sales plunged. Navistar lost almost half its market share as costs soared and losses climbed.
Navistar said it expects the settlement will “accelerate our efforts” to move past the MaxxForce debacle.
In addition to the payouts and rebates, owners who paid for repairs because of the engines can seek up to $15,000 if they have proper documentation, said Jonathan Selbin of Lieff Cabraser Heimann & Bernstein.
The proposed settlement excludes individuals that sued Navistar and won or lost in court, he said.
Law firms spent more than $30 million to press the case, Selbin said. They will seek no more than $40 million in fees.
“All things being equal, I wish Navistar had never rolled out these engines, or that they would have settled this case when we filed it five years ago,” Selbin said. “But this provides real relief and real options for customers.”