SAN DIEGO, April 10, 2013 /PRNewswire/ -- Finkelstein & Krinsk LLP has filed a class action securities lawsuit in the United States District Court for the Northern District of Illinois on behalf of purchasers of Navistar International Corporation ("Navistar") (NYSE: NAV) common stock during the period of November 3, 2010 through August 1, 2012 (the "Class Period").
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements concerning the Company's financial condition and business prospects. Prior to the Class Period, the U.S. Environmental Protection Agency ("EPA") had adopted new emission regulations on 2010 model trucks. Two primary engine technologies were advocated to meet the new standards. One was Exhaust Gas Recirculation ("EGR") and the other Selective Catalytic Reduction ("SCR"). Navistar "bet the ranch" on developing EGR technology while SCR technology, a proven alternative, was used by its competitors to meet the new standards. Navistar represented that its new EGR technology was operative and that superior engines using EGR were ready or imminent for sale. By the beginning of the Class Period, however, it was clear internally that the Company's strategy of achieving product superiority was not working. Despite $700 million spent on developing its EGR engine, the Company had not applied for certification of the EPA emissions standard 10 months after the EPA standards became effective. To conceal adverse facts from Navistar's investors and customers during the Class Period defendants repeatedly stated that Navistar had achieved its engineering advancement and had an EPA-compliant EGR engine ready for certification. As a result of defendants' false statements, the price of Navistar common stock traded at artificially inflated prices during the Class Period, reaching a high of $70.17 per share on April 26, 2011.
In July 2012, Navistar admitted its failure to achieve an EPA-compliant EGR engine and announced it was adopting the same SCR technology of its competitors. On August 2, 2012, Navistar issued a press release announcing that it was withdrawing its full-year fiscal 2012 guidance. Further, the Company had received a formal letter of inquiry from the SEC involving an investigation of various accounting and disclosure matters. As a result of this news, the price of Navistar's common stock dropped from a closing price of $24.77 per share on August 1, 2012 to $21.44 per share on August 2, 2012, a decline of approximately 13% in one trading day.
The complaint alleges that the true facts known by defendants but concealed from the investing public included: (a) Navistar's EGR process for achieving compliance with EPA standards was unsuccessful and Navistar would need to adopt an alternative plan and pay penalties to the EPA, incurring enormous costs; (b) Navistar knew it did not have the trucks ready to satisfy 2010 EPA standards though indicating otherwise; and (c) Navistar's filings with the SEC contained incomplete and misleading disclosures.