According to the law firm press release, Navistar is a holding company whose subsidiaries and affiliates produce commercial and military trucks, buses, diesel engines, recreational vehicles, and chassis, as well as provide parts and service for trucks and trailers.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements concerning the Company’s financial condition and future business prospects. Prior to the Class Period, the U.S. Environmental Protection Agency (“EPA”) had imposed new regulations on 2010 model trucks that included strict emissions standards. The two primary engine technologies that emerged to meet the new standards were Exhaust Gas Recirculation (“EGR”) and Selective Catalytic Reduction (“SCR”). Navistar chose the EGR technology, not the SCR technology its competitors were using to meet the new standards, and then represented that the new EGR technology was compliant and the vehicles were ready for sale. By the beginning of the Class Period, however, it was clear this product differentiation strategy was not working. Despite the $700 million Navistar had spent on developing its EGR engine, the Company had not even applied for certification of the EPA emissions standard by the start of the Class Period – 10 months after the EPA standards had become effective. Thus, by the beginning of the Class Period, Navistar faced technological, legal and liquidity issues which threatened its business. To conceal this fact from Navistar’s investors and customers, throughout the Class Period defendants repeatedly stated that Navistar had indeed achieved an engineering milestone and had an EPA-compliant EGR engine ready to be certified. 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 that in order to remain in business it was adopting the same SCR technology its competitors had been using. On August 2, 2012, Navistar issued a press release announcing that is was withdrawing its full-year fiscal 2012 guidance until the release of its third fiscal quarter 2012 results in September. Further, the Company disclosed receiving a formal letter of inquiry from the SEC involving an investigation of various accounting and disclosure matters dating back to November 2010. 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.
According to the complaint, the true facts, which were known by defendants but concealed from the investing public during the Class Period, were as follows: (a) Navistar’s attempted methods to achieve compliance with EPA guidelines in truck manufacturing had failed and Navistar would be forced to revise its plan to meet guidelines, incurring enormous costs to the Company; (b) Navistar did not have engines ready to meet the 2010 EPA standards; and (c) Navistar’s filings with the SEC contained incomplete and misleading disclosures, including statements about the costs of recalls and details of various debts.
On July 30, 2013, the Court issued an Order appointing lead plaintiff and approving the selection of lead counsel.
On October 10, 2013, the lead plaintiff filed a Consolidated and Amended Complaint.
On July 22, 2014, the Court issued an Order granting the Defendants' motions to dismiss without prejudice. Plaintiffs were given until August 22 to file an amended complaint. The plaintiffs filed their amended complaint on August 22.
On July 10, 2015, the Court issued an Order granting in part and denying in part Defendants' motion to dismiss. Only certain claims against a certain individual defendant remain in this case.
On May 13, 2016, the parties filed a Stipulation of Settlement. The Court preliminarily approved the Settlement on May 27.