On July 30, 2013, Judge Samuel Der-Yeghiayan of the United States District Court for the Northern District of Illinois appointed Cohen Milstein as lead counsel in a securities class action against Navistar International Corporation. Cohen Milstein's client, Central States, Southeast and Southwest Areas Pension Fund, was selected as lead plaintiff. The complaint charges Navistar and certain of its officers and directors with violations of the Securities Exchange Act of 1934. 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 beginning in November 2010, Defendant Navistar Corporation (Navistar), Defendant Daniel C. Ustian, Navistar’s Chief Executive Officer, and Defendant Andrew J. Cederoth, Navistar’s Chief Financial Officer and Executive Vice President, allegedly made materially false and misleading statements concerning Navistar’s financial condition and future business prospects. Specifically, Defendants allegedly made false representations concerning Navistar’s engine technology and that technology’s compliance with U.S. Environmental Protection Agency (EPA) regulations. The EPA imposed new regulations on 2010 model trucks, which included strict emissions standards. Two primary engine technologies emerged to meet the new standards: Exhaust Gas Recirculation (EGR), which reduced emissions by burning off exhaust pollutants within the engine, and Selective Catalytic Reduction (SCR), which reduced emissions by treating the engine exhaust with a urea-based chemical after it left the engine. Navistar chose the EGR technology while the rest of the market used SCR technology. Plaintiffs contend that despite the $700 million Navistar spent on developing its proprietary Advanced EGR engine, by November 2010, Navistar had not even applied for certification of the EPA emissions standards. Due to Navistar’s alleged missteps concerning emissions compliance, Navistar allegedly faced technological, legal, and liquidity issues, which threatened its business. Plaintiffs claim that in order to conceal this fact from Navistar’s investors and customers, Navistar repeatedly represented that it had an EPA-compliant EGR engine ready to be certified. Plaintiffs contend that as a result of Defendants’ alleged false statements, the price of Navistar common stock traded at artificially inflated prices, reaching a high of $70.17 per share on April 26, 2011.
Eventually, Navistar was forced to make certain public disclosures that made evident the falsity of Navistar’s prior statements. On June 7, 2010, Navistar reported a loss of $172 million for the second quarter of 2012 as a result of warranty reserves taken to repair early 2010 and 2011 vehicles and speculation surrounding certification of the Company’s EGR technology engine (June 2010 Disclosure). On July 6, 2012, Navistar finally 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 that its competitors had been using for years (July 2012 Disclosure). Then, on August 2, 2012, Navistar issued a press release announcing that it was withdrawing its full-year fiscal 2012 guidance until the release of its third fiscal quarter 2012 results in September, and announcing that it had received a formal letter of inquiry from the U.S. Securities and Exchange Commission (August 2012 Disclosure). Plaintiffs contend that as a result of the above-mentioned disclosures, 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 on a volume of nearly 7.6 million shares.
Plaintiffs consist of purchasers of Navistar’s common stock between June 9, 2010, and August 1, 2012, who have suffered losses as a result of Defendants’ alleged artificial inflation of the price of Navistar common stock. Plaintiffs seek to recover damages on behalf of all purchasers of Navistar common stock during the Class Period. The attorneys on the case are Carol V. Gilden and S. Douglas Bunch.
Court Order Appointing Lead Plaintiff and Lead Counsel - July 30, 2013 [PDF]