Navistar International (NYSE:NAV) has finalized a series of long-term supply agreements with engine maker Cummins (NYSE:CMI), Navistar announced in a press release Monday. Under the terms of the deals, Cummins will provide its engines for a range of Navistar's heavy trucks. Navistar will also use a Cummins emissions-cutting after-treatment system in its proprietary big-bore engines.
Navistar decided to shift away from in-house production because its truck engines did not fully satisfy Environmental Protection Agency standards. The EPA increased fines for such non-compliance to nearly double the previous level.
Navistar's troubles in developing proprietary engines have cost the company hundreds of millions of dollar, significantly reduced its market share, eroded its stock price, and led to the resignation of its CEO. They also brought the attention of activist investor Carl Icahn, who has amassed a significant stake in the firm and so far has two associates on the board of directors.
The terms of the agreements were not disclosed. Navistar stock closed up $0.81, or 4%, to $19.85 on the day the news was announced. Cummins also advanced, by $1.57, 1.7%, to $93.50.