The Manitowoc Company reaches agreement to settle U.S. EPA matter regarding its emissions certification and compliance process

Rhea-AI Summary

The Manitowoc Company (NYSE: MTW) has reached a settlement with the U.S. EPA and DOJ regarding alleged violations of the Transition Program for Equipment Manufacturers (TPEM) under the Clean Air Act. The company will pay a civil penalty of $42.6 million and complete an emissions mitigation project upgrading a short-line locomotive engine in Maryland. This settlement resolves issues related to engines mounted on Manitowoc mobile cranes sold in the U.S. between 2014 and 2017, which may not have met all TPEM program requirements. The company has already booked a financial reserve for the settlement.

Positive

• Settlement provides closure to the EPA compliance issue announced in January 2022
• Financial reserve already established for the penalty payment

Negative

• Civil penalty of $42.6 million to be paid
• Additional costs required for emissions mitigation project in Maryland
• Non-compliance with TPEM requirements for mobile crane engines (2014-2017)

Insights

Legal & Environmental Compliance Expert

The $42.6 million EPA settlement represents a substantial financial impact for Manitowoc, consuming approximately 13.5% of their market capitalization. The violation of TPEM regulations between 2014-2017 highlights significant oversight failures in their emissions compliance program. While the company had already established financial reserves for this penalty, the magnitude of the fine relative to their market size could strain their financial flexibility.

The mandated emissions mitigation project in Maryland, while not quantified monetarily, adds additional compliance costs and operational overhead. The settlement's conclusion removes a major regulatory overhang, but raises concerns about internal controls and compliance processes. Companies facing similar EPA enforcement actions typically experience increased regulatory scrutiny in subsequent years, necessitating enhanced compliance investments.

For context, this penalty is notably severe for a TPEM violation, suggesting either widespread non-compliance or particularly egregious violations. The resolution provides clarity on liabilities but may impact Manitowoc's ability to pursue growth initiatives or maintain competitive pricing in the mobile crane market.

Financial Analyst

The settlement's financial implications extend beyond the immediate $42.6 million penalty. With Manitowoc's market cap at $314.7 million, this represents a significant capital outflow that could impact their operational flexibility and investment capacity. While the company had prepared by booking reserves, this resolution will likely affect their balance sheet strength and potentially their debt covenants.

The timing of the settlement coincides with challenging market conditions in the construction equipment sector. The locomotive engine upgrade requirement adds an unspecified but material compliance cost. This could pressure margins in upcoming quarters, particularly if the company cannot pass these costs to customers in a competitive market environment.

Historically, companies facing such significant EPA penalties often experience increased compliance costs in subsequent years, typically ranging from 0.5% to 1.5% of revenue. This ongoing cost burden could affect Manitowoc's competitive position in the mobile crane market, where margins are already under pressure from global competition.

MILWAUKEE--(BUSINESS WIRE)-- The Manitowoc Company, Inc. (NYSE: MTW) (the “Company” or “Manitowoc”) today reported that it agreed to the terms of a Consent Decree with the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice (DOJ) regarding alleged violations of the Transition Program for Equipment Manufacturers (TPEM), a program under the U.S. Clean Air Act. Per the terms of the agreement, Manitowoc will pay a civil penalty of $42.6 million and complete an emissions mitigation project upgrading a short-line locomotive engine in Maryland. Completion of the terms in the Consent Decree settles this matter and releases the Company from civil claims under the Clean Air Act related to the Company’s participation in the TPEM program.

This agreement concludes a matter announced in a press release dated January 17, 2022, in which Manitowoc announced that an internal investigation indicated the Company may not have met all requirements of the TPEM program for a portion of engines mounted on Manitowoc mobile cranes sold in the U.S. between 2014 and 2017. Manitowoc has booked a financial reserve for the settlement of this matter.

The Manitowoc Company, Inc.

The Manitowoc Company was founded in 1902 and has over a 120-year tradition of providing high-quality, customer-focused products and support services to its markets. Headquartered in Milwaukee, Wisconsin, United States, Manitowoc is one of the world's leading providers of engineered lifting solutions. Manitowoc, through its wholly-owned subsidiaries, designs, manufactures, markets, distributes, and supports comprehensive product lines of mobile hydraulic cranes, lattice-boom crawler cranes, boom trucks, and tower cranes under the Aspen Equipment, Grove, Manitowoc, MGX Equipment Services, National Crane, Potain, and Shuttlelift brand names.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241218883848/en/

Ion Warner

SVP, Marketing and Investor Relations

+1 414-760-4805

ion.warner@manitowoc.com

Source: The Manitowoc Company, Inc.

FAQ

How much is MTW paying in civil penalties for the EPA settlement?

Manitowoc (MTW) is paying a civil penalty of $42.6 million as part of the settlement with the EPA and DOJ.

What period did MTW's TPEM compliance violations cover?

The compliance issues involved engines mounted on Manitowoc mobile cranes sold in the United States between 2014 and 2017.

What additional requirements must MTW complete besides the civil penalty?

MTW must complete an emissions mitigation project that involves upgrading a short-line locomotive engine in Maryland.

When did MTW first announce the potential TPEM compliance issues?

Manitowoc first announced the potential TPEM compliance issues in a press release dated January 17, 2022.

Has MTW already accounted for the settlement costs?

Yes, Manitowoc has already booked a financial reserve for the settlement of this matter.