(Reuters) - Truck and engine maker Navistar International Corp
Navistar shares fell about 9 percent to $36 in premarket trading on Friday.
The company is developing catalytic reduction engines to reduce nitrogen oxide emission by 70-95 percent after its diesel engine redesign failed to reduce green house gas level last year.
The U.S. Environmental Protection Agency denied approval for that engine, which tried to cut emissions without using additive urea. Navistar had to then source engines from rival Cummins Inc
"We are disappointed that our previous engine strategy continues to negatively impact us in the form of additional warranty expense," Chief Executive Troy Clarke said in a statement on Friday.
The company has also been hurt by lower demand for trucks, especially from the U.S. military as the government cut spending.
Navistar said it expected sales to pick up from the second quarter.
Revenue dropped to $2.75 billion in the fourth quarter ended October 31 from $3.18 billion a year earlier.
Net loss narrowed to $154 million, or $1.91 per share, from $2.77 billion, or $40.13 per share, a year earlier.
The company's shares closed at $39.46 on the New York Stock Exchange on Thursday. They have risen about 50 percent in the past six months, outperforming the 14 percent rise in the S&P 500 index <.SPX>.
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Joyjeet Das)