Navistar International Corp. bond yields are rising while those of other U.S. junk-rated truckmakers fall as investors penalize it for an engine design flaw and Carl Icahn expands his influence in the industry.

Yields on its notes are up 2 percentage points this year as those on the 20 most-indebted high-yield automotive companies fall, according to Bank of America Merrill Lynch index data. Icahn, who owns 14.8 percent of Navistar's shares, is offering $3 billion for Oshkosh Corp. after a failed bid last year prompted speculation of a merger between the two companies.

Navistar, which spent $600 million to design engines that failed to meet emissions rules, is paying Cummins Inc. for replacement technology to reverse a forecast $325.4 million annual loss in the year ended Oct. 31. Liquidity has declined for four straight quarters, and the Lisle, Illinois-based firm sold $200 million of equity last month to bolster cash.