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Yes - retarding the timing will usually make it pass BUT the '89 has fixed ignition timing, controlled by the computer and the crank position sensor at rear of engine. Distributor won't turn to adjust timing even if you wanted to. Sorry.
High NOx is usually due either to running lean, or due to a cat converter that's ready for replacement. Why running lean as a cause? Excess oxygen in the air mixture combines with nigrogen to give nitroux oxide, NOx. If not lean and not rich, there's not enough leftover oxygen after combustion to form a high level of NOx. It's all been used for combustion.
In any case, swapping in a new cat converter will usually fix it, especially if you're that close to the target #. That is, even if the high NOx is caused by some other fault, a new cat converter will likely clean up the exhaust so you'll pass. But of course it's a bit pricey.
I'd check these things if you didn't already.
1) Remove fat air hose between amm and throttle body. Check carefully for any cracks; replace if cracked.
2) Check all visible vacuum hoses for cracks/leaks. Hose size is metric; if replacing with USA size use a slightly tight fit rather than the size that is almost a snug fit. Loose = it leaks. I think you need 1/8" but can't swear to it. Always try to get fuel line grade.
3) Test oxygen sensor, located on drivers side of cat converter. Or get a shop to test it. You access the leads to test it at the firewall, which sure beats crawling underneath to the sensor itself. I've googled "test oxygen sensor" to get the procedure. Yours is a 3-wire sensor, fairly generic in design. Replace if bad. I found replacing to be a real pain when working in my driveway. On a shop lift, probably a piece of cake.
Oxy sensor enables the computer to fine-tune the fuel-air mixture, which is important to NOx. Also supports good fuel economy. If you need a replacement a generic by Bosch should be fine. It will just need some wire connections to be made rather than straight plug-in connections. That can make the difference between an affordable repair and one that's not.
If all the above don't take care of the problem then I think you'll likely need a new cat converter. Sorry to say.
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Sven: '89 245 NA, 951 ECU, expanded air dam, forward belly pan reaches oem belly pan, airbox heater upgraded, E-fan, 205/65-15 at 50 psi, IPD sways, no a/c-p/s belt, E-Codes, amber front corner reflectors, aero front face, quad horns, tach, small clock.
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