Navistar suspends production of Ford diesels

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Navistar International Corp. announced today, Feb. 26, that it is suspending production of the Power Stroke diesel engine that it builds for Ford Motor Co. because Ford has stopped honoring the terms of agreement under which the engines were built.

Navistar’s principal operating company, International Truck and Engine Corp., has been the exclusive diesel engine supplier for Ford’s heavy-duty pickup trucks since 1979 and recently launched a new 6.4L Power Stroke diesel engine designed to meet 2007 emissions standards while increasing performance, durability and fuel economy.

Ford, using International-manufactured Power Stroke diesel engines, has enjoyed leadership market share of close to 50 percent for many years, says Navistar, which believes the new Power Stroke 6.4L diesel engines provide Ford the opportunity to maintain or improve this leadership position. Navistar says trade editors who have driven Ford’s 2008 F-250 equipped with the Power Stroke have given it rave reviews.

International currently produces the new 6.4L Power Stroke diesel engine at its engine plants in Indianapolis and Huntsville, Ala., and as a result of the dispute over commercial terms, production of those engines at both facilities will be halted immediately. The Huntsville operation will continue to produce engines for other customers.

Ford filed a lawsuit in January accusing Navistar of not complying with an agreement under which the two companies are supposed to share certain warranty costs when consumers encounter problems with their engines. In addition, Ford claimed that Navistar had “unjustifiably” raised prices on the Power Stroke engine. Ford said that it had starting holding back payment to recover what it feels the supplier owes Ford on the warranty issue.

Ford’s January lawsuit also noted that Navistar has threatened to cut off shipments of the diesel engine if Ford doesn’t pay the price Navistar is demanding. Navistar says that it pays its suppliers and employees under contract terms and that it expects Ford to honor the terms of its agreement.