Navistar files counter-complaint against Ford, seeks $2B in damages

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Navistar International Corp. announced Wednesday, May 2, that it has filed a counter-complaint against Ford Motor Co. for breach of contract and is seeking damages of more than $2 billion. Navistar filed its counter-complaint following a hearing before Judge John J. McDonald of the Circuit Court of Oakland County, Mich.

The hearing related to a lawsuit filed by Ford against Navistar in January involving 2007 engine pricing and prior period warranty claims. Navistar counter-sued, stating that pricing is consistent with contractual agreements, that the warranty claims are entirely without merit and that Ford has stopped honoring the terms of an agreement under which engines were built.

Navistar temporarily halted shipments of engines used on Ford’s Super Duty F-Series pickup trucks. Ford later agreed to pay Navistar its asking price in return for continued shipments, and also repaid $80 million it debited from Navistar.

Navistar amended its counter-complaint in Wednesday’s filing. Two previous hearings have been held, and Judge McDonald has asked the two companies to meet privately to see if a settlement to the dispute could be reached prior to a trial. At Wednesday’s hearing, Judge McDonald set a schedule for discovery and other events in the case.

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.

The amended counter-complaint filed Wednesday states that Ford’s breach is based on indications that Ford plans to develop its own diesel engine for introduction prior to 2012. Navistar claims Ford’s failure to honor the contract, which runs through 2012, entitles it to damages. In addition, Navistar states that Ford’s actions are interfering with supply-base agreements.

Ford spokeswoman Kristen Kinley told Dow Jones Newswires the company hasn’t seen the amended countercomplaint and couldn’t comment on it, but added “we believe that these private issues should be dealt with in court and not in a public forum.” Kinley also told the news agency that while the two sides will continue to meet and give the judge updates, the parties will proceed with litigation.