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Navistar halts diesel engine shipments to Ford

From Automotive News | February 27,2007

The new Super Duty pickup, the most profitable vehicle that financially strapped Ford Motor Co. will sell this year, is in danger of stalling midlaunch.

Navistar International Corp. said today it has stopped shipping the 2008 Super Duty's popular 6.4-liter Power Stroke diesel engine in a contract dispute.

"The bottom line is we have to be paid," Navistar spokesman Roy Wiley said. He added that he could not recall a time where his company halted supplies of a key component to a customer.

Wiley would not say whether Ford has stopped paying completely for engines or is not paying enough for each engine. Ford refused to comment on the specifics of the dispute.

But this storm has been brewing since last month when Ford sued Navistar over the pricing issue and warranty costs related to the 6.0-liter Super Duty diesel engine that went out of production last year.

Ford's lawsuit claims that Navistar has failed to live up to an agreement to share warranty costs and accuses Navistar of not negotiating in good faith on prices for the new Power Stroke engine. Both claims are without merit, Wiley said.

Ford said it withheld money from Navistar invoices to make up for the money it feels it is owed for warranty costs.

Relations between Ford and Navistar have been strained for years over the troubles with the 6.0-liter Power Stroke engine, which came out in 2002.

The Super Duty truck is expected to play a vital role in hauling Ford out of it financial troubles. Ford has spent millions launching the vehicle, which started arriving at dealers earlier this month.

Navistar has been building 2,000 6.4-liter Power Stroke engines per week since early January. The engine is installed in 75 percent of all Super Duty trucks. Two gasoline engines, a 5.4-liter V-8 and a 6.8-liter V-10 are also available, but they get poor fuel economy and can’t tow as much as the Power Stroke diesel V-8.

Before launch, Ford officials said they had 40,000 advanced orders for all models of the new Super Duty, which includes the F-250, F-350, F-450 and bigger trucks for commercial customers.

Ford's Super Duty trucks dominate the heavy duty pickup market with about a 50 percent share. Ford doesn't break out sales of individual models, but has said in the past that about 40 percent of F-series sales are Super Duty models. Ford sold 796,039 F-series trucks in 2006. According to the Automotive News Data Center, Ford has built about 38,500 Super Duty trucks since December.

Ford would not comment on how many 2008 Super Duty trucks are in dealers' hands. But Ford has built a stockpile of 6.4-liter engines, so no production interruptions are expected.

"We can support production for the near term," Ford spokeswoman Becky Sanchsaid.

Navistar ranks No. 47 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $3.27 billion in 2005.

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