The legal battle continues between Navistar and Ford

WARRENVILLE, IL -- Navistar International has filed a counter-complaint against Ford Motor Co. for breach of contract. The company is also seeking damages.

The legal battles between the two companies began in late February, after Navistar suspended production of the Power Stroke diesel engine that it builds for Ford Motor Co. because it claimed Ford stopped honoring the terms of agreement under which the engines were built. In early March, Navistar entered into a consent injunction with Ford Motor Co. to continue shipping 6.4L Power Stroke diesel engines to Ford, for which Ford would pay, without deductions, for each engine.

Ford has filed a lawsuit against Navistar 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 amended its counter-complaint in today'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.

Now, Navistar has filed its counter-complaint following a hearing before Judge John J. McDonald of the Circuit Court of Oakland County, Michigan. At this week’s hearing, Judge McDonald set a schedule for discovery and other events in the case.

Navistar's principal operating company, International Truck and Engine Corporation, 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 that meets 2007 emissions standards while increasing performance, durability and fuel economy.

The amended counter-complaint filed this week states that Ford’s breach is based on indications that Ford plans to develop its own diesel engine for introduction prior to 2012. Ford's failure to honor the contract, which runs through 2012, entitles Navistar to damages that have been preliminarily calculated to more than $2 billion, the complaint states. In addition, Navistar states that Ford's actions are interfering with supply-base agreements.