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Ford sues Navistar

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Is this the beginning of the end for the Powerstroke??? Maybe we will get a CAT diesel in the future?

http://www.chicagotribune.com/business/

Ford sues Navistar on truck engines

Breach of supply contract alleged

By James P. Miller

Tribune staff reporter

January 12, 2007

A contract dispute between Ford Motor Co. and Navistar International Corp. became public Thursday when the automaker sued Navistar in state court in Michigan for allegedly refusing to live up to terms of a long-standing supply accord.

For a decade, Warrenville-based Navistar has been the sole supplier of the diesel engines that Ford puts into its heavy-duty pickup trucks.

Now, however, the automaker and its key supplier have locked horns over the price Navistar is charging Ford, and also over the extent of Navistar's financial obligations in warranty claims involving its engine.

Ford's claims are "totally without merit," a Navistar spokesman said, adding that the maker of trucks and diesel engines intends to "vigorously respond in court."

Navistar has been providing Ford with a 6-liter diesel engine for several years, Ford's lawsuit notes, and in late 2006 it also began supplying the automaker with a new 6.4-liter engine.

"The parties have previously been able to negotiate and reach agreement on the prices of the engines Navistar produced for Ford," the complaint says, but with regard to the 6.4-liter engine Navistar has altered its bargaining stance and "failed to act in good faith."

In fact, Ford's lawsuit says, Navistar has threatened that unless Ford pays the price Navistar is demanding, Navistar would refuse to ship the new engine to Ford. That move would breach the supply agreement, it contends.

In addition, Ford says, Navistar is not complying with its warranty-sharing obligations. Under the agreement, Navistar is supposed to pay a portion of the costs Ford encounters for engine-related warranty repairs. But Navistar has refused to pay the amounts Ford says it is owed, according to the lawsuit.

In response, Ford took the unusual step of "debiting" Navistar for a portion of those costs. In other words, Ford is withholding money it owes Navistar for engines, in order to recover the money Ford says Navistar owes it under the warranty agreement.

Ford is asking the court to rule that the "debit" is proper under the circumstances, and it also asks the judge to order Navistar to reimburse Ford for future warranty costs.

The automaker also asks the court to issue a declaratory judgment on what Navistar can charge for the 6.4-liter engine.

The debit "is simply a business transaction intended to resolve a dispute we have with [Navistar]," Ford said in a statement. "Regrettably," it said, because Navistar has not cooperated, "we have no other choice but to take the debit and file the lawsuit."

Ford and Navistar also have a joint venture that manufactures medium-duty Ford trucks for sale in North America.

jpmiller@tribune.com

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I'm sure everyone will make nice and it will go away.

I'm sure Navistar likes to sell those 250,000+ engines per year. I'm also sure Ford doesn't want to have to figure out what other manufacturer to dance with to put diesels in their trucks.

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