Navistar To Continue Shipping Super Duty Diesel Engines

The Navistar International Corporation, the parent company of International Truck and Engine Corporation, earlier entered into a consent injunction with Ford Motor Co. in which it resumes the production and shipment of the 6.4L Power Stroke? diesel engines which are intended for the automaker?s Super Duty pickup trucks. The automaker, in the said injunction, is expected to pay without deductions.

The International Truck and Engine Corporation has been Ford?s exclusive diesel engine supplier for Super Duty pickup trucks since 1979. In February, the automaker launched the new 6.4L Power Stroke for the new Super Duty. In addition, Navistar produces 225,000 to 300,000 diesel engines for Ford trucks each year.

Ford said that they had spent $1.05 billion in warranty and repairs on the previous Navistar diesel engine in Ford's Super Duty pickup trucks. Navistar said that the automaker's warranty claim is false. Ford debited Navistar about $125 million early this year. Ford said the contract allows debiting however Navistar disagreed. The two companies also have a dispute about the appropriate price for the new engine. That makes up a disagreement amounting to over $300 million a year.

On 26 February, Navistar suspended the production of the diesel engine. According to the engine supplier, the suspension is resorted to because the automaker had stopped honoring the terms under which the engines were manufactured. The suspension made Ford seek a temporary restraining order from Judge John J. McDonald of the Circuit Court of Oakland County, Michigan.

On 28 February, Judge McDonald issued an order requiring the supplier to resume production of the engine and Ford to pay with no withholding until a hearing was held. After the scheduled hearing the judge asked the companies to continue discussion to settle whether an agreement can be reached before the trial is commenced. The companies met and the judge issued consent injunction that supersedes the temporary restraining order. The said order from the judge also requires both companies to meet and resolve the contract dispute regarding warranty claims and pricing.

"I think this (consent injunction) represents a new spirit of cooperation between the two companies," Navistar spokesman Roy Wiley said. The consent injunction assuages concerns of the derailment for one of Ford's most important launches of the year.

Ford's Louisville, Kentucky plant stopped production last week and was shut down Friday after Navistar suspended shipments of the engines. The pickup truck also serves as the one of the vital keys to make Ford recover from billions of dollars of losses in recent years.

The halt of engine production threatened to disrupt production of the Super Duty, one of the most profitable product lines of Ford. In the past, a shortage of engines also has disrupted production at a Ford plant in Kentucky. That situation is now avoided by the automaker. Super Duty trucks are the most popular vehicles in their class, averaging 50 percent market share in the heavy-duty pickup truck segment during the past years. Hence, to allow production to be disrupted is perilous to the automaker.

Ford acknowledged the agreement with Navistar and said in a statement it was pleased there would be no further disruptions to the production of the F-Series Super Duty. The automaker said its Kentucky plant began ramping production back up early this week and will be back at full speed on Monday.

In 2006, Ford sold 796,000 units of the F-series trucks and 40 percent of the figure is owned by the Super Duty. The redesigned Super Duty include a new grille that blends well with Ford bumper, factory installed trailer brake controller, upfitter switches, and new interior. The Powerstroke Diesel, which is the now the subject of the controversy, was also modified to generate torque from 560ft/lb to 570ft/lb - nonetheless, the peak power output is maintained at 325 horsepower.


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