Navistar Cuts Off Ford's Diesel Engine Supply

Dispute over "commercial terms" halts production of 6.4-l Power Stroke

February 26, 2007 — Navistar International Corp. reports that it is suspending production of the Power Stroke diesel engine it builds and supplies to Ford Motor Co., explaining that Ford has stopped honoring the terms of the supply agreement. Navistar's subsidiary International Truck and Engine Corp. produces the engines at Indianapolis and Huntsville, AL.. Production of other engines at Huntsville will continue.

According to reports, in January Ford sued Navistar for failing to comply with an agreement on warranty costs and for increasing engine prices without cause.

Characterizing its decision as the result of a dispute over "commercial terms," Navistar stated "it pays its suppliers and employees under contract terms and that it expects Ford to honor the terms of its agreement."

The Power Stroke engine is featured in Ford's F-Series Super Duty pickups, and International recently began supplying a new 6.4-liter version of the Power Stroke to meet 2007 emissions standards. Navistar states the new power plant also delivers better performance, durability, and fuel economy.

According to Ford, there is sufficient inventory of the engines to meet near-term production needs for its F-Series Super Duty model.

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